City Research Online

Is There an Optimal Level of Leverage? The Case of Banks and Non-Bank Institutions in Europe

Cincinelli, P., Pellini, E. & Urga, G. ORCID: 0000-0002-6742-7370 (2024). Is There an Optimal Level of Leverage? The Case of Banks and Non-Bank Institutions in Europe. International Review of Financial Analysis, 94, article number 103323. doi: 10.1016/j.irfa.2024.103323


In this paper, we evaluate whether banks and non-banks size and systemic risk are a�ected by their level of leverage. We implement a threshold analysis to a sample of European traditional banks and non-banks (Finance services and Real Estate Finance Services) over 2006:1-2019:4. We �nd that Finance Services show positive co-movements between leverage and size, independently of the level of leverage, while for traditional banks the level of leverage matters. Both banks and non-banks show positive correlation between leverage and systemic risk. During periods of crisis, SRISK measure of systemic risk allows to identify an optimal level of leverage.

Publication Type: Article
Additional Information: © 2024. This manuscript version is made available under the CC-BY-NC-ND 4.0 license in new tab/window)
Publisher Keywords: Leverage; Systemic Risk; Threshold Model; Panel Data
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School
Bayes Business School > Finance
SWORD Depositor:
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