Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries

Yüksel, Serhat; Mukhtarov, Shahriyar; Mammadov, Elvin; Özsarı, Mustafa

doi:10.3390/economies6030041

Cited by 107 publications

(66 citation statements)

References 35 publications

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“…The variable GDP had a negative impact on ROA with a coefficient of -0.986 with the significance level of 1%, indicating that GDP had a very strong impact on ROA. This result agreed with the analysis results of Yong and Christos (2012a), but contrasted with the analysis results of Yüksel et al (2018). This relationship was explained by the low competitiveness of the PCFs in Vietnam.…”

Section: Discussion Of the Model Of Factors Affecting Profitabilitysupporting

confidence: 86%

“…Seventh, economic growth: According to Yong and Christos (2012a), there is a negative relationship between the economic growth and bank profitability. The result of Yüksel et al (2018) is that economic growth positively influences bank profitability. This result allows the study to conclude that higher gross domestic product comes with higher bank profitability.…”

Section: Factors Affecting Profitability Of Pcfsmentioning

confidence: 99%

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The interactive relationship between credit growth and profitability of people's credit funds in Vietnam

Ha¹

2020

10.5267/j.ac

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This study purposes to discover the interactive relationship between credit growth and profitability and to examine factors that affect the credit growth and profitability of people's credit funds (PCFs). After regression analysis on a set of panel data from 2013 to 2018 on 24 selected PCFs, it appeared that deposit growth and loan-to-deposit ratio had positive relationships with credit growth, and capital adequacy ratio and profitability had negative relationships with credit growth of PCFs. The age of PCFs has a positive relationship with profitability, while the credit growth, debt-to-equity ratio, non-performing loan ratio, economic growth and inflation have negative relationships with profitability of PCFs. The study found the credit growth and profitability have relationships with each other in a contrary trend. Based on the findings the study proposes policy measures that could be implemented by the managers to increase PCFs' credit growth rate and profitability.

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Section: Discussion Of the Model Of Factors Affecting Profitabilitysupporting

confidence: 86%

Section: Factors Affecting Profitability Of Pcfsmentioning

confidence: 99%

The interactive relationship between credit growth and profitability of people's credit funds in Vietnam

Ha¹

2020

10.5267/j.ac

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“…However, studies on the determinants of banks' profitability are conducted on banks in developing countries mainly on the banking sectors in the USA and Europe. For example, Berger (1995aBerger ( , 1995b, Abreu and Mendes (2001), Athanasoglou et al (2006), Chiorazzo and Milani (2011), Growe et al (2014), Petria et al (2015), Menicucci and Paolucci (2016), Korytowski (2018) and Yüksel et al (2018). While the studies that explored the determinates of commercial banks' profitability in OIC countries are limited and mainly are single country studies.…”

Section: Literature Review and Theoretical Developmentmentioning

confidence: 99%

The determinants of conventional banks profitability in developing and underdeveloped OIC countries

Al-Harbi¹

2019

JEFAS

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Purpose The purpose of this study is to investigate the effect of internal and external variables on the profitability of conventional banks operating on developing and underdeveloped countries, the Organization of Islamic Cooperation (OIC) states. Design/methodology/approach In this paper, the author uses ordinary least squares fixed-effects model on an unbalanced panel data set of all conventional banks operating in OIC countries (52 countries included from 57) over the period 1989-2008, 686 banks. Findings The results suggest that equity, foreign ownership, off-balance sheet (OBS) activities, real gross domestic product growth, real interest rate and concentration foster banks’ profitability. In addition, the results showed that the banking sector development and loans will increase banks’ profitability in the long run in the countries of the studies. In contrast, the study reported that deposits lower profitability. The study also revealed that GDP per capita, market capitalization and banks size have no impact on profitability. Practical implications The findings of this study have considerable policy implications. First, policymakers need to regulate nontraditional activities to avoid any financial crisis because banks in OIC countries are heavily engaged in nontraditional activities to boost its profit. Second, policymakers are advised to improve the deposit insurance system to insure the stability of the financial system as well as improving banks’ profitability. Third, policymakers need to improve the efficiency of the stock market, maintain small banking system and encourage foreign investments in the banking system. Originality/value The paper adds to the literature on the commercial bank’s profitability determinants. In particular, such study has not been conducted on OIC countries, and the study included all mainstream banks and incorporated the effect of deposit insurance system so far. Also, pure sample of conventional banks used as many conventional banks in OIC countries have Islamic windows or offer Islamic products. In addition, this study investigated the effect of OBS activities on net interest margin (NIM) because the studies that explored this interrelationship are limited especially for developing and under developed countries. The results showed that OBS activities contributed significantly and positively to return on assets and NIM. Moreover, this paper used a pure sample of conventional banks to avoid any biasness; see data section. Moreover, this study gives an idea about the economic situation and financial conditions of OIC countries during the period of the study.

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“…Due to the intermediary function between lenders and borrowers, banks have an important role for all economies. Not only can investors reach the money they need for their business activities, but consumers are also able to spend their future incomes (Yuksel et al 2018).…”

Section: The Results Of Vecm and The Granger Causality Testmentioning

confidence: 99%

Macroeconomic Determinants of Islamic Banking Products in Indonesia

Setyowati

2019

Economies

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The purpose of the study was to investigate which factors determine saving and financing in Islamic banks in Indonesia by using Gregory–Hansen cointegration, vector error correction mode (VECM), Granger causality, and the impulse response function. The results disclose the existence of a long-running cointegrating relationship with a structural break in the deposit and financing case to the consumer price index, industrial production, interest rate, exchange rate, and Jakarta Islamic Index. Most of the structural breaks appeared in January 2006 and April 2007 for both deposit and financing, revealing the first stage of the financial crisis. Any short-term deviation between deposit and financing will give rise to a stable relationship in the long term. In the short-term, there is bidirectional causality between deposits and industrial production and between the consumer price index and financing. This finding shows that real activity, as measured by industrial production, is a highly determinant factor of Islamic bank deposits, while inflation, as measured by the customer price index, is the determinant factor of Islamic bank financing. Our results also suggest that a mix of dynamic behaviors from both Islamic bank savings and financing was revealed in response to the shock of the macroeconomic variable, giving better insight for the government and stakeholders into Indonesian Islamic banking.

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Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries

Cited by 107 publications

References 35 publications

The interactive relationship between credit growth and profitability of people's credit funds in Vietnam

The interactive relationship between credit growth and profitability of people's credit funds in Vietnam

The determinants of conventional banks profitability in developing and underdeveloped OIC countries

Macroeconomic Determinants of Islamic Banking Products in Indonesia

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