Internal and external determinants of banks’ profitability

Abstract

Purpose – The purpose of this paper is to analyze the profitability of 27 universal banks in Portugal over the period from 2002 to 2011. Design/methodology/approach – The paper conducts ordinary least squares estimations with fixed effects using three measures of profitability: the return on average assets, the return on average equity and the net interest margin. Several independent variables were included concerning both bank-specific and macroeconomic and industry-specific characteristics which have not been considered in previous studies. In addition, the sub-sample between 2008 and 2011 was considered for comparative analysis. Findings – The authors concluded that the independent variables selected, with few exceptions, behaved accordingly to what was expected. Originality/value – To the best of the author’s knowledge, this is the first attempt to examine determinants of banks’ profitability in Portugal, both internal and external, using time series data, which have not been considered in previous studies.

The determinants of profitability of Indian commercial banks: A panel data approach

“…This result is consistent with Garcia and Guerreiro (2016) and Rashid and Jabeen (2016) who reported that the real GDP growth has a negative impact on profitability. This result is consistent with Garcia and Guerreiro (2016) and Rashid and Jabeen (2016) who reported that the real GDP growth has a negative impact on profitability.…”

“…Following prior studies (e.g., Athanasoglou et al, 2008;Garcia & Guerreiro, 2016;Naeem et al, 2017;Pathneja, 2016;A. Following prior studies (e.g., Athanasoglou et al, 2008;Garcia & Guerreiro, 2016;Naeem et al, 2017;Pathneja, 2016;A.…”

“…Garcia and Guerreiro (2016) and Saona (2016) have focused their research on internal and external factors affecting bank's profitability. Although there are three main common streams in the prior literature of a bank's profitability, all conducted studies have the same purposes and outlines.…”

“…Singh & Sharma, 2016) that are specific to each bank and that, in many cases, are the direct result of managerial decisions. In majority of prior studies, variables such as capital adequacy, liquidity, deposits, asset quality, operating efficiency, and bank size are used as a function of internal determinants and micro or bankspecific factors of banking profitability (e.g., Bougatef, 2017;Chowdhury & Rasid, 2017;Garcia & Guerreiro, 2016;Menicucci & Paolucci, 2016;Naeem et al, 2017;Pathneja, 2016;Petria et al, 2015;Rani & Zergaw, 2017;Rashid & Jabeen, 2016;Rjoub et al, 2017;Salike & Ao, 2017;A. In majority of prior studies, variables such as capital adequacy, liquidity, deposits, asset quality, operating efficiency, and bank size are used as a function of internal determinants and micro or bankspecific factors of banking profitability (e.g., Bougatef, 2017;Chowdhury & Rasid, 2017;Garcia & Guerreiro, 2016;Menicucci & Paolucci, 2016;Naeem et al, 2017;Pathneja, 2016;Petria et al, 2015;Rani & Zergaw, 2017;Rashid & Jabeen, 2016;Rjoub et al, 2017;Salike & Ao, 2017;A.…”

“…For example, some evidence drawn from these studies were focused on countries including Europe (Menicucci & Paolucci, 2016;Pasiouras & Kosmidou, 2007;Petria et al, 2015), Gulf Cooperation Council (GCC) countries (AL-Omar & AL-Mutairi, 2008;Chowdhury & Rasid, 2017), South Asian, East Asian, Middle East and African countries (Masood &Ashraf, 2012), Latin American, Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, andVenezuela (Jara-Bertin et al, 2014), Greek (Athanasoglou et al, 2008), Chile, Colombia, El Salvador, Honduras, Mexico and Paraguay (Tiberiu, 2015), Pakistan (Rashid & Jabeen, 2016), 12 Asian economies (Salike & Ao, 2017), Tunisia (Bougatef, 2017), Portugal (Garcia & Guerreiro, 2016), and Macedonia (Marijana et al, 2012). For example, some evidence drawn from these studies were focused on countries including Europe (Menicucci & Paolucci, 2016;Pasiouras & Kosmidou, 2007;Petria et al, 2015), Gulf Cooperation Council (GCC) countries (AL-Omar & AL-Mutairi, 2008;Chowdhury & Rasid, 2017), South Asian, East Asian, Middle East and African countries (Masood &Ashraf, 2012), Latin American, Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, andVenezuela (Jara-Bertin et al, 2014), Greek (Athanasoglou et al, 2008), Chile, Colombia, El Salvador, Honduras, Mexico and Paraguay (Tiberiu, 2015), Pakistan (Rashid & Jabeen, 2016), 12 Asian economies (Salike & Ao, 2017), Tunisia (Bougatef, 2017), Portugal (Garcia & Guerreiro, 2016), and Macedonia (Marijana et al, 2012).…”