Measuring the Impact of the 2007–2009 Financial Crisis on the Performance and Profitability of U.S. Regional Banks
Advances in Management Accounting
ISBN: 978-1-78441-650-8, eISBN: 978-1-78441-649-2
Publication date: 17 July 2015
Abstract
Purpose
This paper examines how the determinants of bank performance and profitability were affected by the recent systemic banking crisis. We explore the contemporaneous determinants of U.S. regional banks’ performance and profitability before, during, and after the crisis years.
Methodology/approach
We analyze the determinants of three measures of profitability: return on assets, return on equity, and net interest margins.
Findings
We found evidence of lowered bank profitability, credit quality, and scale of lending activities well after the defined crisis period. This coincides with historical evidence that downturns associated with a financial crisis are more severe than downturns due to short-run fluctuations in the business cycle. Banks responded to the crisis by increasing their equity and liquidity levels.
Originality/value
This paper is the first to compare the determinants of bank profitability during the precrisis, crisis, and postcrisis periods. Our study extends previous work by using data from U.S. banks, adding coverage of the years since the banking crisis ended, and considering profitability determinants not previously explored in studies on the effects of the crisis.
Keywords
Citation
Lee, J.Y., Growe, G., DeBruine, M. and Cha, I. (2015), "Measuring the Impact of the 2007–2009 Financial Crisis on the Performance and Profitability of U.S. Regional Banks", Advances in Management Accounting (Advances in Management Accounting, Vol. 25), Emerald Group Publishing Limited, Leeds, pp. 181-206. https://doi.org/10.1108/S1474-787120150000025005
Publisher
:Emerald Group Publishing Limited
Copyright © 2015 Emerald Group Publishing Limited