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Determinants of Commercial Bank Profitability in Mexico

Author

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  • Ruben Chavarin Rodriguez

    (Universidad de Guadalajara)

Abstract

The aim of the present work is to identify the main determinants of profitability for commercial banks established in Mexico. A database of 45 banks representing virtually the whole world of commercial banking in the period 2007-2013 was used. Dynamic models using Arellano-Bover/BlundellBond estimators with an error that follows an MA(1) process were employed along with static models having random effects and Hausman-Taylor estimator. Findings suggest that the profitability of commercial banking is sustained by the level of capital, the charging of commissions and fees, and control of operating expenses, as well as certain market entry barriers and obstacles to competition that provoke a relatively high persistence of profitability.

Suggested Citation

  • Ruben Chavarin Rodriguez, 2015. "Determinants of Commercial Bank Profitability in Mexico," EconoQuantum, Revista de Economia y Finanzas, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 12(1), pages 97-123, Enero-Jun.
    • Handle: RePEc:qua:journl:v:12:y:2015:i:1:p:97-123
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    File URL: http://econoquantum.cucea.udg.mx/index.php/EQ/article/view/4855
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    File URL: http://econoquantum.cucea.udg.mx/index.php/EQ/issue/view/429
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    Cited by:

    1. Seidl, Andrew & Mulungu, Kelvin & Arlaud, Marco & van den Heuvel, Onno & Riva, Massimiliano, 2020. "Finance for nature: A global estimate of public biodiversity investments," Ecosystem Services, Elsevier, vol. 46(C).

    More about this item

    Keywords

    Bank profitability; Dynamic panel-data; Latin America.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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