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Ulrich Haskamp

21 November 2016
WORKING PAPER SERIES - No. 1983
Details
Abstract
This paper examines whether European regions which incorporate banks with a higher intermediation quality grow faster and are more resilient to negative shocks than its less efficient peers. For this purpose, we measure a bank's intermediation quality by estimating its pro t and cost efficiency while taking the changing banking environment after the financial crisis into account. Next, we aggregate the efficiencies of all banks within a NUTS 2 region to obtain a regional proxy for fi nancial quality in twelve European countries. Our results show that relatively more pro t efficient banks foster growth in their region. The link between fi nancial quality and growth is valid both in the pre-crisis and post-crisis period. These results provide evidence to the importance of swiftly restoring bank pro tability in euro area crisis countries through addressing high non-performing loans ratios and decisive actions on bank recapitalization.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
O16 : Economic Development, Technological Change, and Growth→Economic Development→Financial Markets, Saving and Capital Investment, Corporate Finance and Governance
O47 : Economic Development, Technological Change, and Growth→Economic Growth and Aggregate Productivity→Measurement of Economic Growth, Aggregate Productivity, Cross-Country Output Convergence
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe