Does bank capitalization matter for bank stock returns?

Qiubin Huang; Jakob de Haan; Bert Scholtens

doi:10.1016/j.najef.2020.101171

Does bank capitalization matter for bank stock returns?

Qiubin Huang^*, Jakob de Haan, Bert Scholtens

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

We examine US bank capitalization and its association with bank stock returns, and find that the book- and market-based capital ratios show different patterns. Fama-MacBeth regressions and portfolio analyses suggest that banks’ market-based capital ratios are negatively associated with banks’ stock returns during the (tranquil) 1994–2007 period while book-based capital ratios are positively associated with banks’ stock returns during the (turbulent) 2008–2014 period. These results suggest that the effect of bank capitalization on bank stock returns depends on the capital measure used and the period considered.

Original language	English
Article number	101171
Number of pages	23
Journal	North American Journal of Economics and Finance
Volume	52
Early online date	26 Feb 2020
DOIs	https://doi.org/10.1016/j.najef.2020.101171
Publication status	Published - Apr 2020

Keywords

Bank capitalization
Portfolio analysis
Bank stock returns
Fama-MacBeth regressions

Access to Document

10.1016/j.najef.2020.101171

Qiubin_2020_NAJEF_Bankcapitalization_AAM
Copyright © 2020 Elsevier Inc. All rights reserved. This work has been made available online in accordance with publisher policies or with permission. Permission for further reuse of this content should be sought from the publisher or the rights holder. This is the author created accepted manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1016/j.najef.2020.101171
Accepted author manuscript, 1.13 MBLicence: CC BY-NC-ND

Cite this

@article{457e3afcd300451090455a707aa7feb1,

title = "Does bank capitalization matter for bank stock returns?",

abstract = "We examine US bank capitalization and its association with bank stock returns, and find that the book- and market-based capital ratios show different patterns. Fama-MacBeth regressions and portfolio analyses suggest that banks{\textquoteright} market-based capital ratios are negatively associated with banks{\textquoteright} stock returns during the (tranquil) 1994–2007 period while book-based capital ratios are positively associated with banks{\textquoteright} stock returns during the (turbulent) 2008–2014 period. These results suggest that the effect of bank capitalization on bank stock returns depends on the capital measure used and the period considered.",

keywords = "Bank capitalization, Portfolio analysis, Bank stock returns, Fama-MacBeth regressions",

author = "Qiubin Huang and {de Haan}, Jakob and Bert Scholtens",

year = "2020",

month = apr,

doi = "10.1016/j.najef.2020.101171",

language = "English",

volume = "52",

journal = "North American Journal of Economics and Finance",