Strengthening Bank Stability after the Crisis

48 Pages Posted: 30 Jun 2021 Last revised: 12 Aug 2021

See all articles by Michael Gelman

Michael Gelman

Alfred Lerner College of Business and Economics, The University of Delaware; Wharton School, University of Pennsylvania (visiting)

Doron Greenberg

Ariel University - Department of Economics and Business Administration

Zaheer Khan

University of Aberdeen

Mosi Rosenboim

Ben-Gurion University of the Negev

Date Written: June 20, 2021

Abstract

During normal times, strengthening the financial stability of banks is associated with contradictory effects on returns. In this paper, we establish that liquidity and capital ratios had a positive impact on bank returns during the first three years following the global financial crisis. Our results are robust to different endogeneity and robustness tests. We identify deposit franchise and risk management as two key channels through which stronger financial stability improved bank returns. Our study contributes to a better understanding of the time- varying effects of financial stability and of the benefits of liquidity and capital ratios during normal times and not only in crisis periods.

Keywords: Bank Stability, Global financial crisis, Liquid assets, Capital ratios

JEL Classification: G01, G21, G28, G30, G32, G33

Suggested Citation

Gelman, Michael and Greenberg, Doron and Khan, Zaheer and Rosenboim, Mosi, Strengthening Bank Stability after the Crisis (June 20, 2021). Available at SSRN: https://ssrn.com/abstract=3870723 or http://dx.doi.org/10.2139/ssrn.3870723

Michael Gelman (Contact Author)

Alfred Lerner College of Business and Economics, The University of Delaware; Wharton School, University of Pennsylvania (visiting) ( email )

20 Orchard Rd
United States

Doron Greenberg

Ariel University - Department of Economics and Business Administration ( email )

Israel

Zaheer Khan

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

Mosi Rosenboim

Ben-Gurion University of the Negev ( email )

1 Ben-Gurion Blvd
Beer-Sheva, 84105
Israel

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