Equity Returns in the Banking Sector in the Wake of the Great Recession and the European Sovereign Debt Crisis

23 Pages Posted: 1 Nov 2012

See all articles by Jorge A. Chan-Lau

Jorge A. Chan-Lau

International Monetary Fund (IMF) - International Capital Markets Department; National University of Singapore (NUS) - Risk Management Institute; Tufts University - Fletcher School of Law and Diplomacy

Estelle Liu

International Monetary Fund

Jochen Schmittmann

International Monetary Fund (IMF)

Date Written: July 2012

Abstract

This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk and to a lesser extent, by deteriorating funding conditions and investor sentiment. While the equity return performance in the banking sector has been dismal in general, better capitalized and less leveraged banks have outperformed their peers, a finding that supports policymakers’ efforts to strengthen bank capitalization.

Keywords: Banks, Equity Returns, Sovereign Risk, Sovereign Debt Crisis, Economic Growth, Regulatory Capital, Panel Data Econometrics, Banking Sector, Credit Risk, Economic Recession, General Financial Markets

JEL Classification: G14, G21

Suggested Citation

Chan-Lau, Jorge Antonio and Liu, Estelle and Schmittmann, Jochen, Equity Returns in the Banking Sector in the Wake of the Great Recession and the European Sovereign Debt Crisis (July 2012). IMF Working Paper No. 12/174, Available at SSRN: https://ssrn.com/abstract=2169719

Jorge Antonio Chan-Lau (Contact Author)

International Monetary Fund (IMF) - International Capital Markets Department ( email )

700 19th Street NW
Washington, DC 20431
United States

National University of Singapore (NUS) - Risk Management Institute ( email )

21 Heng Mui Keng Terrace
Level 4
Singapore, 119613
Singapore

Tufts University - Fletcher School of Law and Diplomacy ( email )

160 Packard Ave
Medford, MA 02155
United States

HOME PAGE: http://fletcher.tufts.edu/ceme/index.shtml

Estelle Liu

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jochen Schmittmann

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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