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An Analysis of Bank Profitability in the Western European Banking Sector under the Aspect of Risk Management and Regulation

  • This thesis examines bank-internal, industry-specific and macroeconomic determinants of bank profitability in the Western European banking sector with specific focus on determinants related to risk management and regulation. A linear panel analysis and a dynamic panel data analysis are conducted based on a sample of 53 Western European banks over the post-crisis time period from 2011 until 2019. This time period lies in-between the end of the financial crisis and the beginning of the COVID-19 pandemic. The results of the panel analysis show a stronger relationship between bank profitability and bank-internal determinants than bank-external determinants. Credit risk and operational efficiency are found to be the most significant determinants of profitability. This implies that especially factors in control of the bank management are central to safeguard and advance profitability but regulation is needed to prevent procyclical decision-making by managers.

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Author:Simon Mössler
Advisor:Uwe Hack
Document Type:Bachelor Thesis
Year of Completion:2021
Granting Institution:Hochschule Furtwangen
Date of final exam:2021/02/28
Release Date:2021/04/12
Tag:Bank profitability; Bank regulation; Credit risk; Dynamic panel data; Risk management
Page Number:66
Degree Program:IBW - Internationale Betriebswirtschaft
Functional area:Finance & Accounting
Licence (German):License LogoUrheberrechtlich geschützt