The Determinants of Bank Profitability: Dynamic Panel Evidence from South Asian Countries

Using the GMM estimator, this paper empirically studies the bank-specific, industry specific and macroeconomics specific determinants of bank profitability of 259 commercial banks in the South Asian countries (Bangladesh, India, Nepal and Pakistan) for the period of 1997-2012. Empirical results show...

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Bibliographic Details
Published in:Journal of applied finance and banking 2016-05, Vol.6 (3), p.77
Main Authors: Islam, Md Shahidul, Nishiyama, Shin-Ichi
Format: Article
Language:English
Subjects:
Bank management
Banking industry
Capital assets
Commercial banks
Developing countries
Econometrics
Economic development
Economic growth
Equity
Financial institutions
Funding
GDP
Gross Domestic Product
Growth rate
Hypotheses
Inflation
Interest rates
International finance
LDCs
Macroeconomics
Profitability
Profits
Researchers
Studies
Tax rates
Variables
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Summary:Using the GMM estimator, this paper empirically studies the bank-specific, industry specific and macroeconomics specific determinants of bank profitability of 259 commercial banks in the South Asian countries (Bangladesh, India, Nepal and Pakistan) for the period of 1997-2012. Empirical results show a low level of profit persistency and a late-hit of the global financial crisis in the banking sector in the region. We found no evidence for the traditional SCP hypothesis in relation to banking profit but financial solvency and managerial excellence have positive affiliation. Cost of fund, liquidity, funding gap, term structure of interest rate and economic growth rate found negative influence while rate of inflation positively affect bank profit. Also to report that South Asian banks are operating with 'inefficient' manpower.
ISSN:1792-6580
1792-6599