The Determinants of Commercial Banking Profitability in Low-, Middle-, and High-Income Countries

44 Pages Posted: 15 Mar 2014

See all articles by Andreas Dietrich

Andreas Dietrich

Lucerne University of Applied Sciences and Arts

Gabrielle Wanzenried

Lucerne University of Applied Sciences and Arts, Institute of Financial Services Zug IFZ

Date Written: January 13, 2014

Abstract

Using a broad bank-level dataset and the GMM estimator technique described by Arellano and Bover (1995), this paper analyzes how bank-specific characteristics, macroeconomic variables, and industry-specific factors affect the profitability of 10,165 commercial banks across 118 countries over the period from 1998 to 2012. Grouping the countries according to three income levels, we show that the determinants of bank profitability included in our model can explain existing profitability differences among commercial banks in low-, middle-, and high-income countries. The profitability determinants vary quite widely across the different levels of income in terms of significance, sign and size of the effect. The level of income has thus an important impact on the determinants of bank profitability.

Keywords: Banking profitability; Macroeconomic impact on banking profitability; Ownership; Financial crisis; Economic development; Low-income countries; middle-income countries; high-income countries.

JEL Classification: G21, E44, C23, G32, L25, O16

Suggested Citation

Dietrich, Andreas and Wanzenried, Gabrielle, The Determinants of Commercial Banking Profitability in Low-, Middle-, and High-Income Countries (January 13, 2014). Available at SSRN: https://ssrn.com/abstract=2408370 or http://dx.doi.org/10.2139/ssrn.2408370

Andreas Dietrich (Contact Author)

Lucerne University of Applied Sciences and Arts ( email )

IFZ Institute of Financial Services Zug
P.O. Box 4332
Zug, CH-6304
Switzerland

Gabrielle Wanzenried

Lucerne University of Applied Sciences and Arts, Institute of Financial Services Zug IFZ ( email )

IFZ Institute of Financial Services Zug
P.O. Box 4332
Zug, CH-6304
Switzerland
+4141757 67 37 (Phone)
+4141757 67 00 (Fax)

HOME PAGE: http://www.ifz.ch

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