Macroeconomic and Industry-Specific Determinants of Greek Bank Profitability

International Journal of Business and Economic Sciences Applied Research, Vol. 10, No.1, 3 - 22

11 Pages Posted: 20 Jul 2017

See all articles by Konstantina Zampara

Konstantina Zampara

University of Peloponnese - Department of Economics, Students

M. Giannopoulos

Hellenic Open University

Dimitrios N. Koufopoulos

Gnosis Management Consultants; HOCG (Hellenic Observatory of Corporate Governance; Queen Mary University of London - Centre for Commercial Law Studies (CCLS)

Date Written: February 1, 2017

Abstract

Purpose: The purpose of this paper is to investigate the external factors that influence the profitability of a typical Greek systemic bank over the period 2001-2014.

Design/Methodology/Approach: A conceptual framework incorporating two fundamental groups of constructs, namely, macroeconomic forces and industry related factors, was developed.

Two constructs were examined in the former: GDP growth rate and unemployment rate, whilst two attributes were explored in the latter; the bank's market share, both in terms of deposits and in terms of assets, and the banking market growth, also both in terms of the market's total assets and total deposits. In order to isolate the effects of the ongoing financial crisis, the research was undertaken for two periods, firstly 2001 to 2014 and secondly, the period 2001-2011, which excluded the deep recession. Consequently, multiple regression analysis was conducted and linear models were specified by means of OLS.

Findings: The empirical analysis revealed that both macroeconomic forces and industry-related factors affect bank profitability. As far as the macroeconomic factors are concerned, unemployment rate has a negative impact, whereas the GDP growth rate has a positive impact on bank profitability. The industry-related factors, rate of growth of the industry's deposits and bank's assets market share have a positive impact on the financial performance of the bank. Finally, the rate of growth of the industry's assets and the bank's deposits market share have a negative effect on bank profitability.

Originality/Value: This study reveals the mechanism determining bank profitability over a recent period that includes the financial crisis. Moreover, understanding the impact of macroeconomic forces as well as industry related attributes on bank profitability may enable banks to focus on the most critical factors in their decision process.

Keywords: Greek banking, bank profitability, determinants of profitability, financial crisis, decision process

JEL Classification: G01, G21, L2

Suggested Citation

Zampara, Konstantina and Giannopoulos, M. and Koufopoulos, Dimitrios N. and Koufopoulos, Dimitrios N., Macroeconomic and Industry-Specific Determinants of Greek Bank Profitability (February 1, 2017). International Journal of Business and Economic Sciences Applied Research, Vol. 10, No.1, 3 - 22, Available at SSRN: https://ssrn.com/abstract=3002384

Konstantina Zampara (Contact Author)

University of Peloponnese - Department of Economics, Students ( email )

Greece

M. Giannopoulos

Hellenic Open University

Parodos Aristotelous 18
Patra, 26335
Greece

Dimitrios N. Koufopoulos

Gnosis Management Consultants ( email )

London
United Kingdom

HOME PAGE: http://www.gnosisconsultants.com

HOCG (Hellenic Observatory of Corporate Governance ( email )

83 Rodney Court
6-8 Maida Vale
London, W9 1TJ
United Kingdom

HOME PAGE: http://www.hocg.eu

Queen Mary University of London - Centre for Commercial Law Studies (CCLS) ( email )

Charterhouse Square
London, EC1M 6AX
United Kingdom

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