Bank-specific, industry-specific and macroeconomic determinants of bank profitability

Abstract

The aim of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants of bank profitability, using an empirical framework that incorporates the traditional Structure-Conduct-Performance (SCP) hypothesis. To account for profit persistence, we apply a GMM technique to a panel of Greek banks that covers the period 1985-2001. The estimation results show that profitability persists to a moderate extent, indicating that departures from perfectly competitive market structures may not be that large. All bank-specific determinants, with the exception of size, affect bank profitability significantly in the anticipated way. However, no evidence is found in support of the SCP hypothesis. Finally, the business cycle has a positive, albeit asymmetric effect on bank profitability, being significant only in the upper phase of the cycle.

Après le déluge: Institutions, the Global Financial Crisis, and Bank Profitability in Transition

“…Beltratti and Stulz (2012), incorporating measures of both bankspecific and country-specific institutional and governance factors, also show that the largest factors of profitability remained bank-specific, including total assets. In addition, Athanasoglou et al (2008) find that capital adequacy and credit risk are also important determinants of bank profitability (adequacy positively and credit risk negatively), and these are also included as explanatory variables. Finally, given the importance of foreign banks for developing the financial sector in transition, I include a dummy for foreign ownership, justified by the empirical results from Claessens et al (2001).…”

“…Bulgaria, 2006Bulgaria, -2012 transition, with work such as Brunetti et al (1997), Havrylyshyn and van Rooden (2003), and Hartwell (2013) taking a methodical look at the various institutions needed for a market economy and how they impacted different parts of the real economy in transition. Linking these two strands of research together is the diverse body of work on how institutions would influence financial outcomes: in addition to Demirgüç-Kunt et al (2004) and Athanasoglou et al (2008), very recent work from Fang et al (2014) has already found some evidence of the impact of institutions on bank stability in transition. Given this empirical backing, it is plausible to expect that these same institutional changes may have benefitted the banking sector writ large and individual banks in particular.…”

“…Where ROA is average return on assets, the preferred (as in, inter alia, Athanasoglou et al 2008 andDietrich andWanzenried 2011) bank profitability indicator. The positive attributes of ROA as an indicator of profitability have been amply discussed elsewhere (see Golin 2001), but suffice it to say here that ROA is preferred to ROE as ROE disregards risks associated with high leverage (financial leverage ratios can also be endogenously determined by regulation).…”

“…Papers such as Beck and Levine (2005), Akitoby and Stratmann (2010), and Beltratti and Stulz (2012) argue for the powerful influence of various institutions on the path of financial sector development, as well as affecting the outcomes generated by financial institutions. This research on institutions and profitability has thus far concentrated on either single countries (such as Athanasoglou et al (2008) on Greece and Dietrich and Wanzenried (2011) on Switzerland) or on widely dispersed and heterogeneous samples, as with Demirgüç-Kunt et al (2004), who examine banks from 72 countries over the period from 1995 to 1999.…”

Pengaruh Inflasi, Bi Rate Dan Kurs Terhadap Profitabilitas Bank Syariah Di Indonesia

“…Menurut tingkat profitabilitas bank syariah yang diukur dengan laba bersih usaha dapat dipengaruhi oleh kinerja keuangan bank dan juga kondisi makroekonomi yang terjadi dalam perekonomian. 2 Dalam pengertian yang sama menurut Athanasoglou, et.al (2005), menyatakan bahwa profitabilitas bank merupakan fungsi dari faktor internal dan eksternal. 3 Faktor internal merupakan faktor mikro atau faktor spesifik bank yang menentukan profitabilitas.…”