Tax Crimes that Could Get You in Jail Tax Evasion: Any action done to escape a tax assessment, such as filing a fake return, can result in a five-year prison sentence. Failure to File a Return: Failure to file a return can result in a one-year jail sentence for each year you fail to do… Continue reading Tax Crimes that Could Get You in Jail
GENERALIZED METHOD OF MOMENTS Recent academic research towards profitability in the banking sector uses generalized method of moments (GMM) techniques to overcome the above mentioned problems of pooled ordinary least squares techniques. In contrary to OLS, GMM techniques do not make assumptions surrounding the distribution of the data (i.e. normality or skewness). In this context,… Continue reading BANK’S GENERALIZED METHOD OF MOMENTS.
METHODOLOGY The previous chapter selected the dependent variable and independent variables based on academic literature. Consequently, this paragraph describes the methodology that is used in the empirical analysis to test the different hypotheses. Modeling is based on panel data techniques. Panel data or longitudinal data, comprises of both cross-sectional elements and time-series elements; the cross-sectional… Continue reading The dependent variable and independent variables.
SUMMARY The empirical part of this thesis use widely employed determinants for profitability in banking literature. In particular, several independent variables are very similar to those employed by Dietrich and Wanzenried (2011) in order to compare results found in the Swiss banking market with results of this study towards the European banking market. Accordingly, the… Continue reading Profitability in banking literature.
Effective tax rate: The analysis of determinants of banks’ profitability is based on the dependent variable ROAA. The profitability ratios use after tax profits in the numerator, hence the amount of taxes paid affect the profitability measures. Including the effective tax rate controls for differences in the individual countries’ tax regime under which banks operate.… Continue reading Banks’ profitability based on the dependent variable ROAA.
Table 2 Selection of the determinants of profitability and used data source. Variables Description Expected sign Data source Dependent variable: banks’ profitability ROAA Return on average assets, net income divided by average asset Bankscope Independent variables Bank-specific variables Equity to total asset in % This ratio is… Continue reading The determinants of profitability and used data source.
MACROECONOMIC VARIABLES Among others, Dietrich and Wanzenried (2011) use several macroeconomic control variables that probably affect banks’ performance. The macroeconomic control variables are external for banks’ managers and uncontrollable. The growth of real gross domestic product (GDP) is selected as proxy for the business cycle and the effective tax rate as proxy for differences in… Continue reading BANK’S MACROECONOMIC VARIABLES.
Ownership structure: To capture the potential effect of the ownership structure on banks’ profitability, banks are classified into three groups based on different ownership forms. First, a category is created for banks listed on a stock exchange (controlled by shareholders). Second, banks organized in a mutual or co-operative structure are classified into a separate group.… Continue reading The ownership structure on banks’ profitability
INDUSTRY-SPECIFIC VARIABLES Characteristics of the national banking sectors are used to control for variation in profitability arising by differences between countries. Furthermore, this section includes the bank size and ownership variables because those variables are to some extent external. Managers cannot change the variables immediately and they stand in relation to the characteristics of the… Continue reading BANK’S INDUSTRY-SPECIFIC VARIABLES.