This paper seeks to examine the determinants of large bank profitability in the U.S. after the 2008 financial crisis. Panel data is used in this study consisting of 50 large U.S. banks observed from 2011 to 2015, providing a total of 250 observations. This study hypothesizes that five bank-specific factors: capital structure; loan quality; management efficiency; liquidity; and bank size affect bank profitability. Macroeconomic variables are included to account for the economy’s impact on bank profitability. The hypotheses are tested using a random effects G2SLS model to account for endogeneity. Robust standard errors are included to account for potential heteroscedasticity. The results support the hypothesis for management efficiency. Loan quality is also significant; however, its negative relationship with bank profitability was not expected. The results show no evidence to suggest capital structure, liquidity, and bank size affect bank profitability.
Herold, Joshua Jeffrey, "The Determinants of Large Bank Profitability in the United States after the 2008 Financial Crisis: A Theoretical and Empirical Study" (2017). Senior Independent Study Theses. Paper 7477.
Corporate Finance | Finance and Financial Management
bank profitability, capital structure, management efficiency, liquidity, firm size, economic conditions
Bachelor of Arts
Senior Independent Study Thesis
© Copyright 2017 Joshua Jeffrey Herold