Banks, Eurozone, human capital efficiency and return on equity: an approach via panel econometrics

Patrick Piget and Josse Roussel
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Patrick Piget: UP1 - Université Paris 1 Panthéon-Sorbonne, PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne

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Abstract: During the last decade the banking sector had to face several challenges to develop in a globalized environment with strong intellectual capital. This required talent to deal with sophisticated financial products and to satisfy demanding clients. The last economics crisis sparked new governmental regulations, in particular banks from the Eurozone had to deal with the low rate policy of the European central bank who has affected the profitability and expectation of shareholders. In this study, we analyze, over the period of 2009-2013, the impact of human capital through two proxies (net banking income/staff costs and total assets/staff costs) measuring human capital efficiency on the return on equity of 126 banks. The low rate policy of the European central bank leads us to distinguish between Eurozone banks and European Union banks and to consider the following two questions: What are the markers of the parameters of the relation linking the proxies of human capital efficiency and return on equity? Has membership of the Eurozone or the EU had an impact on return on equity of a bank? The originality of our research is twofold: on the one hand, we analyze the impact of human capital efficiency on return on equity of a large sample of European banks which are members of the Eurozone or of the EU we assess the influence of human capital on return on equity by using three great econometrics models: 1- The pooled ordinary least squares model (POLS); 2- The fixed effect models (FIX); 3- The random effect (RAN) or error components model. The conclusion decides between the random effect model (RAN) - which has two proxies of human capital and membership of the Eurozone or not and the two-way fixed model (FIXTWO) which has two proxies of human capital and a ratio of economic performance. In the two cases all variables are significant at the level α of 5 % and the hypotheses of normality of residuals and homoscedasticity cannot be rejected.

Keywords: Human capital; banks; return on equity; panel econometrics (search for similar items in EconPapers)
Date: 2019-11-12
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Published in Vie et Sciences de l'Entreprise, 2019, N° 207 (1), pp.187-205. ⟨10.3917/vse.207.0187⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04012321

DOI: 10.3917/vse.207.0187

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