Arbeitspapier
The long-term relationship between capital and earnings in banking
Contrary to received wisdom, some recent studies report a negative relationship between leverage and profitability in banking in the 1980s and early 1990s. This study presents new data on the leverage and profitability of Swedish commercial banks in 1870-2001, and explores the sign of the relationship in the long term. In the studied period, the capital-asset ratio decreased by a factor four, while return-on-equity more than doubled. The leverage formula postulates a positive linear relationship between return-on-equity and the debt-equity ratio. A strong positive linear relationship was found over the period 1871-1980, but not in 1980-2001. Thus, while supporting the results of the previous studies, a long-term normal positive relationship between leverage and profitability is also reaffirmed.
- Sprache
-
Englisch
- Erschienen in
-
Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 611
- Klassifikation
-
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Economic History: Financial Markets and Institutions: Europe: Pre-1913
Economic History: Financial Markets and Institutions: Europe: 1913-
- Thema
-
Return-on-equity
Leverage
Bank capital
Bank
Return on Investment
Betriebsergebnis
Kapitalstruktur
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Hortlund, Per
- Ereignis
-
Veröffentlichung
- (wer)
-
Stockholm School of Economics, The Economic Research Institute (EFI)
- (wo)
-
Stockholm
- (wann)
-
2005
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Hortlund, Per
- Stockholm School of Economics, The Economic Research Institute (EFI)
Entstanden
- 2005
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