Banking Profitability and Performance Management ... totally serve the purpose of measuring how effectively a bank is functioning in relation to its size and does not truly reflect its asset efficiency. Thus, the paper gives some support to a policy of imposing higher capital requirements in the region in order to strengthen financial stability. Data were analyzed using multiple regression method. specific; market concentration as industry, termed as total share holders’ funds. Finally , the e f fect of inflation is also another important determinant of banking performance. 3268 0 obj <>stream The purpose of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants on banks' profitability in Ethiopia. The loans market, especially credit to households and firms, is risky and has a greater expected return than other bank assets, such as government securities. Using bank data for 80 countries for 1988-95, Demirgüç-Kunt and Huizinga show that differences in interest margins and bank profitability reflect various determinants: ° Bank characteristics. (EVA). The impact of the Asian financial crisis is negative, while Korean banks have been relatively more profitable during the pre-crisis compared to the post-crisis period. indicators such as inflation, interest rates, Hausman test, Chi-square =27.6, and P-value, bank’s management has control. affect bank performance (ROA, ROE and EVA) significantly and negatively. In the business of banking, banks do not only invest the received deposits to meet future obligations but also to make a profit. Also staff terminal benefits and board size correlate negatively and significantly with ROA while employee productivity and capital adequacy show positive significant relationship with ROA. This study entitled, “THE DETERMINANTS OF BANK FINANCIAL PERFORMANCE”: Evidence from selected Ethiopian Commercial banks, aims to investigate the factors determining the banks financial performance. ° Macroeconomic conditions. This study mainly evaluated the effect of Board composition on the performance of deposit money banks (DMBs) in Sub Saharan Africa (SSA) with special focus on the critical mass question. negative relation with ROA and insignificant and negative relation with ROE and EVA. The impacts of credit risk and overhead costs are always negative whether we control for the macroeconomic and financial conditions or not. The estimation results show that expenses management, capitalization, and loan intensity significantly affect bank performance. Secondary data on six SSA countries and twelve banks collected for the period 2004 to 2016 were used. There are two categories of empirical studies. We find that apart from credit risk, higher returns on assets are associated with larger bank size, activity diversification, and private ownership. Finally they checked there is little evidence of a systematic relationshi, conclude that Bank profits are high in Sub-Sahara, As financial intermediaries, banks play an important role in t, attention in various literatures on this, payment services or savings accounts. Bank liquidity risk and performance, in Proc. Generally, there is study conducted on the determinants of bank profitability in commercial bank of Ethiopia so as to suggest improvements in the future. – High return on average assets (ROAA) was found to be associated with well‐capitalized banks and lower cost to income ratios. The results. determinants of bank profitability and explore the relationship between profits and equity in the region. On the other hand, LIQ and This policy can adjust to enhance pro, ratio was associated with low bank profitability. Specialization and other Determinants of Non-Commercial Bank Financial Institution's Profitability: Emperical Evidence from Malaysia. – specific determinants and profitability. Panel data regression approach was employed under fixed and random effects models. Using panel data techniques, this paper seeks to study the determinants bank asset quality and profitability using robust data sets for the period from 1997-2009. Determinants of default risk of banks in emerging economies have so far received inadequate attention in the literature. It is recommended among others that organizational restructuring by deposit money banks should be handled with caution so as to minimize the usual negative reactions of surviving and retrenched employees which could reduce productivity and profitability. Causation in the Granger sense from returns on assets to capital occurs with a considerable lag, implying that high returns are not immediately retained in the form of equity increases. We develop propagation mechanisms with testable implications to isolate the sources of persistence. – The approach is to use an unbalanced pooled time series dataset of 23 banks. Bank size and financial ratios are taken as variables such as efficiency / profitability ratios, capital / leverage ratios, liquidity ratios and, The objective of this study is to empirically assess the effect of bank-specific and macroeconomic Keywords: bank profitability, credit, risk premia, emerging markets, interest rates. This shows that, new and potential demand for financial se, of banks managers to anticipate exchange rate fluctuations. This is because the default risk is lower in upturn than in, interest rate policy. statistically significant. A positive relationship between capital adequacy and performance of commercial banks in Kenya was established. Unpublished Master’s thesis, Erasmus University, schoo, Peiyi Yu an Dwerner Neus. – The paper's value lies in showing that money supply growth has no significant impact on profits, whereas the ratios banks' assets to GDP, stock market capitalization to banks assets and concentration are all statistical significant and negatively related to ROAA. 2006 to 2015 by using multiple regression on a sample of seven private commercial banks. On, interest rate spread and exchange rate have sta, external environment together to improve their bank performance in general and, Keywords: Banking Industry, Determinants, opportunities for growth and challenges for bankin, increasingly competitive environment. is concluded that Non Interest Income, Non Interest Expense, Loan Loss Provisions, Equity, Total Assets, GDP, Market Capitalization have significant effect on ROA. The finding is consistent with previous studies undertaking by (Olweny and Shipho, 2011;Dang, 2011; ... • According to our results, there is a negative relationship between personnel expenses/asset ratio and return on assets. Specific objectives are determination of the effect of women directors and board composed of more non-executive directors on return on assets (ROA) and net interest margin (NIM) of the banks. �2�Q������n�{! The findings also suggest reasons for the recent record profitability of the industry. It could be Determinants of Banking Profitability: A Comparison of Islamic and Conventional Banks @inproceedings{Gunnarsdttir2013DeterminantsOB, title={Determinants of Banking Profitability: A Comparison of Islamic and Conventional Banks}, author={Elisa Hrund Gunnarsd{\'o}ttir and Matylda Mostepan}, year={2013} } When we come to previous studies on Sub Saharan African countries, including Ethiopia, Flamini et al. Most of the studies consider internal factors (i.e., banks’ specific) and external, for both categories, according to the natu, Internal determinants of bank profitability can be defined as those factors that are, (Athanasoglou, 2006, kasmidou, 2008 and Sufian, 2011). Avai, sector. (2009) have made a study on the determinants of commercial bank profitability in the region by using a sample of 389 … CAP, ASQ, ME, LIQ, BS and GDP as these were found to have significant effect on private commercial Cambridge Core - Econometrics and Mathematical Methods - Introductory Econometrics for Finance - by Chris Brooks. This study examines the bank-specific, industry-specific and macroeconomic factors that affect bank profitability of nine commercial banks in Ethiopia, during the period of 2007-2016. Furthermore, higher diversification regarding banks' income sources towards derivative instruments and other fee-based activities shows a positive effect. Furthermore, the evidence of the impact of macroeconomic environment cannot be confirmed due to insignificant result. determinants of Ethiopian private commercial banks financial performance using three measures Extension in the period of analysis may tend to further study. The effect of internal and external determinants of the bank profitability in … The present paper seeks to examine the determinants of Philippines banks profitability during the period 1990–2005. Hicks (1935) assumes as much, proposing, in his ‘quite life’ hypothesis, that monopoly will reduce the pressure towards efficiency. 20. Francis (2010) also noted that as t, reflected lack of competiveness and inefficiency in the SSA bank, With the context of the above discussion, specifically in Ethiopia the banking, interest rate and inflation as macroeconomic, variables employee efficiency and productivity, Reg, of profitability which are not included in previous study. Panel data regression approach was employed with model selection subjected to Hausman tests. all notice a positive relationship between interest rates and bank profitability. Particularly the study will try to find answers to: These data are collected for the top sixteen global banks and the sample spans 35 years Profitability of the banking sector is also central as the well-being of the industry is closely associated with the wellness of the whole economy in general. The internal factors that influence profitability are: bank size, financial structure, credit risk taken, liquidity risk, business mix, income-expenditure structure and capital adequacy. Our analysis suggests that different processes underlie persistence at the high and low ends of the performance distribution. The implication of this finding is that investing in short-term, less risky securities like government treasury bills rather than holding liquid assets leads to increased profitability. banks financial performance. Size was positive in all cases but statistically significant only when the macroeconomic and financial structure variables entered the models. The results also indicate moderate persistence in profitability. asset quality ratios. Based on the result of analysis, it. And finally they conclude that Bank profits are high in Sub-Sahara n Africa (SSA) as compared to other re gions. An important, profits (Athanasoglou, 2005). The estimation results indicate that, with the exception of liquidity, all bank-specific determinants significantly affect bank profitability in the anticipated way. Access scientific knowledge from anywhere. Specific objectives are examination of the effect of staff terminal benefits, employee productivity, capital adequacy and board size on return on assets (ROA) of the banks. We find that apart from credit risk, higher returns on assets are associated with larger bank size, activity diversification, and private ownership. Purpose The study applied balanced panel data of eight Ethiopian commercial banks that covers the In that respect, this paper analyses determinants of profitability for the Taiwanese banking system using bank- specific, industry-specific and macroeconomic factors, under a quarterly dataset, for the period 2002 to 2007. The study on determinants of bank profitability is done either bank from individual country or cross-country. determinants of profitability: empirical study on ethiopian MFIs ° General financial structure. Concentration and other determinants of bank profitability in Europe, North America and Australia Corpus ID: 109934485. Their study also found that macroeconomic. ROA and significant and negative relation with ROE and EVA. In case of Ethiopia, there are few (finger counted) studies undertaken related to factors affecting banks profitability [1,9,14. However, the outcome of NIM regression shows that the coefficient. The effect of bank-specific, industry-specific and macroeconomic determinants is examined. Therefore, Ethiopian commercial banks policy makers and managers should give high emphasis on This paper uses a sample of 389 banks in 41 SSA countries to study the determinants of bank profitability. Findings indicated among others that capital adequacy and employee productivity have positive significant effect on ROA while staff terminal benefits and board size exhibit negative insignificant effect. @inproceedings{Kutsienyo2011TheDO, title={The Determinant of Profitability of Banks in Ghana}, author={Lawrence Kutsienyo}, year={2011} } figure 1.1 table 2.1 … evaluating bank profitability. We can accept that this ratio is a proxy for management efficiency, Commercial banks are major component of financial sector and take part in the growth of economy. namely, return on assets (ROA), return on equity (ROE) and economic value added (EVA) for the period Thus the increase of those variables will lead to a decrea, relative to income, was negative and statistically significant for both ROA and NIM. Turning to macroeconomics and financial structure, the growth of gross domestic product (GDP) has a significant and positive impact on ROAA, while inflation has a significant negative impact. This research sampled 20 banks listed in Indonesia Stock Exchange during the research period that is 2003 to 2011. Join ResearchGate to find the people and research you need to help your work. Findings The GDP per capita grow, the association between economic growth and financial sector performance. {P�b�(�����!a7�E!��Y �:+J� � �uC���!a�+�H U�M)"�iH��κ;}PV�>�I�����lDq�_�5jC�t+��X��mʪ1A55�婬a�QMM ����mO8��9��Q@�2`FP;�����Ą�a^���'��3t콦 ��i�4�&��+� J�>z� ��yPt�;���0@�ue�PLW�r�� 1����Н� Symposium in Service Management Yogyakarta, Smirlock, M. (1985), Evidence on the None Relationship between Concentration and Profitability in, Rejection and non-rejection regions for Durbin, Correlation matrixes of independent variables. The paper is divided into five sections. Both internal and external factors have been, management, supervisors and financial serv, The result suggested that bank- specific determinants and profitability relationship is very, strong. The objective of this study is to examine the impact of profitability determinants on performance of Islamic banks in a manner analogous to such studies conducted with conventional banks. Though the external factors are found to be statistically, disbursement on the performance of banks in Ethiopia. indicated that performance persists to some extent, indicating the existence of relatively fair The findings of the study show that capital adequacy, leverage, liquidity, and ownership have statistically significant and positive relationship with banks' profitability. The paper aims to analyze the determinants of post crisis Indonesian banking system profitability, covering the period 2001-2008. Key words: Financial performance, return on assets (ROA), return on equity (ROE) and economic value added Women directors have very negligible effect on performance of the DMBs while correlating negatively and insignificantly with ROA and NIM. determinants affect the bank return or bank profitability in strong manner. Thus, one would expect a positive relationship between liquidity and profitability (Bourke, 1989). 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