The determinants of profitability of nationalised banks in Bangladesh
by Md. Tofael Hossain Majumder; Mohammad Jashim Uddin
International Journal of Economics and Business Research (IJEBR), Vol. 13, No. 4, 2017

Abstract: This study intends to investigate the determinants of profitability of four nationalised banks in Bangladesh, during the period of 2010 to 2014. Eight variables are drawn from the banking literature as proxies for bank-internal and macroeconomic determinants such as risk (NPLTL), capital regulation (CAR), liquidity (LIQD), income diversification (INDIV), bank size (SIZE), non-traditional activities (OFBSTA), growth in GDP (GGDP), and inflation (INFLR), and one variable is considered as a measurement of profitability, i.e., return on assets (ROA). This study employs various financial ratios and using SPSS software descriptive statistics, correlation analysis, and multivariate regression analysis run to measure the significant determinants of profitability. The empirical results show that among the independent variables, CAR, INDIV, and INFLR are positive and significantly associated with the dependent variable ROA; on the other hand, NPLTL, LIQD, SIZE, and OFBSTA, are negative and significantly associated with the dependent variable ROA. GGDP also negatively associated with profitability, but insignificant impact on ROA. The findings of this study have considerable potential as a tool for exploring bank profitability determinants and for suggesting optimal policies to the policy maker of bank management.

Online publication date: Tue, 06-Jun-2017

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