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

By Jorge A Chan-Lau, Miss Estelle X Liu, Jochen M. Schmittmann

July 1, 2012

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Jorge A Chan-Lau, Miss Estelle X Liu, and Jochen M. Schmittmann Equity Returns in the Banking Sector in the Wake of the Great Recession and the European Sovereign Debt Crisis, (USA: International Monetary Fund, 2012) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Banking, Capital adequacy requirements, Commercial banks, Financial crises, Financial institutions, Financial regulation and supervision, Financial services, Stocks, Yield curve

Keywords: Bank, Bank CDS premia, Banking sector, Banks, Capital adequacy requirements, Capital ratio, CDS spread, Commercial banks, Economic growth, Equity, Equity price, Equity return, Equity returns, Financial crisis, Funding, Global, Investor base, Panel data econometrics, Regulatory capital, Return performance, Sovereign debt crisis, Sovereign risk, Stocks, Tier 1, Tier 1 capital ratio, WP, Yield curve

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/174
Stock No:

WPIEA2012174
ISBN:

9781475505221
ISSN:

1018-5941

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