Coronavirus pandemic impact on bank performance

Abstract

This study examines the effects of the coronavirus (COVID-19) epidemic on the performance of the banking sector. Our sample consists of 1,575 banks in 85 countries from 2020Q1 to 2021Q4. The findings demonstrate that the COVID-19 outbreak has significantly decreased bank performance. Moreover, the adverse impact of COVID-19 on the bank’s performance depends on the bank’s and country-specific aspects. The adverse effect of the COVID-19 outbreak on bank performance is higher in smaller, undercapitalized, and less diversified banks. At the same time, a better institutional environment and financial development have significantly increased the strength and resilience of banks. The results are quite robust to using the alternative bank performance measures and estimation techniques. These findings provide practical implications for regulators and policymakers in the face of unprecedented uncertainty caused by COVID-19 epidemics.