What Drives Bank Profitability? A Panel Data Analysis of Commercial Banks in Bangladesh

Rana-Al-Mosharrafa,; Islam, Md. Shahidul

doi:10.20525/ijfbs.v10i2.1236

Cited by 9 publications

(14 citation statements)

References 31 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…EAR, LDR, and DTAR all have a considerable favorable impact on ROE, implying that the higher the effect on productivity, the better. Several researchers (Onofrei et al, 2018 ; Cetin, 2019 ; Mosharrafa and Islam, 2021 ) have discovered similar results. The findings of Ariyadasa et al ( 2016 ), Aydemir and Ovenc ( 2016 ), Tan et al ( 2016 ), Alzoubi ( 2018 ); and Mohanty and Krishnankutty ( 2018 ) were also confirmed.…”

Section: Discussionmentioning

confidence: 68%

“…Mahmud et al ( 2016 ) investigated 15 Bangladeshi commercial banks and discovered that the bank's capital had a favorable relationship with the bank profitability. Bank profitability is affected by bank-specific and market-specific factors, according to Hossain and Khalid ( 2018 ), Odusanya et al ( 2018 ), Mosharrafa and Islam ( 2021 ) looked at bank's profitability in Bangladesh from 2007 to 2017 and discovered a favorable relationship between loan and efficient management and bank profitability. Menicucci and Paolucci ( 2016 ) examined, from 2006 to 2015, the profitability and endogenous variables of the 28 biggest banks in the European Union (EU).…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries

et al. 2022

View full text Add to dashboard Cite

Aim of the articleThe main purpose of this article was to investigate the impact of the determinants of profitability on the commercial banks in Asian countries. An Asian country like Bangladesh and India was selected as the research field. The present study also pursues to examine the impact of specific factors and macroeconomic factors on the profitability in the Bangladeshi and Indian private commercial banking sectors.Methods applied and analysis toolsThe data were retrieved from the Annual Reports of Indian and Bangladeshi private commercial banks covering the period of 2010–2021. As sample, 40 private commercial banks were considered randomly, of which 20 were from India and 20 were from Bangladesh. The panel data research methodology was used as an estimation technique to analyze the data. Also, the ordinary least squares (OLS) regression model was used to scrutinize data. To check whether the models were appropriate, the Breusch–Pagan Lagrange Multiplier (LM) Test was employed. Banks' specific factors and microeconomic factors showed almost the same variations for both Bangladesh's and India's private banks. All models and tests were evaluated using E-views econometric software.The major findingsThe present study finds that the Return on Asset (ROA) from the banks' specific variables, strength of the Bank size (BS), and Debt to Asset Ratio (DAR) are found to be positive and significant. For banks, the Deposit to Asset Ratio (DTAR) and the Loan to Deposit Ratio (LDR) are found to be negative and significant. The Equity to Asset Ratio (EAR) and Debt to Equity Ratio (DER) do not have any positive/negative impact.Contribution, originality, and implicationsAs macroeconomic variables, the inflation rate (IR) and the GDP growth rate (GDPGR) are measured and found to be positive and significant for ROA. As macroeconomic variables, the Inflation Rate (IR) and the GDP Growth Rate (GDPGR) are found to be positive and significant in the case of ROA. The concerned authorities responsible for regulating the financial performance of the banking sector can use the results of this study to take various fruitful decisions on bank profitability.

show abstract

Section: Discussionmentioning

confidence: 68%

Section: Literature Reviewmentioning

confidence: 99%

Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries

et al. 2022

View full text Add to dashboard Cite

show abstract

“…We observe several articles that studied the influence of capital structure on profitability of bank by centering their attention on low-income emerging economies for instance, Ethiopia as observed in Ayalew (2021). Again, we observe prior research that made analysis by focusing on one of the developing countries of Asia for example, Bangladesh (Rana-Al-Mosharrafa and Islam, 2021). However, to our knowledge, an insignificant and limited number of researches have been made by taking into account a large number of countries from Asia that involves a mix blend of both emerging and developed economies.…”

Section: Introductionmentioning

confidence: 79%

“…However, Ayalew (2021) estimated cost to income ratio as a measure of operational efficiency of bank. In addition, being a significant driver of bank profitability, we estimate credit risk as the ratio of loans to total assets, complying with (Ali and Puah, 2019;Ayalew, 2021;Rana-Al-Mosharrafa and Islam, 2021). Apart from our control variables, the study further investigates the influence of noninterest income and CAP on the bank profitability.…”

Section: Methodsmentioning

confidence: 99%

The effect of capital structure, operating efficiency and non-interest income on bank profitability: new evidence from Asia

Mehzabin

Shahriar

Hoque³

et al. 2022

AJEB

View full text Add to dashboard Cite

PurposeThe Asian banking system has been appreciated with many distinct qualities including consistent in profitability. Many studies have examined the profitability of Asian banking sector from diverse perspectives. However, studies on bank profitability in connection to the capital structure, operating efficiency and non-interest income are only a few. This study investigates the influence of capital structure as estimated by leverage ratio and long-term debt, operating efficiency and non-interest income on the profitability of the banking industry in 28 countries of Asia.Design/methodology/approachThis paper utilizes fixed effect regression model by involving panel data with sample of 492 banks from 28 countries of Asia for the time span of 15 years from 2004 to 2018.FindingsThe results confirm that an increase in total debt ratio increases the profit margin of the bank as supported by the agency cost theory, suggesting that the debt financing increases the profitability of the firm. In addition, the findings reveal that lowering the operating expenses and managing of costs effectively can boost the profitability of bank. Furthermore, non-interest income plays a vital role when the interest rates are lower. Hence the study suggests that a careful investment in this sector can generate income as well as increase the profit margin of the banking arena.Originality/valueThe paper examines the profitability of bank by including impact of leverage ratio and long-term debt as a measure of capital structure along with the influence of operational efficiency and non-interest income which contributes to the understanding of the existing literature.

show abstract

“…Additionally, prior studies investigated the banking sector performance by considering low-income growing economies such as Ethiopia as noted (Ayalew, 2021). Again, some narrowed their focus by analyzing one of the rising economies of South-East Asia, such as Bangladesh (Rana-Al-Mosharrafa & Islam, 2021). However, Mehzabin, Shahriar, Hoque, Wanke and Azad (2022) analyzed both emerging and developed economies by considering a large number of countries in Asia.…”

Section: Introductionmentioning

confidence: 99%

Bank stability, performance and efficiency: an experience from West Asian countries

Shahriar

Mehzabin

Ahmed

et al. 2022

IRJMS

View full text Add to dashboard Cite

PurposeThe banking sector in West Asia has always experienced positive growth except for Palestine. Apart from some negligible outlying outcomes in some countries that have faced political crises and war, most West Asian countries have gained bank profitability and efficiency. However, the stability in the banking sector has been rarely examined in the literature. Hence, this study sheds light on examining bank stability by considering 12 countries in West Asia.Design/methodology/approachA fixed effect panel data regression analysis is employed on strongly balanced panel data using data from 2004 to 2018.FindingsResults reveal that the net interest margin has a positive relationship with bank stability. The bank’s stability rises as the net interest margin improves. Furthermore, the non-interest income reveals a positive significant impact on the stability of banks, depicting that the increase in non-interest income increases the stability of banks. Additionally, the non-interest expense also reveals positive significant results with the stability of banks. Nevertheless, leverage ratio and long-term debt portray a negative significant impact on banks’ stability. The finding reveals that higher long-term debt and leverage ratios may decrease the stability of the banks in West Asia.Practical implicationsOverall, the authors’ findings add to the literature on the stability of the banks by providing some new but significant information. Some of the recommendations may be beneficial to the long-term success of 12 Western Asian countries’ banks.Originality/valueThe study examines the stability of banks by incorporating both profitability and operating efficiency along with net-interest income, which extends to the current literature’s insight.

show abstract

What Drives Bank Profitability? A Panel Data Analysis of Commercial Banks in Bangladesh

Cited by 9 publications

References 31 publications

Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries

Profitability determining factors of banking sector: Panel data analysis of commercial banks in South Asian countries

The effect of capital structure, operating efficiency and non-interest income on bank profitability: new evidence from Asia

Bank stability, performance and efficiency: an experience from West Asian countries

Contact Info

Product

Resources

About