A Statistical Analysis of the Relative Profitability of Commercial Banks

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

“…The first group of studies includes Haslem (1968), Short (1979), Bourke (1989), Molyneux and Thornton (1992) and Demirguc-Kunt and Huizinga (2000). A more recent study in this group is Bikker and Hu (2002), though it is different in scope; its emphasis is on the bank profitabilitybusiness cycle relationship.…”

“…In addition, as Short (1979) argues, size is closely related to the capital adequacy of a bank since relatively large banks tend to raise less expensive capital and, hence, appear more profitable. Using similar arguments, Haslem (1968), Short (1979), Bourke (1989), Thornton (1992) Bikker andHu (2002) and Goddard et al (2004), all link bank size to capital ratios, 3 which they claim to be positively related to size, meaning that as size increases -especially in the case of small to medium-sized banks -profitability rises. However, many other researchers suggest that little cost saving can be achieved by increasing the size of a banking firm (Berger et al, 1987), which suggests that eventually very large banks could face scale inefficiencies.…”

Credit Risk and Commercial Bank Profitability in Rwanda.

“…One of the most pioneer paper in banking profitability, (Haslem, 1968) identifies that bank management, time, location and size influence on bank"s profitability. It remains a great interest among the researchers to investigate the effect of credit risk on profitability.…”

“…The findings suggest that only one bank is competent in all forms of efficiencies over the assessment periods. One of the most pioneer paper in banking profitability, Haslem (1968) identifies that bank management, time, location and size influence on bank"s profitability. Berger (1995) surprisingly finds a strong positive relationship between capital adequacy ratio and profitability of US banks during 1980s; however, he considered the relationship should be negative under certain situations.…”

Profitability Determinants of the Ghanaian Banking Sector in Ongoing Wave of Consolidation

“…Effects of internal determinants on bank profitability have been studied by a lot of researchers using American data and among these notable researchers are Hester and Zoellner (1966), Haslem (1968Haslem ( , 1969, Fraser and Rose (1971), Fraser et al (1974), Heggested (1977), Mullineaux (1978), Kwast and Rose (1982), Smirlock (1985), except Bourke (1989), Molyneux and Thornton (1992) and Stienherr and Huveneers (1994) which used international data. Fraser and Rose (1971) and Haslem (1968) found that balance sheet items and portfolio selection do not affect profitability. Similarly, Haron (2004) finds that money supply, liquidity, expenditures and the levels of interest rates have positive influence on profitability whereas capital and market share affect profitability negatively.…”