Essays on the european banks financial stability, profitability, and efficiency;

Resumo

As a result of the financial crisis of 2007-2008, all banking systems in Europe experienced a complete overhaul. These major changes justify the motives for this research, which has been based on three essays on the European banking sector. The first essay analyses the effects of bank competition on a banks financial stability. Using a sample of 117 listed banks from 16 Western European countries from the period 2011 - 2018, the main findings indicate that an excessive increase in competition tends to generate financial instability, especially in countries where banking systems have low financial stability. In the second essay, the effect of the implementation of negative interest rate policies on the profitability and risk of banks is evaluated. Considering a sample of 2,596 banks from 29 European countries in the period 2011- 2019, the results obtained have led us to conclude that the implementation of a negative interest rate policy reduces the net interest margin and the profitability of most banks, but it does not lead to the adoption of investment strategies with high risk exposure. However, these conclusions are not applicable to all banks, which differ according to the business models adopted by each bank. In the third essay, the impact of adopting socially responsible policies on banking efficiency is analysed. Based on a sample of 108 listed banks from 21 European countries during the period 2011 - 2019, it is concluded from the evidence of a U-shaped relationship between corporate social performance and banking efficiency that banks with good performance in the social area and with high quality governance models are the most efficient.