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Determinants of bank profitability before, during, and after the financial crisis

Determinants of bank profitability before, during, and after the financial crisis The purpose of this paper is to report the results of an investigation into the relationship between bank-specific, macroeconomic factors and bank profitability before (1999-2006), during (2007-2009), and after (2010-2013) the financial crisis.Design/methodology/approachUsing the Economic Community of West African States’ bank panel data from 1999 to 2013, the paper used fixed effect models. The panel model includes bank-specific determinants (size, cost management, and liquidity), industry level, and macroeconomic variables.FindingsPanel data analyses results show that there is a significant relationship between bank-specific determinants (size, cost management, and liquidity) and bank profitability (ROA) before, during, and after the financial crisis. However, the relationships between other bank-specific (capital strength, credit risk, and market power), macroeconomic (gross domestic product and inflation) determinants are sensitive to both periods of analysis (before, during, and after financial crisis) and bank profitability measure used (ROA or NIM).Originality/valueOverall, these results suggest that the financial crisis did not affect the relationships between some bank-specific determinants and bank profitability. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Managerial Finance Emerald Publishing

Determinants of bank profitability before, during, and after the financial crisis

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1743-9132
DOI
10.1108/ijmf-07-2017-0148
Publisher site
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Abstract

The purpose of this paper is to report the results of an investigation into the relationship between bank-specific, macroeconomic factors and bank profitability before (1999-2006), during (2007-2009), and after (2010-2013) the financial crisis.Design/methodology/approachUsing the Economic Community of West African States’ bank panel data from 1999 to 2013, the paper used fixed effect models. The panel model includes bank-specific determinants (size, cost management, and liquidity), industry level, and macroeconomic variables.FindingsPanel data analyses results show that there is a significant relationship between bank-specific determinants (size, cost management, and liquidity) and bank profitability (ROA) before, during, and after the financial crisis. However, the relationships between other bank-specific (capital strength, credit risk, and market power), macroeconomic (gross domestic product and inflation) determinants are sensitive to both periods of analysis (before, during, and after financial crisis) and bank profitability measure used (ROA or NIM).Originality/valueOverall, these results suggest that the financial crisis did not affect the relationships between some bank-specific determinants and bank profitability.

Journal

International Journal of Managerial Finance – Emerald Publishing

Published: Jul 9, 2018

Keywords: Financial crisis; African ECOWAS; Panel models; Banks profitability; C23; E44; F20; G01; G21; L23

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