Financial Structure and Bank Profitability
Countries differ in the extent to which their financial systems are bank-based or market-based. The financial systems of Germany and Japan, for example, are considered bank-based because banks play a leading role in mobilizing savings, allocating capital, overseeing investment decisions of corporate...
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| Format: | Publications & Research |
| Language: | en_US |
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World Bank, Washington, DC
2015
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| Online Access: | http://hdl.handle.net/10986/21368 |
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okr-10986-21368 |
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okr-10986-213682021-04-23T14:04:01Z Financial Structure and Bank Profitability Demirgüç-Kunt, Aslı Huizinga, Harry accounting assets assets of deposit money assets of deposit money banks balance sheet balance sheets bank assets bank lending bank performance bank profits banking sector banking sector development banking system bankruptcy banks book value borrowing capital adequacy capitalization central bank central bank assets commercial bank contract enforcement corporate finance corporate managers country data credit risk creditor rights deposit interest deposit rates deposits developed countries earning assets earning power economic development economic growth economists empirical evidence financial dependence financial development financial intermediaries financial regulation financial sector financial structure financial structures financial system financial systems foreign banks GDP GDP per capita high interest rates income income groups income statements inflation interest expense interest income interest margin interest rate interest rates international banking lending rates loan defaults low interest market capitalization monetary economics net interest margin operating costs overhead costs political economy private sector profitability regression analysis risk management savings stock market stock markets taxation wages financial systems bank ratings profitability banking regulation market-based instruments savings behavior capital assets investments risk management industrialized societies developing countries financial development performance indicators stock markets trading arrangements transactions competition policy Countries differ in the extent to which their financial systems are bank-based or market-based. The financial systems of Germany and Japan, for example, are considered bank-based because banks play a leading role in mobilizing savings, allocating capital, overseeing investment decisions of corporate managers, and providing risk management vehicles. The systems of the United States, and the United Kingdom are considered more market-based. Using bank-level data for a large number of industrial and developing countries, the authors present evidence about the impact of financial development, and structure on bank performance. They measure the relative importance of bank or market finance by the relative size of stock aggregates, by relative trading or transaction volumes, and by indicators of relative efficiency. They show that in developing countries, both banks and stock markets are less developed, but financial systems tend to be more bank-based. The richer the country, the more active are all financial intermediaries. The greater the development of a country's banks, the tougher is the competition, the greater is the efficiency, and the lower are the bank margins, and profits. The more under-developed the stock market, the greater are the bank profits. But financial structure per se does not have a significant, independent influence on bank margins, and profits. 2015-01-30T15:26:41Z 2015-01-30T15:26:41Z 2000-08 http://hdl.handle.net/10986/21368 en_US Policy Research Working Paper;No. 2430 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Germany Japan United Kingdom UNITED STATES |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
en_US |
| topic |
accounting assets assets of deposit money assets of deposit money banks balance sheet balance sheets bank assets bank lending bank performance bank profits banking sector banking sector development banking system bankruptcy banks book value borrowing capital adequacy capitalization central bank central bank assets commercial bank contract enforcement corporate finance corporate managers country data credit risk creditor rights deposit interest deposit rates deposits developed countries earning assets earning power economic development economic growth economists empirical evidence financial dependence financial development financial intermediaries financial regulation financial sector financial structure financial structures financial system financial systems foreign banks GDP GDP per capita high interest rates income income groups income statements inflation interest expense interest income interest margin interest rate interest rates international banking lending rates loan defaults low interest market capitalization monetary economics net interest margin operating costs overhead costs political economy private sector profitability regression analysis risk management savings stock market stock markets taxation wages financial systems bank ratings profitability banking regulation market-based instruments savings behavior capital assets investments risk management industrialized societies developing countries financial development performance indicators stock markets trading arrangements transactions competition policy |
| spellingShingle |
accounting assets assets of deposit money assets of deposit money banks balance sheet balance sheets bank assets bank lending bank performance bank profits banking sector banking sector development banking system bankruptcy banks book value borrowing capital adequacy capitalization central bank central bank assets commercial bank contract enforcement corporate finance corporate managers country data credit risk creditor rights deposit interest deposit rates deposits developed countries earning assets earning power economic development economic growth economists empirical evidence financial dependence financial development financial intermediaries financial regulation financial sector financial structure financial structures financial system financial systems foreign banks GDP GDP per capita high interest rates income income groups income statements inflation interest expense interest income interest margin interest rate interest rates international banking lending rates loan defaults low interest market capitalization monetary economics net interest margin operating costs overhead costs political economy private sector profitability regression analysis risk management savings stock market stock markets taxation wages financial systems bank ratings profitability banking regulation market-based instruments savings behavior capital assets investments risk management industrialized societies developing countries financial development performance indicators stock markets trading arrangements transactions competition policy Demirgüç-Kunt, Aslı Huizinga, Harry Financial Structure and Bank Profitability |
| geographic_facet |
Germany Japan United Kingdom UNITED STATES |
| relation |
Policy Research Working Paper;No. 2430 |
| description |
Countries differ in the extent to which their financial systems are bank-based or market-based. The financial systems of Germany and Japan, for example, are considered bank-based because banks play a leading role in mobilizing savings, allocating capital, overseeing investment decisions of corporate managers, and providing risk management vehicles. The systems of the United States, and the United Kingdom are considered more market-based. Using bank-level data for a large number of industrial and developing countries, the authors present evidence about the impact of financial development, and structure on bank performance. They measure the relative importance of bank or market finance by the relative size of stock aggregates, by relative trading or transaction volumes, and by indicators of relative efficiency. They show that in developing countries, both banks and stock markets are less developed, but financial systems tend to be more bank-based. The richer the country, the more active are all financial intermediaries. The greater the development of a country's banks, the tougher is the competition, the greater is the efficiency, and the lower are the bank margins, and profits. The more under-developed the stock market, the greater are the bank profits. But financial structure per se does not have a significant, independent influence on bank margins, and profits. |
| format |
Publications & Research |
| author |
Demirgüç-Kunt, Aslı Huizinga, Harry |
| author_facet |
Demirgüç-Kunt, Aslı Huizinga, Harry |
| author_sort |
Demirgüç-Kunt, Aslı |
| title |
Financial Structure and Bank Profitability |
| title_short |
Financial Structure and Bank Profitability |
| title_full |
Financial Structure and Bank Profitability |
| title_fullStr |
Financial Structure and Bank Profitability |
| title_full_unstemmed |
Financial Structure and Bank Profitability |
| title_sort |
financial structure and bank profitability |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://hdl.handle.net/10986/21368 |
| _version_ |
1764448057377685504 |