Essays on Capital in Banking

My dissertation is on capital in banking. I test and confirm cross section dependence in the U.S. commercial bank data. I therefore perform a unit root test that can handle data with cross section dependence to test for stationarity. I estimate the model in first differences using the Common Correlation Effects Pooled (CCEP) model. The contribution is twofold: first, I identify new variables, such as, federal funds sold and retained earnings that specifically affect depository institutions’ leverage which have not been used in the existing literature, and second, I use recent econometric techniques to account for unobserved common factors with cross section that face common trends and spillovers, while taking into account data with heterogeneous panels that exhibit cross-section dependence. I also track the trajectory of disaggregated deposits and disaggregated loans prior to, during and post the Great Financial Crisis (GFC). I then use an event study methodology to determine the impact of perceived risk, as measured by unused commitments and the provisions for loans and lease losses, on first, disaggregated deposits and second, on loans.

Many thanks to Sathiavanee’s dissertation committee: • Committee Chair – Shawkat Hammoudeh – Professor – Drexel University • Committee Member: Rolph Anderson - Professor – Drexel University • Committee Member: Mehmet Balcilar - Professor- Eastern Mediterranean University • Committee Member: Konstantinos Serfes - Professor – Drexel University • Committee Member: Muhammad Shafiullah - Assistant Professor – University of Nottingham