Title: Nexus between assets structure and profitability of Croatian banking system

Authors: Iris Lončar; Tonći Svilokos

Addresses: Department of Economics and Business Economics, University of Dubrovnik, Lapadska obala 7, 20000, Dubrovnik, Croatia ' Department of Economics and Business Economics, University of Dubrovnik, Lapadska obala 7, 20000, Dubrovnik, Croatia

Abstract: Traditionally, in Croatia, as well as in other developing countries, most entities (households and enterprises) with cash surpluses entrust their investment portfolios to banks, instead of investing in securities. Therefore, the question of the profitability of banks' business becomes a key issue, as they do not only meet the interests of their shareholders and management, but also have positive effects on the whole economy. The aim of this paper is to analyse the influence of the structure and dynamic of total assets on financial performances on the example of the Republic of Croatia. In order to achieve the main purpose, the cross-section and fixed-effects panel models will be estimated. They will include standard profitability and various assets indices. The results of the analysis show that the level of total assets and especially the level of fixed assets, as well as the share of the other deposits, significantly influence the level of profit after taxation, as well as on return on assets (ROA) and return on equity (ROE).

Keywords: Croatian banking industry; assets' structure; profitability; ROA; return on assets; ROE; return on equity; cross-section model; fixed-effects panel model.

DOI: 10.1504/IJEBR.2021.112013

International Journal of Economics and Business Research, 2021 Vol.21 No.1, pp.107 - 125

Received: 10 Sep 2019
Accepted: 11 Feb 2020

Published online: 27 Nov 2020 *

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