The Determinants of Commercial Bank’ Profitability in the South-Eastern Europe Region: A System GMM Approach

13 Pages Posted: 3 Jun 2021

See all articles by Michael Enowbi Batuo

Michael Enowbi Batuo

Westminster Business School

Francesco Guidi

University of Greenwich - Greenwich Business School

Date Written: May 10, 2021

Abstract

This study investigates the determinants of banks’ profitability on a sample of 169 commercial banks located in 7 countries of South-Eastern Europe. Specifically, the study employs dynamic panel data analysis based on the generalized method of moments over a period spanning from 2003–2012. Using alternative profitability measures, such as ROA and ROE, suggests that total assets and loan loss provision usually have more pronounced effects on banks' profitability than other variables and that macroeconomic variables are usually statistically significant, therefore highlighting their importance. Splitting the sample into small and large banks, we found that the determinants of profitability on small banks have a larger effect in comparison to large banks irrespective of the profitability measures used in the analysis; the opposite is the case on macroeconomic variables.

Keywords: profitability, banking, dynamic panel, SEE

JEL Classification: C23: G21: N94

Suggested Citation

Enowbi Batuo, Michael and Guidi, Francesco, The Determinants of Commercial Bank’ Profitability in the South-Eastern Europe Region: A System GMM Approach (May 10, 2021). Available at SSRN: https://ssrn.com/abstract=3857948 or http://dx.doi.org/10.2139/ssrn.3857948

Michael Enowbi Batuo (Contact Author)

Westminster Business School ( email )

35 Marylebone Road
London NW1 5LS
United Kingdom

Francesco Guidi

University of Greenwich - Greenwich Business School ( email )

30, Park Row
London, SE10 9LS
United Kingdom

HOME PAGE: http://www.gre.ac.uk/

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