Disentangling the Texas ratio: the case of the Italian banking sector
by Andrea Ferrarin; Maurizio Polato; Giulio Velliscig
International Journal of Managerial and Financial Accounting (IJMFA), Vol. 12, No. 3/4, 2020

Abstract: According to the ECB, the Texas ratio represents a key performance indicator that shows the dependency between the NPLs and the level of bank capitalisation. Using a sample of twelve Italian listed banks, we disentangle the main drivers of the Texas ratio and evaluate its impact on profitability, probability of default and price-to-book value. Our findings question the overall effectiveness of the restructuring measures undertaken by both supervisory and regulatory authorities to cope with the NPLs' issue.

Online publication date: Tue, 12-Jan-2021

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