Impact of Bank Characteristics and Macroeconomic Factors on Banks’ Profitability: A Study on Emerging Economy
Author (s)
Mohammad Ahsan Uddin & Mohammad Rokibul Hossain
Abstract
This study explores the impact of bank-specific characteristics and macroeconomic factors influence banks’ profitability in an emerging economy. In order to evaluate the internal features of banks, the study takes into account a number of firm-level variables, such as the Liquidity Ratio, Loan-to-Deposit Ratio, Capital Adequacy Ratio, Investment Income, Non-Performing Loans, and Total Assets. The real interest rate, the GDP, and inflation as measured by the Consumer Price Index (CPI) are regarded as external macroeconomic variables. Return on Assets (ROA) and Interest Income are the two main metrics used to assess profitability. The research makes use of a panel data collection that includes 80 observations from 10 banks between 2014 and 2021. A multiple regression analysis is conducted to assess the impact of macroeconomic variables and bank-specific attributes on profitability. The findings demonstrate that capital adequacy ratio and investment income have large positive effects on profitability (ROA), whereas real interest rates, GDP, and non-performing loans have considerable negative effects. Liquidity, Loan-to-Deposit Ratio, Total Assets, and Inflation do not statistically significantly affect ROA.
Key words: Liquidity Ratio, Loan-to-Deposit Ratio, Capital Adequacy Ratio, Investment Income, Non-Performing Loans, Total Assets, GDP.
| Title: | Impact of Bank Characteristics and Macroeconomic Factors on Banks’ Profitability: A Study on Emerging Economy |
|---|---|
| Author: |
Mohammad Ahsan Uddin & Mohammad Rokibul Hossain |
| Journal Name: | Journal of Scientific Reports |
| Website: | https://ijsab.com/jsr |
| Publisher | IJSAB-International |
| DOI: | https://doi.org/10.58970/JSR.1046 |
| Media: | Online |
| Volume: | 7 |
| Issue: | 1 |
| Acceptance Date: | 18/09/2024 |
| Date of Publication: | 20/09/2024 |
| PDF URL: | https://ijsab.com/wp-content/uploads/1046.pdf |
| Free download: | Available |
| Page: | 100-116 |
| First Page: | 100 |
| Last Page: | 116 |
| Paper Type: | Research Paper |
| Current Status: | Published |
Cite This Article:
Uddin, M. A. & Hossain, M. R. (2024). Impact of Bank Characteristics and Macroeconomic Factors on Banks’ Profitability: A Study on Emerging Economy, Journal of Scientific Reports, 7(1), 100-116. DOI: https://doi.org/10.58970/JSR.1046
About Author (s)
Mohammad Ahsan Uddin, Assistant Professor, Accounting Discipline, Department of Business Administration, Premier University, Chittagong, Bangladesh. ORCID: https://orcid.org/0009-0002-7553-8393
Mohammad Rokibul Hossain (Corresponding author), Assistant Professor, Department of Business Administration, Marketing Discipline, Faculty of Business Studies, Premier University, Chittagong, Bangladesh. ORCID: https://orcid.org/0000-0003-0974-5415
DOI: https://doi.org/10.58970/JSR.1046