IDEAS home Printed from https://ideas.repec.org/a/jec/journl/v7y2011i1p43-72.html
   My bibliography  Save this article

Profitability of the Korean Banking Sector: Panel Evidence on Bank-Specific and Macroeconomic Determinants

Author

Listed:
  • Fadzlan Sufian

    (Khazanah Research and Investment Strategy, Khazanah Nasional Berhad, Malaysia and Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia, Malaysia)

Abstract

The paper analyzes the profitability of banks in Korea, while controlling for a wide array of bank specific and macroeconomic determinants. We find that Korean banks with lower liquidity levels tend to exhibit higher profitability. Furthermore, higher diversification regarding banks' income sources towards derivative instruments and other fee-based activities shows a positive effect. The impacts of credit risk and overhead costs are always negative whether we control for the macroeconomic and financial conditions or not. Business cycle effects, particularly inflation, display a substantial pro-cyclical impact on bank profitability. The industry concentration of the national banking system positively and significantly affects bank performance. The impact of the Asian financial crisis is negative, while Korean banks have been relatively more profitable during the pre-crisis compared to the post-crisis period.

Suggested Citation

  • Fadzlan Sufian, 2011. "Profitability of the Korean Banking Sector: Panel Evidence on Bank-Specific and Macroeconomic Determinants," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 7(1), pages 43-72, January.
    • Handle: RePEc:jec:journl:v:7:y:2011:i:1:p:43-72
    as

    Download full text from publisher

    File URL: http://www.jem.org.tw/content/pdf/Vol.7No.1/03.pdf
    Download Restriction: no
    File URL: http://www.jem.org.tw/content/abstract/Vol.7No.1/English/03.htm
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    banks; profitability; financial crisis; Korea;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

    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:jec:journl:v:7:y:2011:i:1:p:43-72. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Yi-Ju Su (email available below). General contact details of provider: https://edirc.repec.org/data/cbfcutw.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.