Baltas, Konstantinos (2024) The nexus between bank efficiency and leverage. International Journal of Finance and Economics. DOI https://doi.org/10.1002/ijfe.2941
Baltas, Konstantinos (2024) The nexus between bank efficiency and leverage. International Journal of Finance and Economics. DOI https://doi.org/10.1002/ijfe.2941
Baltas, Konstantinos (2024) The nexus between bank efficiency and leverage. International Journal of Finance and Economics. DOI https://doi.org/10.1002/ijfe.2941
Abstract
In this paper we shed light on the impact of leverage on efficiency by introducing a new banking efficiency indicator that includes efficiency and stability conditions. This indicator relies on the leverage as a proxy of a bank's risk and stability. Banks' leverage played an important role in the last Önancial crash as well as in the Basel III regulatory rules. The results of the econometric investigation using a large sample of American commercial banks show that profit efficiency indicators including leverage are better predictors of future profits than current indicators, including other measures of bank risk. This is particularly evident for the period during the 2007 - 2009 Financial crisis. Our findings have important policy implications, particularly in light of the recently implemented optimal leverage ratio.
Item Type: | Article |
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Uncontrolled Keywords: | bank efficiency; Bank efficiency; Leverage; Financial Stability; Stochastic profit frontier; Business Cycles; US banking Sector; business cycles; financial stability; leverage; stochastic profit frontier; US banking sector |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Essex Business School |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 16 Jan 2024 15:56 |
Last Modified: | 24 Apr 2024 13:29 |
URI: | http://repository.essex.ac.uk/id/eprint/37572 |
Available files
Filename: Int J Fin Econ - 2024 - Baltas - The nexus between bank efficiency and leverage.pdf
Licence: Creative Commons: Attribution 4.0