The Dynamics of US Bank Profitability
Forthcoming, European Journal of Finance
32 Pages Posted: 15 Dec 2011 Last revised: 21 Mar 2018
Date Written: February 28, 2013
We examine the determinants of profitability for a large sample of US banks over the period 1984-2010. Specifically, we assess the extent to which short-run profits persist, and whether such persistence is affected by changes in regulation and the recent financial crisis. Our findings suggest that the competitive process reduces positions of abnormal profitability, albeit this is not immediate. There is also evidence that changes in regulation enacted during the 1990s affected both the level and persistence of bank profitability. The financial crisis of 2007-2010 appears to have resulted in an increase in the persistence of bank profitability.
Keywords: banking, crisis, deregulation, profitability, persistence, regulation
JEL Classification: G21, L11
Suggested Citation: Suggested Citation