The factors affecting bank profitability: The case of Bosnia and Herzegovina

Alihodžić, Almir

doi:10.15611/fins.2020.2.01

Cited by 2 publications

(2 citation statements)

References 7 publications

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“…According to a study done with banks in Bosnia and Herzegovina by Alihodžić (2020), profit or loss growth rates, cost-income ratios, and growth rates of the gross domestic product had the most impacts on profitability indicators. There is no statistically significant correlation between CAR and ROE or ROA, according to the empirical findings of the study by Alshiqi and Sahiti (2021).…”

Section: Literature Reviewmentioning

confidence: 99%

Assessment of cost efficiency in the banking sector of selected countries in Southeastern Europe

Krasniqi-Pervetica,

Ahmeti

2024

IJAEFA

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This study examines the assessment of cost efficiency in the banking sector of selected countries in Southeastern Europe. In Southeastern Europe (SEE), where over 100 commercial banks operate, these institutions form the backbone of the financial sector, supporting between 80% and 90% of the financial system in five Balkan Peninsula nations. Kosovo stands out for having a lower participation rate (65%), with 80% to 90% of its banks under foreign government control. A study conducted from 2010 to 2021 employed Data Envelopment Analysis (DEA), a non-parametric technique, to scrutinize the cost-effectiveness and profitability of SEE's banking industry. DEA evaluated SEE's commercial banks in terms of cost efficiency, considering total costs as the dependent variable and inputs including deposits, workforce, and fixed assets. Interest expenses, personnel expenses, and capital-related expenses were compared concerning total deposits and assets, while securities and loans served as outputs. The findings unveiled commendable cost efficiency within SEE's banks. Subsequently, a panel regression analysis utilizing fixed and random effects was performed. Factors like Cost Efficiency, Asset Quality, Market Participation, Debt Ratio, Bank Size, Inflation, Ownership, and Gross Domestic Product were assessed against Return on Equity (ROE) and Return on Assets (ROA). The results underscored robust cost control measures within SEE's banks and highlighted significant factors—Cost Efficiency, Asset Quality, Market Participation, Debt Ratio, Bank Size, Inflation, and Ownership—exerting substantial influence on ROA and ROE. These insights offer valuable information for strategic decision-making, aiding stakeholders in developing targeted actions to enhance the financial sustainability and stability of Southeastern Europe's banking sector.

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Section: Literature Reviewmentioning

confidence: 99%

Assessment of cost efficiency in the banking sector of selected countries in Southeastern Europe

Krasniqi-Pervetica,

Ahmeti

2024

IJAEFA

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“…Therefore, there is an argument that banks going into non-interest income activities is a way of diversifying their portfolios and hence reducing the idiosyncratic risk that they face (Chen et al, 2017). A study conducted by Alihodžić (2020) on the determinants of bank stability in selected Balkan countries and Turkey reveal that non-interest income (NII) has a negative and statistically significant relationship with bank stability.…”

Section: Diversification and Financial Stabilitymentioning

confidence: 99%

Modelling the effect of bank performance on financial stability

Antwi

Kwakye

2022

IJRBS

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This study examines the link between bank performance and bank stability in the context of African countries. Using the Augmented Mean Group (AMG) estimator and panel data from 16 selected African countries covering the period 2002–2019, this study considers whether the banking sector's performance influences the banking system's financial stability. The findings reveal a significant positive long-run relationship between ROA and financial stability. This was the case when the AMG estimator was employed and when the CCEMG was employed to check for robustness. Inflation was initially negative and insignificant but a highly significant determinant when a more robust method (CCEMG) was used. Economic growth has a negative relationship using both estimators but is insignificant, while trade openness and non-interest income had insignificant coefficients in both estimators. The granger causality results show a one-way causality established to bank stability in the case of bank performance and trade openness. In addition, there was a non-causal relationship between bank stability, non-interest income and inflation as against a double-track causation between bank stability and economic growth. African countries should strive to improve bank performance to enhance the stability of the sector.

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The factors affecting bank profitability: The case of Bosnia and Herzegovina

Cited by 2 publications

References 7 publications

Assessment of cost efficiency in the banking sector of selected countries in Southeastern Europe

Assessment of cost efficiency in the banking sector of selected countries in Southeastern Europe

Modelling the effect of bank performance on financial stability

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