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Bank Specific and Macroeconomic Determinants of Commercial Bank Profitability: Empirical Evidence from Nigeria

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  • Olalere Oluwaseyi Ebenezer

    (School of Business Innovation and Technopreneurship, Universiti Malaysia Perlis)

  • Wan Ahmad Wan Bin Omar

    (School of Business Innovation and Technopreneurship, Universiti Malaysia Perlis)

  • Syahida Kamil

    (School of Business Innovation and Technopreneurship, Universiti Malaysia Perlis)

Abstract

The study examines the bank-specific and macroeconomic determinants of banks profitability in Nigeria analyzing audited financial reports of selected sixteen (16) commercial banks over the period of 2010 to 2015 making up to 96 observations. The study identified that existing studies are sketchy in developing economies even though many studies have emerge in developed economies. The bank profitability is measured by return on assets and return on equity as function of bank-specific and macroeconomic determinants. Using the balanced panel data set, the empirical results of the study shows that capital adequacy and liquidity have a positive and significant effect on bank profitability. However, efficiency ratio have a negative and significant effect on bank profitability. With regards to macroeconomic variable, GDP growth also have a positive and significant impact on banks profitability. The empirical results of the study suggestedthat banks can improve their profitability through increasing capital and liquidity, decreasing operating cost with conscious effort to maintain transparency in their operations. In addition, a good economic environment for financial institutions foster increase in bank profitability. Hence, the study recommends that further studies can expand the scope while extending to other industries as well.

Suggested Citation

  • Olalere Oluwaseyi Ebenezer & Wan Ahmad Wan Bin Omar & Syahida Kamil, 2017. "Bank Specific and Macroeconomic Determinants of Commercial Bank Profitability: Empirical Evidence from Nigeria," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(1), pages 25-38, January.
    • Handle: RePEc:rbs:ijfbss:v:6:y:2017:i:1:p:25-38
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    2. Davis, E Philip & Ali Abdilahi, Ridwa, 2022. "Econometric Analysis of the Determinants of Bank Profitability in Three Major African Counties: Kenya, Nigeria and South Africa," National Institute of Economic and Social Research (NIESR) Discussion Papers 536, National Institute of Economic and Social Research.
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    7. Sanni Mubaraq & Salami Abdulai Agbaje & Uthman Ahmad Bukola, 2020. "Determinants of Bank Performance in Nigeria: Do they Behave Differently with Risk-Adjusted Returns?," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 30(3), pages 1-34, September.
    8. Eissa A. Al-Homaidi & Najib H.S. Farhan & Waleed M. Alahdal & Amgad S.D. Khaled & Moatasem M. Qaid, 2021. "Factors affecting the profitability of Indian listed firms: a panel data approach," International Journal of Business Excellence, Inderscience Enterprises Ltd, vol. 23(1), pages 1-17.
    9. Eissa A. Al-Homaidi & Mosab I. Tabash & Najib H. S. Farhan & Faozi A. Almaqtari, 2018. "Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1548072-154, January.
    10. Ozili, Peterson K & Ndah, Honour, 2022. "Impact of financial development on bank profitability," MPRA Paper 111337, University Library of Munich, Germany.

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