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Bank-Specific, Industry-Specific and Macroeconomic Determinants of Bank Profitability

  • Panayiotis P. Athanasoglou


    (Bank of Greece)

  • Sophocles N. Brissimis

    (Bank of Greece, Economic Research Department and University of Piraeus)

  • Matthaios D. Delis

    (Athens University of Economics and Business)

The aim of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants of bank profitability, using an empirical framework that incorporates the traditional Structure-Conduct-Performance (SCP) hypothesis. To account for profit persistence, we apply a GMM technique to a panel of Greek banks that covers the period 1985-2001. The estimation results show that profitability persists to a moderate extent, indicating that departures from perfectly competitive market structures may not be that large. All bank-specific determinants, with the exception of size, affect bank profitability significantly in the anticipated way. However, no evidence is found in support of the SCP hypothesis. Finally, the business cycle has a positive, albeit asymmetric effect on bank profitability, being significant only in the upper phase of the cycle.

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Paper provided by Bank of Greece in its series Working Papers with number 25.

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Length: 35 pages
Date of creation: Jun 2005
Date of revision:
Publication status: Forthcoming in Journal of International Financial Markets, Institutions & Money
Handle: RePEc:bog:wpaper:25
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