The Persistence of Profits: Evidence from the European Union and the South American banks

Marcin Puziak

Abstract

Empirical research regarding the behaviour of company‘s profits is one of the most interesting topics because it can provide the answer whether the rates of return converge to competitive levels. This paper investigates the profitability of the European Union and the South American banks using dynamic panel model with generalized method -of -moments estimators. Investigation is based on a the panel of 474 banks from 52 countries, which are listed companies. Time span covers the period 2000 - 2015. The analysis is performed for return on average equity (ROE) and return on average assets (ROA). Rate of convergence of abnormal returns can be interpreted as an indicator of the competition intensity in the industry. Dynamic panel estimates of the persistence of profit for European Union banks and South American banks are reported and compared. Moreover, panel unit-root tests are employed in order to identify if banks profits are mean- reverting or exhibit hysteric behavior. Conslusion from such analysis may indicate, where regulatory intervention are required to restore competitive environment. Despite of the fact that banking industry suffered substantially from the latest financial crisis, the persistence of abnormal returns is still present, however important differences exist between analysed industries.
Author Marcin Puziak (WZ / KM)
Marcin Puziak,,
- Department of Microeconomics
Pages1463-1477
Publication size in sheets0.7
Book Guinea Fernando Alonso (eds.): XVIII Reunión de Economia Mundial : Actas, 2016, Sociedad de Economía Mundial, ISBN 978-84-617-5761-9, 1494 p.
Keywords in Englishpanel data, firm profitability, abnormal returns, persistence of profits, banks
URL http://www.sem-wes.org/sites/default/files/actas%2018rem.pdf
Languageen angielski
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