文章基本信息

标题：Credit Quality and Stock Returns of Commercial Banks
本地全文：下载
作者：Nawazish Mirza ; Amir Hasnaoui ; Birjees Rahat 等
期刊名称：Economics Bulletin
电子版ISSN：1545-2921
出版年度：2020
卷号：40
期号：1
页码：1-18
出版社：Economics Bulletin
摘要：Commercial banks exhibit distinctive dynamics that are priced in their stock returns. This paper evaluates conventionalasset pricing models using an exchange rate adjusted portfolio of banking firms from fourteen European countries andproposes a banking specific risk factor. Our findings suggest that credit quality premium (proportion of non-performingloans to total loans and measured as BdMGd - bad minus good) is systematic in nature. Hence, investors demandincremental risk premium for investing in banking stocks with lower credit quality. We also note that the credit qualitypremium is more significant for banks that are smaller in size. We conclude that the variation in stock returns forbanking firms is better explained by an asset pricing framework augmented for credit quality as compared toconventional pricing propositions. These findings have considerable implications for portfolio management and pricingof banking equities, notably in an international context.