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Review of the Banking Sector Profit Persistence

Author

Listed:
  • Sanderson Abel

    (Department of Economist, Bankers Association of Zimbabwe, 14177 Gunhill Avenue, Gunhill, Harare, Zimbabwe,)

  • Khobai Hlalefang

    (Nelson Mandela Metropolitan University, Port Elizabeth South Africa,)

  • Pierre Le Roux

    (Department of Economics, Nelson Mandela Metropolitan University, Port Elizabeth, South Africa)

  • Learnmore Mutandwa

    (Midlands State University, Gweru, Zimbabwe.)

Abstract

The study aims to investigate the profit persistence and identify the determinants of profitability in the Zimbabwean banking sector during the period 2009-2014. The study established that banks were inefficient operating under monopolistic competition. The study revealed that profitability does not persist implying banks are enjoying abnormal profits over time. The results further reveals that market power, cost efficiency, credit risk, liquidity risk and the size of the bank are significant factors influencing bank profits. The results indicate that bank profits are determined mostly by strategies adopted by bank management.

Suggested Citation

  • Sanderson Abel & Khobai Hlalefang & Pierre Le Roux & Learnmore Mutandwa, 2018. "Review of the Banking Sector Profit Persistence," International Journal of Economics and Financial Issues, Econjournals, vol. 8(1), pages 54-63.
    • Handle: RePEc:eco:journ1:2018-01-7
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    References listed on IDEAS

    as
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    2. Zuzana Fungácová & Laura Solanko & Laurent Weill, 2010. "Market power in the russian banking industry," International Economics, CEPII research center, issue 124, pages 127-146.
    3. Manthos D. Delis & K. Christos Staikouras & Panagiotis T. Varlagas, 2008. "On the Measurement of Market Power in the Banking Industry," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(7‐8), pages 1023-1047, September.
    4. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    5. Entrop, Oliver & Memmel, Christoph & Ruprecht, Benedikt & Wilkens, Marco, 2015. "Determinants of bank interest margins: Impact of maturity transformation," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 1-19.
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    8. Constantinos Alexiou & Voyazas Sofoklis, 2009. "Determinants Of Bank Profitability: Evidence From The Greek Banking Sector," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 54(182), pages 93-118, July – Se.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Competition; Generalised Methods of moment; Instrumental Variables; Persistence; Profitability.;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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