Studying banking performance from an accounting perspective: Evidence from Europe

Abstract

This paper investigates the relationship between management quality and bank performance through a system of bank-specific factors, under the constraint of the prudential regulations and the macroeconomic environment. The research, based on multiple linear regressions, analyzes a sample of 207 banks from 29 European countries, grouped according to the IMF classification into emerging and developed countries, for the period 2010-2015. We find that performance is positively influenced by: the efficiency of managing the bank assets; the high weight of traditional banking activities in total activities; the inflation; the economic growth rhythm, combined with the monitoring of the credit and liquidity risks. Performance is negatively correlated with the raise in the banking functionality costs and the diversification of activity through financial investments on the capital markets. This research extends the existing literature by analyzing the post-crisis period and by introducing the influence of additional internal determinants, not considered in other studies.

Keywords

• determinants of bank profitability
• post-crisis period
• European banks
• regression analysis