Determinants of Banks’ Profitability: Evidence from EU 27 Banking Systems

By Nicolae Petria, Bogdan Căpraru, Iulian Ihnatov. 2015

458 citations recorded by the source corpus.

Abstract In this study we assess the main determinants of banks’ profitability in EU27 over the period 2004-2011. We split the factors that influence bank profitability in two large groups: bank-specific (internal) factors and industry specific and macroeconomic (external) factors. We consider as proxy for banks profitability the return on average assets (ROAA) and the return on average equity (ROAE). The empirical findings are consistent with the expected results. Credit and liquidity risk, management efficiency, the diversification of business, the market concentration/competition and the economic growth have influence on bank profitability, both on ROAA and ROAE. An interesting and valuable result is the positive influence of competition on bank profitability in EU27.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/be1126c0e553251f6fdb74435fb29bdc6e68b32a

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Citations in the corpus

Ownership, bank size, capitalization and bank performance: Evidence from India (2020, background): “AL-Omar and AL-Mutairi (2008), Anbar and Alper (2011), Masood and Ashraf (2012), Acaravci and Çalim (2013), Petria et al. (2015), Singh and Sharma (2016), Bougatef (2017), and Chowdhury and Rasid (2017) and other strand of literature find the evidence of negative effect of size on profitability…”
Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach (2018, methodology): “This outcome is consistent with Rashid and Jabeen (2016) who have reported that lending interest rate affects negatively the performance of banks. However, this finding contradicts Tiberiu (2015) who reported that the interest rate margins positively affect the banks’ profitability.”
Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries (2018, methodology): “Furthermore, Petria et al. (2015); Albertazzi et al. (2016); Deng (2016) and Wali Ullah et al. (2016) also showed that GDP growth affects bank profitability by using regression analysis in their studies.”