Title: The determinants of bank performance: an analysis of theory and practice in the case of an emerging market

Authors: Nader Naifar

Addresses: Department of Finance and Investment, College of Economics and Administrative Sciences, Al-Imam Muhammad Ibn Saud Islamic University, P.O. Box 5701, Riyadh, Saudi Arabia

Abstract: The aim of this paper is to explain empirically the determinants of bank performance using pooled time-series and cross-section data. The existing theories and most of the empirical studies focus mainly on developed markets. Therefore, we chose an emerging market, Tunisia, to examine the validity of these studies. The Tunisian business environment is motivating because of the institutional reforms that have been successfully implemented since 1987. The study analyses Tunisian bank performance from 1999 to 2007. The findings show that bank performance is mainly explained by expenses management, ownership structure and bank loans. Consequently, reducing state ownership and expanding openness to foreign capital would encourage product innovation and competitive advantage and then, lead to a superior performance. The results of this study are very important for market participants and the Tunisian economic development.

Keywords: bank performance; Tunisia; performance determinants; banks; banking; pooled time-series; cross-section data; institutional reforms; expenses management; ownership structure; bank loans; state ownership; nationalisation; openness; expansion; foreign capital; product innovation; competitive advantage; economic development; privatisation; business environment; emerging markets.

DOI: 10.1504/IJBE.2010.037602

International Journal of Business Environment, 2010 Vol.3 No.4, pp.460 - 470

Published online: 20 Dec 2010 *

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