Financial and Macroeconomic Drivers of Bank Profitability: Evidence From Greek Systemic Banks During 2009-2019

Financial and Macroeconomic Drivers of Bank Profitability: Evidence From Greek Systemic Banks During 2009-2019

Panagiotis Barkas (Hellenic Observatory, London School of Economics, UK, & European Securities and Markets Authority (ESMA), France & Hellenic Foundation for European and Foreign Policy (ELIAMEP), Greece), Theodoros Kounadeas (National and Kapodistrian University of Athens, Greece & Hellenic Observatory, London School of Economics, UK), and Nikolaos Dimitrios Spatharakis (Hellenic Open University, Greece)
Copyright: © 2022 |Pages: 22
DOI: 10.4018/IJCFA.312568
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This paper aims at investigating the factors that affected the profitability of Greek systemic banks during the period 2009-2019. The authors initially review the findings of relevant international literature. Then, details of the methodology followed are provided and the variables that constitute the model are explained. Based on those, they investigate econometrically the factors that influenced banks' return on assets. The econometric analysis establishes that the ability of Greek systemic banks to generate profits through the use of their assets, during the period 2009-2019, was shaped under the influence of the debt crisis, which turned into a financial crisis, as well as specific financial and macroeconomic factors.
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Literature Review

According to Katsimi and Moutos (2010), the situation that led to the Greek crisis mainly featured bureaucracy, vested interests and relations between private interests and the public sector, which contributed to the mismanagement of public resources, tax evasion and the deterioration of the quality of public services. At the macroeconomic level, governments proved to have been unable to reduce the fiscal deficit. On the side of the Greek statistical authorities, there may have been not only misrepresentation of data, but also significant errors on the side of European partners. The latter revealed the weakness or reluctance in their reactions to the visible signs of Greek failure, such as the chronically large current account deficits. In this regard, Kotios and Roukanas (2013) analysed the Greek financial crisis in light of the functional responsibilities and inadequacies of eurozone governance. Some of the dimensions of the management of the Greek crisis are the weaknesses of the European decision-making mechanism and European leadership, the economic nationalism displayed by some member states, the risks of contagion of the crisis to the Eurozone and the overreactions of markets and credit rating agencies.

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