Analyzing the Effects of Macroeconomic Factors on the Financial Performance of Bangladeshi Commercial Banks

Abstract

Since banks mobilize financial resources across the economy, they are expected to be critical in bringing about financial stability and economic progress. The purpose of this research was to determine the impact of macroeconomic variables on the financial performance of commercial banks in Bangladesh. From the World Bank website, secondary data were gathered for the fiscal years 2010 through 2021. Correlation, multiple linear regression, factor analysis, and model selection criteria were utilized for this study. From the correlation analysis, it was observed that the inflation rate was significantly and positively correlated with the financial performance of commercial banks in Bangladesh. From the multiple linear regression analysis, it was seen that import, exchange rate, and inflation rates have a substantial impact on Bangladesh's commercial banks' financial performance. From the factor analysis, it was observed that GDP and imports are highly correlated with Bangladesh's commercial banks' financial performance. Based on the model selection criteria, it was discovered that the model including all variables is the best. The government, other researchers, bank managers, possible investors, financial experts, and anybody else involved in Bangladesh's banking sector should all take note of the findings.