Abstract
Purpose: The goal of the paper is to analyse the determinants of the level of ROE (return on equity) for two groups of banks, interrelated by capital links, and their banking sectors.
Highlights
The share of foreign capital in the banking sectors of Central, Eastern and Southeastern European countries (CESEE) is high, which is an issue for the economic discussion and for the political debate in this region
What are the differences between global systemically important banks (G-SIBs) and their subsidiaries in CESEE in ROE drivers? There are four variables whose impact differed: leverage, growth of capital, GDP and the share of big investors
The increased leverage had a positive impact on their performance due to the traditional type of business and less risk incurred
Summary
The share of foreign capital in the banking sectors of Central, Eastern and Southeastern European countries (CESEE) is high, which is an issue for the economic discussion and for the political debate in this region. The decision to enter any foreign market is usually preceded by an in-depth analysis of business opportunities The expected performance, such as ROE, is one of the factors used to decide either to enter or to maintain presence on a given market. Higher capital levels usually decrease the return on equity This may force banks to search for new business opportunities that may increase the risk to their portfolios (e.g., Iwanicz-Drozdowska, 2014). In the future, these regulations may be of great importance to the operations on local markets, outside the G-SIB country of registration. The paper is organized as follows: the first section presents a review of the literature, the second section explains the data and methodology, and the third section presents empirical results, followed by final conclusions
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