Intra- and extra-bank determinants of Latin American Banks' profitability
By Paolo Saona. 2016
155 citations recorded by the source corpus.
Using data on commercial banks in seven Latin American countries from 1995 to 2012, we find evidence of several major relationships involving bank profitability, including: 1) an inverse U-shaped relationship between banks' capital ratios and profitability, 2) a positive relationship between asset diversification (e.g. security trading, hedge funds, foreign exchange, assurance, etc.) and profitability, 3) a negative relationship between revenue diversification (e.g. interests, fees, commissions, etc.) and profitability, 4) a positive relationship between market concentration and profitability, and 5) improvements in the legal and regulatory system are associated with a negative impact on banks' profitability. This paper contributes to the literature by assessing these relationships using data on Latin American banks and by estimating their models using a system GMM approach that addresses issues arising from endogenous independent variables and heterogeneity among individual banks.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/411eba2311e3032e39c8df2346f5b07f99bb0c9d
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Citations in the corpus
- The impact of corporate governance on financial performance of Indian and GCC listed firms: An empirical investigation (2020, background): “Moreover, Saona (2016) argues that problems and issues that are related to individual heterogeneity are one of the justifications for using GMM.”
- Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach (2018, methodology): “Then, following Saona (2016) the application of a dynamic model of banking profitability takes the following form: Profitabilityit ¼ β0 þ β1Profitabilityit 1 þ ∑ 9 j¼1 δjXit ∑ 4 k¼1 θkYt þ ηi þ μt þ εit (6) Where Xit represents the vector of the intra-bank determinants of profitability, Yt is the…”