Determinants of Bank Performance: Evidence for Latin America

25 Pages Posted: 2 Feb 2014

See all articles by Jose Arias

Jose Arias

Universidad Catolica de la Santisima Concepcion; Middlesex University London

Mauricio Jara-Bertin

University of Chile - Business School

Arturo Rodriguez

Universidad de Chile

Date Written: December 1, 2013

Abstract

We analyze the impact of macroeconomic-industrial and bank-specific factors on Latin American banks’ performance. For that purpose, we use a data panel system estimator version of the generalized method of moments to estimate the determinants of return on assets and interest margin for a sample of 78 commercial banks from Argentina, Brazil, Chile, Colombia, México, Paraguay, Peru, and Venezuela over the period from 1995 to 2010. Our results show that, on the one hand, bank performance is positively related to idiosyncratic factors, such as service diversification, size, capital ratio, and specialization degree, and to macroeconomic-industrial factors such as economic growth, inflation, and bank concentration. On the other hand, the results show that bank performance is negatively related to credit risk, liquidity risk, and operational inefficiencies.

Keywords: Latin American bank industry, diversification, performance, interest margin, industry concentration, credit risk, liquidity risk, operational efficiency

JEL Classification: G21

Suggested Citation

Arias, Jose and Jara-Bertin, Mauricio Alejandro and Rodriguez, Arturo, Determinants of Bank Performance: Evidence for Latin America (December 1, 2013). Available at SSRN: https://ssrn.com/abstract=2387638 or http://dx.doi.org/10.2139/ssrn.2387638

Jose Arias

Universidad Catolica de la Santisima Concepcion ( email )

Alonso de Ribera 2850
Concepcion, 4030000
Chile

HOME PAGE: http://https://www.facea.ucsc.cl/

Middlesex University London ( email )

, The Burroughs, Hendon, London, United Kingdom
London, NW4 4BT
United Kingdom

HOME PAGE: http://https://www.mdx.ac.uk/

Mauricio Alejandro Jara-Bertin (Contact Author)

University of Chile - Business School ( email )

Diagonal Paraguay 257
Santiago, Chile
Chile

Arturo Rodriguez

Universidad de Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

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