Title: The determinants of credit and insolvency risk of European commercial banks: a dynamic panel data analysis

Authors: Wiem Ben Jabra; Zouheir Mighri; Faysal Mansouri

Addresses: Research Laboratory for Economy, Management and Quantitative Finance (LaREMFiQ), IHEC, University of Sousse, Tunisia, Route Hzamia Sahloul 3 – BP n° 40 – 4054 Sousse, Tunisia ' Research Laboratory for Economy, Management and Quantitative Finance (LaREMFiQ), IHEC, University of Sousse, Tunisia, BP n° 10, Route de la plage, Hammam Sousse 4083, Tunisia ' Research Laboratory for Economy, Management and Quantitative Finance (LaREMFiQ), IHEC, University of Sousse, Tunisia, Route Hzamia Sahloul 3 – BP n° 40 – 4054 Sousse, Tunisia

Abstract: This paper investigates the impact of both bank-specific and macroeconomic determinants on banking risk. A dynamic panel data regression analysis is applied to a large sample of 280 commercial banks operating in the euro area during the period 2003-2013. The main empirical results are as follows: (i) Economic growth, inflation, regulatory quality, insurance coverage and bank size are inversely and significantly related to credit risk, while capitalisation and competition are positively and significantly related to credit risk. (ii) Economic growth, inflation, capitalisation and regulatory quality are positively related to insolvency risk, while bank size, competition and deposit insurance coverage are negatively associated to insolvency risk.

Keywords: bank risk; credit risk; insolvency risk; dynamic panel data; bank-specific determinants; macroeconomic determinants.

DOI: 10.1504/IJMEF.2017.084208

International Journal of Monetary Economics and Finance, 2017 Vol.10 No.2, pp.111 - 143

Received: 10 Jul 2015
Accepted: 26 Nov 2015
Published online: 21 May 2017 *

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