The Impact of Liquidity on Bank Profitability: Empirical Evidence from European Banking Sector 2008-2015

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi
dc.contributor.advisor Ikäheimo, Seppo Kauppila, Antti 2017-06-13T08:12:56Z 2017-06-13T08:12:56Z 2017
dc.description.abstract Objectives of the study In European level, my study is the first one conducted to explore the new liquidity regulation impact on banks’ profitability. Currently we know that some banks have faced difficulties to meet liquidity levels. In addition, we know that banks adjust their balance sheet to achive compliance with the liquidity target defined in Basel III Accord. What we don’t know is how the balance sheet adjustments impact on banks’ profitability. Previous academic literature shows mixed evidence of the relationship between liquidity and profitability. Data and methodology Using a simple linear OLS – model, I split my sample into two groups to be able to analyze the profitability difference between the groups. The interpretation of profitability difference is made with help of dummy variables. To separate the banks according their liquidity, the distinction is made based on the bank’s Liquidity Coverage Ratio in the end of the year 2014. My sample consist of 128 european banks operating in 24 EU countries over the period 2008 – 2015. Findings of the study My results show that liquidity regulation divides banks into two different group in terms of profitability. After the liquidity regulation comes into effect the profitability decreases more among the banks that didn’t meet the targets in the first place. More specifically, the group of banks that were below the LCR target in 2014 were less profitable compared to banks already above the threshold. The finding is that balance sheet adjustments decrease the performance of the banks as banks try to reach the appropriate liquidity level. As a matter of fact, in terms of profitability liquidity regulation treat banks differently hitting more hard to certain banks’ profitability. Secondly, I find that the banks below the LCR target were less profitable during the whole timeperiod of research (2008 -2015). en
dc.format.extent 47
dc.language.iso en en
dc.title The Impact of Liquidity on Bank Profitability: Empirical Evidence from European Banking Sector 2008-2015 en
dc.type G2 Pro gradu, diplomityö fi Kauppakorkeakoulu fi School of Business en
dc.contributor.department Laskentatoimen laitos fi
dc.subject.keyword liquidity en
dc.subject.keyword bank en
dc.subject.keyword profitability en
dc.subject.keyword regulation en
dc.identifier.urn URN:NBN:fi:aalto-201706135556
dc.type.ontasot Master's thesis en
dc.type.ontasot Maisterin opinnäyte fi
dc.programme Accounting en
dc.subject.helecon laskentatoimi fi
dc.subject.helecon likviditeetti fi
dc.subject.helecon säädökset fi
dc.subject.helecon kannattavuus fi
dc.ethesisid 15021
dc.location P1 I fi

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