6533b7dbfe1ef96bd1270816

RESEARCH PRODUCT

Bank Stability: The Case of Nordic and Non-Nordic Banks in Latvia

Yannis ThalassinosEleftherios ThalassinosSyeda Hina ZaidiRamona Rupeika-apoga

subject

Inflationbusiness.industrymedia_common.quotation_subjectStability (learning theory)Financial systemLiquidity risk01 natural sciencesGeneral Business Management and AccountingBanking industry010305 fluids & plasmasMarket liquidity03 medical and health sciences0302 clinical medicine0103 physical sciencesProfitability index030212 general & internal medicinebusinessGeneral Economics Econometrics and FinanceRisk managementmedia_commonCredit risk

description

The banking industry is facing huge challenges due to technology-enabled innovation, to changes in customer preferences, to bank de-risking and to new regulatory initiatives. To go through all these changes, banks need to be stable. The present study contributes to the empirical literature by identifying the determinants of stability of banks in the Latvian Banking Industry. This study covers both bank-specific (endogenous) factors and macroeconomic (exogenous) factors that impact the stability of banks. The data set used in this study is the annual financial statements of Latvian banks operated in the period 2003-2016. Using multivariate regression analysis techniques, we found evidence that credit risk and efficiency ratio have a significant negative impact on banks\' stability, whereas size of the bank, liquidity ratio, profitability, inflation and GDP growth have significant positive impact on bank\'s stability. We made comparison of bank-specific variables performance for Nordic-owned and non-Nordic-owned banks. Credit and liquidity risks, as well as efficiency ratio for Nordic-owned banks during the research period were higher, whereas size of the banks and profitability were better. Comparing measurement results of stability of banks, we received that Nordic-owned banks performance between 2003 to 2016 was better than non-Nordic-owned banks performance.

https://doi.org/10.35808/ijeba/156