Banks’ profitability determinants in post-crisis European Union
Marcin Korytowski ORCID ↗
International Journal of Finance & Banking Studies · 2018 · Vol. 7 / Issue 1 · 1
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Abstract
<p>The purpose of this article is to examine the impact of selected internal and external factors on a bank’s profitability. The research investigates the impact of operational size, liquidity, risk appetite, management efficiency, product diversification, concentration, GDP growth and inflation change on the profitability of sample of 4179 European commercial banks for the period between 2011 and 2015. The input data were obtained from the Orbis Focus and the World Bank databases. The determinants were used to construct two models with ROAA and ROAE as a proxies and regression analysis using between groups panel approach was conducted. It has been found that growing economy impacts banks’ profitability positively. The liquidity has been found to impact profitability positively, but statistically significant results were obtained only with the ROAA model. It has been robustly confirmed that management efficiency, product diversification, market concentration and inflation result in decreased profitability. The operational size has been found to be negatively linked to changes in net results but was confirmed only with ROAA model. Similarly, statistically significant results with regard to liquidity were found only for ROAA model and the correlation was positive. The strong negative impact of market concentration on profitability is an interesting finding allowing for further exploration of reasons for this unexpected vector of correlation.</p>
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Marcin Korytowski
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