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The Relevance of Foreign Ownership and Financial Liberalization for Determining Banking Risk: A Comparative Analysis of European Countries
Abstract
The goal of this study is to empirically identify how foreign capital group and financial liberalization affect the risk profiles of the banking sector in Europe. Through a dataset that covers 381 European banks spanning the 1995–2015 period and the methodology of panel regression, the empirical findings document the heterogeneity of banking risk determinants. We examine the implications of banks’ risk adjusted ROA that manifest themselves as spreading and growing instability. It also contributes to the literature by focusing on a group of countries from Central and Eastern and Advanced Europe that have not been studied before. The extended model provides a causal link between the risk in the banking sector and the growth of the financial sector and economy.
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DOI: http://dx.doi.org/10.17951/h.2017.51.5.139
Date of publication: 2017-12-22 12:02:45
Date of submission: 2017-04-18 18:36:55
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