Determinants of Bank Profitability and Basel Capital Regulation: Empirical Evidence from Nigeria

Research Journal of Finance and Accounting, 6 (2), 124-131

14 Pages Posted: 4 Jan 2015 Last revised: 27 Oct 2016

See all articles by Peterson K Ozili

Peterson K Ozili

University of Essex - Essex Business School; Central Bank of Nigeria

Date Written: 2015

Abstract

This study, empirically, investigates the determinants of bank profitability. The debate on whether Basel capital regulation affects bank profitability continues to attract research interest, globally. I contribute to this debate by providing a country specific study. Overall, I find that Basel capital regime had no significant effect on bank profitability. The result is significant because it lends support to the view that modified Basel accord in different countries might be aimed to meet other prudential objectives relative to the intended objective - to reduce excessive bank risk-taking. Second, after employing NIM and ROA profitability metrics, I find that the determinants of bank profitability, and its significance, depends on the profitability metric employed. Third, I find that loan quality significantly influences bank interest margin while bank size and cost efficiency significantly influences return on asset. Finally, bank capital adequacy ratio is observed to be a significant determinant of bank profitability.

Keywords: Bank Profitability, Performance, Basel, Return on Asset, Net Interest Margin, Bank Regulation

JEL Classification: G21, G38

Suggested Citation

Ozili, Peterson Kitakogelu, Determinants of Bank Profitability and Basel Capital Regulation: Empirical Evidence from Nigeria (2015). Research Journal of Finance and Accounting, 6 (2), 124-131. Available at SSRN: https://ssrn.com/abstract=2544647 or http://dx.doi.org/10.2139/ssrn.2544647

Peterson Kitakogelu Ozili (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Central Bank of Nigeria ( email )

Plot 33, Abubakar Tafawa Balewa Way
Central Business District, Cadastral Zone
Abuja
Nigeria

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