An empirical study on the factors influencing the performance of financial institutions in Zimbabwe

Abstract

The main aim of this study was to empirically assess the main microeconomic factors that affect a bank's performance. The objectives were to ascertain if there is a relationship between the performance variables with the microeconomic variables, determine those that are significant and their impact on the performance of banks in Zimbabwe. An econometric model was built from balanced panel data and the Arellano-Bond estimation procedure was employed. The empirical analysis was carried out on a sample of 17 banks that were operational in the years 2010 to 2017 in Zimbabwe. Return on Assets (ROA), Return on Equity (ROE) and Net Interest Margin (NIM) were used as the performance indicators in the analysis. The results indicate the main microeconomic factors to be those attributed to growth, credit risk, capitalisation, managerial efficiency, liquidity and diversification in the Zimbabwean financial institutions. Performance in these institutions is generally good as measured by positive persistent profits, that is, ROA, ROE and NIM. These returns reflect the extent to which these institutions are resilient to the economic crisis.

Keywords: {'name': 'ROA, ROE, NIM, Panel Data, Arellano-Bond Estimation, Microeconomic Factors.'}

Authors & affiliations

Isabel Linda Moyo
Affiliation not supplied

Victor Gumbo
Affiliation not supplied

Eriyoti Chikodza
Affiliation not supplied

Brian Jones
Affiliation not supplied

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