Table 4 List, definition, and source of variables used in dynamic panel data analysis
From: Size matters: analyzing bank profitability and efficiency under the Basel III framework
Variable | Definition | Source |
|---|---|---|
Dependent variables | ||
Return on assets (ROA) | Return on assets: pre-tax profit/total assets | Authors calculation |
Efficiency for the entire sample of banks (EFF_A) Efficiency for large and medium-sized banks (EFF LM) Efficiency for small sized banks (EFF_S) | Bias-corrected efficiency scores for each bank i in time t (Simar Wilson correction) | Authors calculation |
Independent variables | ||
Bank specific variables | ||
Return on assets (ROA) | Return on assets: pre-tax profit/total assets | Authors calculation |
Efficiency (EFF) | Relative efficiency of the bank within the 0–1 range | Authors calculation |
Liquidity (LIQ) | Liquidity: total loans/total assets | Authors calculation |
Bank size (LBSIZE) | Bank size: logarithm of total assets | Authors calculation |
Macro (monetary) variables | ||
Long-term interest rate (LTR) | Long-term interest rates are used as a convergence criterion for the European Monetary Union, based on the Maastricht Treaty. Yearly interest rates are calculated based on the monthly averages | Eurostat |
Real gross domestic product growth (GDPG) | Percentage change from previous year | Eurostat |
Herfindahl–Hirschman Index (LHHI) | Herfindahl–Hirschman Index—sum of the squared fraction of bank’s total assets to the total assets within a given country multiplied by 10.000 LHHI = logarithm of HHI | Authors calculation |
Inflation (HICP) | Harmonized Index of Consumer Prices is a measure of change over time in the prices of consumer goods and services | Eurostat |
Regulatory variable | ||
Regulatory variable (REG_DUMMY) | Dummy variable, years 2006 and 2007 (for Basel II), 2013, 2014, 2015 (for Basel III) equal 1, while other years equal 0 | Authors calculation |
Control variables | ||
European Monetary Union (EMU) | Dummy variable: equals 1 if a country is a member of European Monetary Union (19 countries) and 0 otherwise | Authors calculation |
Old EU member countries (EU15) | Dummy variable: equals 1 if a country is a member of old 15 EU countries and 0 otherwise | Authors calculation |