Internal Factors, External Factors and Bank’s Profitability

Rehman, Zia Ur; Khan, Sher Ali; Khan, Asad; Rahman, Asim

doi:10.31529/sjms.2018.4.2.9

Cited by 10 publications

(7 citation statements)

References 24 publications

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“…These are factors that are beyond the control of the banks and they include the macro‐economic variables (Al‐Homaidi et al., 2018; Rehman et al., 2018) such as Economic Growth Rate, and Inflation level in a country. These variables are now explained below:…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Capital, liquidity, and profitability in European banks

Adelopo

Vichou

Cheung

2021

J Corp Accounting Finance

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The research aims to investigate the impact of increased capital requirements and high liquidity levels on the profitability of European banks in the post crisis period. The study examines the largest banks in the European Union spanning 28 countries using data from 2010 to 2018. It used three measures to define bank profitability: return on average assets, return on average equity, and operating profit to risk weighted assets. Capital, liquidity, size, and asset quality represent bank specific determinants, while economic growth and inflation are considered as the main external determinants having influence on profitability. We used multiple regression models to analyze the association amongst the variables. The results revealed a positive and significant association between liquidity level and bank performance. Asset quality showed a negative and statistically significant influence on bank performance, while economic growth and inflation have no significant influence on bank performance. The study concludes that there is limited influence of the Basel III on bank profitability although the policy is important in achieving banking stability. This study contributes to the literature by empirically analyzing the impact of capital regulation on bank performance for the biggest banks in Europe. Although the Basel III framework is important for prudential banking, its effects on the performance of European bank is debatable.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Capital, liquidity, and profitability in European banks

Adelopo

Vichou

Cheung

2021

J Corp Accounting Finance

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“…Several researchers together with Jaber and Al-Khawaldeh (2014), Berhe (2017), Rehman et al (2018), Yuksel et al (2018), Assfaw (2018), Makkar and Hardeep (2018), Al-Homaidi et al (2018), Bhattarai (2018), Supriyono and Herdhayinta (2019), Al-Harbi (2019), etc., have conducted research to analyze the determinants of the profitability of banks in different countries across the world. A number of studies have also been done in Bangladesh with same focal point such as Sufian and Kamaruddin (2012), Mizan et al (2013), Rahman and Akhter (2015), Mahmud et al (2016), Banna et al (2017), Siddique et al (2017, Liza (2017), Matin (2017), Islam and Rana (2017), , Lee and Iqbal (2018), Hossain and Khalid (2018), and Hassan and Ahmed (2019).…”

Section: Justification Of the Studymentioning

confidence: 99%

“…Thus, profitable banks will ensure the continuity of economic growth as well as the stability of the financial system (Al-Harbi, 2019). However, to maintain financial stability and sustain negative shocks, it is important to understand the factors that influence the profitability of banks (Rehman et al, 2018). On the other hand, banking business is directly associated with trust factor (Babu & Choudary, 2014).…”

Section: Introductionmentioning

confidence: 99%

Impact of bank-specific internal factors on the profitability of state-owned commercial banks in Bangladesh

Ullah¹,

Nath²,

Biswas

2020

Indian Journal of Commerce &Amp; Management Studies

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The aim of this study is to identify the bank-specific internal factors that affect the profitability of state owned commercial banks of Bangladesh. Methodology: The study applied explanatory research design and carried out based on secondary data only. The main source of data is annual reports (Audited Financial Statements) of the respective banks for the period of 2014 to 2018. Multiple Regression Model & Descriptive Statistics are used for data analysis which is being done through MS Excel 2013 version. In Multiple Regression Model considered ROA as dependent variable and internal factors as an independent variable. VIF test is also employed to check the Multicollinearity problem. Findings: The regression analysis reveals that independent variables (bank-specific internal factors) of the banks are important enough to explain the variation of the dependent variable (ROA) of the study. Moreover, the results show that there is a significant and negative relationship between ROA and NPL ratio & liquidity ratio. On the other hand, ROA and bank size have significant positive relationship. But leverage ratio and solvency ratio have statistically insignificant relationship with ROA. So, it is said that among five internal factors, NPL, liquidity and bank size are the most important bank specific internal factors that affect the profitability of banks. Implications: This study shall provide the regulators, managements, depositors and other concerned parties an important insight about State Owned Commercial Banks profitability and enhance the performance thereby. Originality: This study is a unique one in Bangladesh perspective because there is hardly any study about effect of bank-specific internal factors on the profitability of State Owned Commercial Banks of Bangladesh.

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“…Some of the results of this study support previous research, such as research conducted by Ebenezer et al, (2019) at 63 commercial banks in ASEAN-5 countries during the period 2009-2017, using the regression of panel data, found that the Loan to Deposit Ratio (LDR) negatively affected bank risk. Rehman et al, (2018) stated that a more concentrated banking market will decrease competition and at the same time will provide better access to bank deposits and loans, thus lowering risk. Jabra, Mighri and Mansouri (2017) conducted research in Eastern Europe and Western Europe, using panel data from 280 banks during the period 2005 to 2015, finding that excessive volatility in international financial markets, internal and macroeconomic factors can have a positive and negative effect on bank risk.…”

Section: Table 4 the Results Of Panel Data Regression With Random Effects Model Onmentioning

confidence: 99%

Determinant of Bank Risk with Bank Scale as Moderating Variable in ASEAN

Muchtar

Manurung²,

Margaretha

2021

IJSOC

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This research examines the determinant of bank risk with Bank Scale as the moderating variable. The determinants of bank risk in the study are Capital Adequacy Ratio (CAR), Non-Performing Loan (NPL), Loan to Deposit Ratio (LDR), Market Power (MP), Exchange Rate (ER), Interest Rate (IR), and Technology Investment (TI). Standard Deviation (STD) and Value at Risk (VaR) are proxies of bank risk. The bank scale is based on Bank Umum Kelompok Usaha (BUKU Bank). The unit of research analysis are conventional banks listed on the Stock Exchange of ASEAN-4 countries namely Indonesia Malaysia, Philippines, and Thailand during the period of 2010 - 2019 with a total of 35 banks. Panel data regression is used to determine bank risk. The examination was conducted on banks in ASEAN-4 countries and Indonesia. The results found that banks in ASEAN-4 countries: CAR, MP, ER, IR, TI, and BB have significant negative effect on STD and LDR have significant negative effect on VaR, MP and TI have significant positive effect on VaR. For banks in Indonesia, ER positively affects STD, IR and IT negatively affect STD, NPL positively affects VaR, LDR and TI negatively affect VaR. BB has no effect on bank risk. The results of this study are expected to contribute in bank management to pay attention on bank-specific variables, especially technology investments and macroeconomic variables due to their enormous influence in increasing profitability and lowering risks.

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Internal Factors, External Factors and Bank’s Profitability

Cited by 10 publications

References 24 publications

Capital, liquidity, and profitability in European banks

Capital, liquidity, and profitability in European banks

Impact of bank-specific internal factors on the profitability of state-owned commercial banks in Bangladesh

Determinant of Bank Risk with Bank Scale as Moderating Variable in ASEAN

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