An International Comparison of Banks' Equity Returns

Journal of Money, Credit and Banking, Vol. 30, No. 3, Part 2 (August 1998)

Posted: 10 Apr 1998

See all articles by Kathryn L. Dewenter

Kathryn L. Dewenter

University of Washington - Michael G. Foster School of Business

Alan C. Hess

University of Washington - Michael G. Foster School of Business

Abstract

This paper tests implications of banking theory and legal theory for cross-country differences in banks' equity betas and returns. Banking theory predicts different risk exposures between transactional banks, found in the U.S., U.K., Australia and Canada, and relationship banks, found in Japan, Germany, Switzerland, and the Netherlands. We find strong empirical support for banking theory's prediction of different risks and returns between transactional and relationship banks. Legal theory predicts that differences in banks' equity risks depend on the nature of the legal system for protecting the interests of outside investors. We find mixed evidence that banks' returns may vary by the type of legal system.

JEL Classification: G21

Suggested Citation

Dewenter, Kathryn L. and Hess, Alan C., An International Comparison of Banks' Equity Returns. Journal of Money, Credit and Banking, Vol. 30, No. 3, Part 2 (August 1998). Available at SSRN: https://ssrn.com/abstract=75055

Kathryn L. Dewenter (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Dept. of Finance & Business Economics
Seattle, WA 98195-3200
United States
206-685-7893 (Phone)
206-685-9392 (Fax)

Alan C. Hess

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States
206-543 4579 (Phone)
206-543-6809 (Fax)

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