The Impact of International Financial Crisis on Bank Performance in Eastern and Central European Countries
The Impact of International Financial Crisis on Bank Performance in Eastern and Central European Countries

Summary/Abstract: In this paper we investigate the determinants of bank profitability in 10 countries from Central andEastern Europe, in the period between 2004 and 2013. We proxy the profitability of banks with morecommonly used ratio: the return on assets (ROA), computed as a ratio of the net profit to the total bank assets.We used multiple regression with bank specific variables, banking industry variables and macroeconomicvariables. Moreover, we added a global financial crisis dummy to highlight the crisis impact on asset return.OLS is the main estimation method, but we also used difference-in-difference in order to test if the crisisimpact was amplified or diminished by the bank specific characteristics. The evidence shows significantdifferences between the profit levels of the CEEC banks. Our results are in line with the empirical literature.The impact of the international financial crisis on ROA was negative and statistically significant, as expected.The second part of the analysis we separate the banks sample in three categories: banks with high capitaladequacy, large banks by total assets and foreign-owned banks. Our findings show that the three selectedvariables both amplified and decreased the crisis effect.

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