Determinants of commercial bank profitability: South Asian evidence

    Research output: Contribution to journalArticleResearchpeer-review

    Abstract

    This study investigates the bank-specific and other determinants of commercial bank profitability in selected South Asian countries (Bangladesh, India, Pakistan and Sri Lanka). The single-equation, dynamic panel data procedure employed accommodates explicit measures of production efficiency, industry competition, profit persistence and country-specific differences in governance. The findings reveal profit persistence in South Asian banking markets. Even though increasing competition exerts negative pressure on bank profitability, high industry concentration still allows these banks to earn higher profits. The well-capitalised banks and those with relatively more efficient production processes are the more profitable. South Asian banks also seem to experience economies of scale as bank size is positively associated with profitability. The results also indicate that slack legal systems in these countries (leading to inferior contract enforcement) positively affect profits as banks probably require higher risk premiums on their loan contracts.
    Original languageEnglish
    Pages (from-to)365 - 380
    Number of pages16
    JournalAsian Journal of Finance and Accounting
    Volume5
    Issue number1
    DOIs
    Publication statusPublished - 2013

    Cite this

    @article{817aeb2ff98c4725aa6ec51d9be5f3d5,
    title = "Determinants of commercial bank profitability: South Asian evidence",
    abstract = "This study investigates the bank-specific and other determinants of commercial bank profitability in selected South Asian countries (Bangladesh, India, Pakistan and Sri Lanka). The single-equation, dynamic panel data procedure employed accommodates explicit measures of production efficiency, industry competition, profit persistence and country-specific differences in governance. The findings reveal profit persistence in South Asian banking markets. Even though increasing competition exerts negative pressure on bank profitability, high industry concentration still allows these banks to earn higher profits. The well-capitalised banks and those with relatively more efficient production processes are the more profitable. South Asian banks also seem to experience economies of scale as bank size is positively associated with profitability. The results also indicate that slack legal systems in these countries (leading to inferior contract enforcement) positively affect profits as banks probably require higher risk premiums on their loan contracts.",
    author = "Perera, {Gangadawila H Shrimal R} and Skully, {Michael Thomas} and Zahida Bashir",
    year = "2013",
    doi = "10.5296/ajfa.v5i1.3012",
    language = "English",
    volume = "5",
    pages = "365 -- 380",
    journal = "Asian Journal of Finance and Accounting",
    issn = "1946-052X",
    publisher = "Macrothink Institute",
    number = "1",

    }

    Determinants of commercial bank profitability: South Asian evidence. / Perera, Gangadawila H Shrimal R; Skully, Michael Thomas; Bashir, Zahida.

    In: Asian Journal of Finance and Accounting, Vol. 5, No. 1, 2013, p. 365 - 380.

    Research output: Contribution to journalArticleResearchpeer-review

    TY - JOUR

    T1 - Determinants of commercial bank profitability: South Asian evidence

    AU - Perera, Gangadawila H Shrimal R

    AU - Skully, Michael Thomas

    AU - Bashir, Zahida

    PY - 2013

    Y1 - 2013

    N2 - This study investigates the bank-specific and other determinants of commercial bank profitability in selected South Asian countries (Bangladesh, India, Pakistan and Sri Lanka). The single-equation, dynamic panel data procedure employed accommodates explicit measures of production efficiency, industry competition, profit persistence and country-specific differences in governance. The findings reveal profit persistence in South Asian banking markets. Even though increasing competition exerts negative pressure on bank profitability, high industry concentration still allows these banks to earn higher profits. The well-capitalised banks and those with relatively more efficient production processes are the more profitable. South Asian banks also seem to experience economies of scale as bank size is positively associated with profitability. The results also indicate that slack legal systems in these countries (leading to inferior contract enforcement) positively affect profits as banks probably require higher risk premiums on their loan contracts.

    AB - This study investigates the bank-specific and other determinants of commercial bank profitability in selected South Asian countries (Bangladesh, India, Pakistan and Sri Lanka). The single-equation, dynamic panel data procedure employed accommodates explicit measures of production efficiency, industry competition, profit persistence and country-specific differences in governance. The findings reveal profit persistence in South Asian banking markets. Even though increasing competition exerts negative pressure on bank profitability, high industry concentration still allows these banks to earn higher profits. The well-capitalised banks and those with relatively more efficient production processes are the more profitable. South Asian banks also seem to experience economies of scale as bank size is positively associated with profitability. The results also indicate that slack legal systems in these countries (leading to inferior contract enforcement) positively affect profits as banks probably require higher risk premiums on their loan contracts.

    UR - http://dx.doi.org/10.5296/ajfa.v5i1.3012

    U2 - 10.5296/ajfa.v5i1.3012

    DO - 10.5296/ajfa.v5i1.3012

    M3 - Article

    VL - 5

    SP - 365

    EP - 380

    JO - Asian Journal of Finance and Accounting

    JF - Asian Journal of Finance and Accounting

    SN - 1946-052X

    IS - 1

    ER -