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

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniel Anarfi & Kofi Ampadu Boateng & Kwabena Adu-Ababio, 2016. "Determinants of Return on Equity for a Sustainable Growth of the Manufacturing Industry in the Czech Republic," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 2(1), pages 43-52, November.
    2. Shinta Amalina Hazrati Havidz & Chandra Setiawan, 2015. "A Comparative Study of Efficiency between Conventional and Islamic Banks in Indonesia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(5), pages 790-804, May.
    3. Mohammad Abdelkarim Almumani, 2013. "Impact of Managerial Factors on Commercial Bank Profitability: Empirical Evidence from Jordan," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(3), pages 298-310, July.
    4. Tan, Yong, 2016. "The impacts of risk and competition on bank profitability in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 85-110.
    5. Feldmann, Horst, 2015. "Banking system concentration and unemployment in developing countries," Journal of Economics and Business, Elsevier, vol. 77(C), pages 60-78.
    6. Siudek, Tomasz & Drabarczyk, Katarzyna, 2015. "Wzrost i rozwój gospodarczy a efektywność finansowa banków komercyjnych w krajach Unii Europejskiej," Problems of World Agriculture / Problemy Rolnictwa Åšwiatowego, WydziaÅ‚ Nauk Ekonomicznych, Uniwersytet Warszawski, vol. 15(30).
    7. repec:eco:journ1:2017-02-77 is not listed on IDEAS

    More about this item

    Keywords

    banks; profitability; financial crisis; Korea;

    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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yi-Ju Su). General contact details of provider: http://edirc.repec.org/data/cbfcutw.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.