Determinants of bank profitability before, during and after the financial crisis

Adelopo, Ismail, Lloydking, Robert and Tauringana, Venancio (2018) Determinants of bank profitability before, during and after the financial crisis. International Journal of Managerial Finance, 14 (4), 378-398. (doi:10.1108/IJMF-07-2017-0148).

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Abstract

This paper reports the results of an investigation into the relationship between bank-specific, macroeconomic factors and bank profitability before (1999-2006), during (2007-2009) and after (2010-2013) the financial crisis. The results indicate that banks sustained profitable performance even during the financial crisis despite fall in loans and increasing bank liquidity. Panel data analyses results show that there is a significant relationship between bank-specific determinants (size, cost management, and liquidity) and bank profitability (ROA) before, during and after the financial crisis. However, the relationships between other bank-specific (capital strength, credit risk, and market power), macroeconomic (GDP and inflation) determinants are sensitive to both period of analysis (before, during and after the financial crisis) and bank profitability measure used (ROA or NIM). Overall, these results suggest that the financial crisis did not affect the relationships between some bank-specific determinants and bank profitability.

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