IDEAS home Printed from https://ideas.repec.org/a/bas/econst/y2025i4p19-35.html
   My bibliography  Save this article

Unraveling the Profitability Puzzle: A Comprehensive Analysis of Banks' IT Adoption in Southeast and Central Europe

Author

Listed:
  • Ajtene Avdullahi
  • Esat A. Durguti
  • Bese Sadikaj
  • Milaim Mehmeti

Abstract

The purpose of this research paper is to investigate the impact of commercial bank branches (CBBs), automated teller machines (ATMs), the number of debit cards (NDCs), and the number of credit cards (NCCs) on Banks Profitability (BP) in terms of Return on Assets (ROA) and Return on Equity (ROE). The sample used for this research covers the years 2017-2022, respectively 108 yearly observations with a particular emphasis on the eighteen Southeast and Central European countries (SCE). The current research employed panel data, with the econometric strategy that combines ordinary least squares (OLS) and generalized methods of moments (GMM) to examine the premise. The findings indicate that NDCs and ATMs have a negative statistical influence on BP, whereas CBBs and NCCs have positive influences, based on the static approach. Additionally, results obtained from the dynamic GMM approach indicate that ATMs, CBBs, and NCCs positively impact BP, whereas NDCs have the opposite effect. From the perspective of originality and scientific contribution, the research is considered unique in the inclusion of variables and countries in the analysis.

Suggested Citation

  • Ajtene Avdullahi & Esat A. Durguti & Bese Sadikaj & Milaim Mehmeti, 2025. "Unraveling the Profitability Puzzle: A Comprehensive Analysis of Banks' IT Adoption in Southeast and Central Europe," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 19-35.
    • Handle: RePEc:bas:econst:y:2025:i:4:p:19-35
    as

    Download full text from publisher

    File URL: https://archive.econ-studies.iki.bas.bg/2025/2025_04/2025_04_02.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. Nicola Cetorelli & Philip E. Strahan, 2006. "Finance as a Barrier to Entry: Bank Competition and Industry Structure in Local U.S. Markets," Journal of Finance, American Finance Association, vol. 61(1), pages 437-461, February.
    3. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    4. Qazim Tmava & Ajtene Avdullahi & Bese Sadikaj, 2018. "Loan portfolio and nonperforming loans in Western Balkan Countries," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 7(4), pages 10-20, October.
    5. Wajeeha Aslam & Ayesha Tariq & Imtiaz Arif, 2019. "The Effect of ATM Service Quality on Customer Satisfaction and Customer Loyalty: An Empirical Analysis," Global Business Review, International Management Institute, vol. 20(5), pages 1155-1178, October.
    6. Lihua Zuo & Hongchang Li & Xuanxuan Xia, 2023. "An Empirical Analysis of the Impact of Digital Finance on the Efficiency of Commercial Banks," Sustainability, MDPI, vol. 15(5), pages 1-25, March.
    7. Tu DQ. Le & Thanh Ngo, 2020. "The determinants of bank profitability : A cross-country analysis," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 20(2), pages 65-73.
    8. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    9. Agerti Galo, 2016. "Credit Card in Albania," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 5, December.
    10. Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LLC, vol. 7(3), pages 281-312, September.
    11. Winifred Huang & Philip Molyneux & Steven Ongena & Ru Xie, 2023. "The new challenges of global banking and finance," The European Journal of Finance, Taylor & Francis Journals, vol. 29(7), pages 693-699, May.
    12. Abdul Ghafoor Awan & Janoobia Parveen, 2024. "Relationship between financial innovations and the performance of commercial banks," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(3), pages 1002-1016, September.
    13. Shaohua Yang & Zeyun Li & Yaxin Ma & Xingxing Chen, 2018. "Does Electronic Banking Really Improve Bank Performance? Evidence in China," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(2), pages 82-94, February.
    14. Silber, William L, 1983. "The Process of Financial Innovation," American Economic Review, American Economic Association, vol. 73(2), pages 89-95, May.
    15. Esat Durguti & Erëza Arifi & Emine Gashi & Muhamet Spahiu, 2023. "Anti-money laundering regulations’ effectiveness in ensuring banking sector stability: Evidence of Western Balkan," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2167356-216, December.
    16. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    17. repec:bla:obuest:v:61:y:1999:i:0:p:653-70 is not listed on IDEAS
    18. Murinde, Victor & Rizopoulos, Efthymios & Zachariadis, Markos, 2022. "The impact of the FinTech revolution on the future of banking: Opportunities and risks," International Review of Financial Analysis, Elsevier, vol. 81(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caravaggio, Nicola, 2020. "A global empirical re-assessment of the Environmental Kuznets curve for deforestation," Forest Policy and Economics, Elsevier, vol. 119(C).
    2. Raffaella Santolini, 2017. "Electoral Rules And Public Spending Composition: The Case Of Italian Regions," Contemporary Economic Policy, Western Economic Association International, vol. 35(3), pages 551-577, July.
    3. Naima Chrid & Sami Saafi & Mohamed Chakroun, 2021. "Export Upgrading and Economic Growth: a Panel Cointegration and Causality Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 811-841, June.
    4. Ronald MacDonald & Flávio Vieira, "undated". "A panel data investigation of real exchange rate misalignment and growth," Working Papers 2010_13, Business School - Economics, University of Glasgow.
    5. Alessandro Federici & Pierluigi Montalbano, 2012. "Macroeconomic volatility, consumption behaviour and welfare: A cross-country analysis," Working Paper Series 3612, Department of Economics, University of Sussex Business School.
    6. Kouvavas, Omiros, 2013. "Political Budget Cycles Revisited, the Case for Social Capital," MPRA Paper 57504, University Library of Munich, Germany, revised 15 Sep 2013.
    7. Yongfu Huang, 2011. "Private investment and financial development in a globalized world," Empirical Economics, Springer, vol. 41(1), pages 43-56, August.
    8. Michal Madr, 2016. "Economic Development as a Factor of Democratisation: Evidence from Post-Socialist Economies," MENDELU Working Papers in Business and Economics 2016-70, Mendel University in Brno, Faculty of Business and Economics.
    9. Twine, Edgar E. & Kiiza, Barnabas & Bashaasha, Bernard, 2015. "The Flexible Accelerator Model of Investment: An Application to Ugandan Tea- Processing Firms," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 10(01), pages 1-15, March.
    10. Grifno, Kenny & Bao, Chenzhang & Russell, Craig J. & Delen, Dursun, 2025. "Relationships Between Clinical Psychological Depression and Employee Absenteeism: A data analytics approach," Journal of Business Research, Elsevier, vol. 189(C).
    11. Badamassi Aboubacar & Xu Deyi & Mahaman Yacoubou Abdoul Razak & Boubacar Hamidou Leyla, 2018. "The Effect of PM 2.5 from Household Combustion on Life Expectancy in Sub-Saharan Africa," IJERPH, MDPI, vol. 15(4), pages 1-13, April.
    12. Sloboda, Brian W. & Sissoko, Yaya, 2020. "Determinants of Economic Growth in ECOWAS Countries: An Empirical Investigation," African Journal of Economic Review, African Journal of Economic Review, vol. 8(2), July.
    13. Bunje, Madinatou Yeh & Abendin, Simon & Wang, Yin, 2022. "The multidimensional effect of financial development on trade in Africa: The role of the digital economy," Telecommunications Policy, Elsevier, vol. 46(10).
    14. Brücker, Herbert & Siliverstovs, Boriss, 2006. "Estimating and forecasting European migration : methods, problems and results," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 39(1), pages 35-56.
    15. Lau, Lin-Sea & Choong, Chee-Keong & Ng, Cheong-Fatt & Liew, Feng-Mei & Ching, Suet-Ling, 2019. "Is nuclear energy clean? Revisit of Environmental Kuznets Curve hypothesis in OECD countries," Economic Modelling, Elsevier, vol. 77(C), pages 12-20.
    16. Gharehgozli, Orkideh, 2021. "An empirical comparison between a regression framework and the Synthetic Control Method," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 70-81.
    17. Dominic Atogumsekiya Anarigide & Haruna Issahaku & Stanley Kojo Dary, 2023. "Drivers of financial innovation in sub-Saharan Africa," SN Business & Economics, Springer, vol. 3(9), pages 1-21, September.
    18. Dierk Herzer & Niklas Schmelmer, 2024. "The impact of South-South and North-South FDI on energy intensity in developing countries," Economics Bulletin, AccessEcon, vol. 44(4), pages 1367-1377.
    19. Michel Dumont, 2015. "Working Paper 05-15 - Evaluation of federal tax incentives for private R&D in Belgium: An update," Working Papers 1505, Federal Planning Bureau, Belgium.
    20. Baiardi, Donatella & Bianchi, Carluccio & Lorenzini, Eleonora, 2015. "The price and income elasticities of the top clothing exporters: Evidence from a panel data analysis," Journal of Asian Economics, Elsevier, vol. 38(C), pages 14-30.

    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bas:econst:y:2025:i:4:p:19-35. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Diana Dimitrova (email available below). General contact details of provider: https://edirc.repec.org/data/ikbasbg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.