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’ 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.
Citation
Huang , Q , de Haan , J & Scholtens , B 2020 , ' Does bank capitalization matter for bank stock returns? ' , North American Journal of Economics and Finance , vol. 52 , 101171 . https://doi.org/10.1016/j.najef.2020.101171
Publication
North American Journal of Economics and Finance
Status
Peer reviewed
ISSN
1062-9408Type
Journal article
Rights
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
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