Long-term Relationship Between Internet Banking and Bank Performance in Europe

Abstract

In this study, long-term interactions are investigated between internet banking and bank profitability performance. Pedroni cointegration tests and then estimations of the error correction model are made for the data from 2005 to 2014 for the European Union countries. ROA and ROE ratios are taken into account as a bank performance criteria. Analysis has not only been limited to the entire sample, but also the two sub-samples were analyzed as Euro Area countries and member countries outside it. The findings of previous similar studies have shown that short-term interaction between bank profitability and internet banking in Europe. The conclusion of this study is the relationship between long-term profitability of banks and internet banking have shown that only exist in EU countries outside the euro area. Lack of long-term impact on the profitability can be considered as reasonable for the Euro Area counries internet banking markete had reached a certain maturity because of advanced economical and financial structures. However, profitability on a long-term equilibrium relationship is not surprising in consequence of internet banking market is under development in the union members outside the euro area except for Denmark, Britain and Sweden.