This study examines the determinants of profitability of commercial banks in Albania. These determinants are categorized into two groups, internal factors that are the bank specific factors and external factors that are further divided into macroeconomic factors and industry specific factors.
The main objective of the study is to determine the factors affecting the profitability of commercial banks and making some recommendations, that maybe can help the management and policymakers. A panel data with 16 commercial banks in Albania is analyzed for the period 2009-2014. Two indicators are used (dependent variables) for the measurement of profitability, return on assets (ROA) and return on equity (ROE). Banking specific factors that are used in this study include variables such as bank size, asset management, credit risk, liquidity of assets, capital adequacy, operational efficiency and cost of financing. On the other hand is taken into consideration only one industry specific factor, which is the concentration and macroeconomic factors such as GDP, inflation and exchange rate.
To meet the main object of the research, the study is based mainly on quantitative research method, which is supplemented by a qualitative method. Quantitative data were obtained mainly from the financial statements of commercial banks, by INSTAT, Bank of Albania, and World Bank, in order to make empirical analysis needed to identify and measure the determinants of bank profitability. In particular, multiple regression analysis was used to measure the impact of the determinants of bank profitability. On the other hand, qualitative data were collected through unstructured interviews conducted with executives of finance in the albanian commercial banks. To realize empirical analysis were used the software SPSS 22 and Eviews 7.
Contents
1. CHAPTER 1
1.1 A General Overwiew
1.2 Evidence of the Problem
1.3 Objective of the Study
1.4 Hypothesis of the Study
1.5 Conceptual Framework
1.6 Methodology and Data
1.7 Study Limitations
1.8 The Importance of the Study
1.9 Organization of the Study
2. CHAPTER 2
2.1 A Short History of the Albanian Banking System
2.2 Economic Importance of Commercial Banks
2.3 Structure of Financial/Banking System
2.4 Main Developments in the Performance of the Albanian Banking System
3. CHAPTER 3
3.1 Introduction
3.2 Theoretical Profitability Analysis
3.3 Determinants Factors of Profitability
3.4 Internal FactorsType text or a website address or translate a document.Translate from: EnglishFaktorwt hdsh
3.5 External Factors
4. CHAPTER 4
4.1 Research Approaches
4.2 The Applied Method
4.3 Data Collection
4.4 Data Analysis and Model Specification (ROA/ROE)
4.5 Statistical Examination of Determinants
4.6 Diagnostic Tests of the Model
4.7 Hypotheses of Study
5. CHAPTER 5
5.1 Tests for Model Validation (ROA/ROE)
5.2 Correlation Analysis for Profitability Models (ROA/ROE)
5.3 Descriptive Data Statistic for Profitability Models (ROA/ROE)
5.4 Granger Cause Test for ROA Model
5.5 The Results of the Regression Analysis for the Model (ROA)
5.6 Granger Cause Test for ROE Model
5.7 The Results of the Regression Analysis for the Model (ROE)
5.8 Bank Profitability Analysis (ROA/ROE) by Groups
5.9 Interview Findings
6. CHAPTER 6
6.1 Conclusions
6.2 Recommendations
Research Objectives and Themes
This study investigates the determinants of commercial bank profitability in Albania for the period 2009-2014, categorizing them into internal (bank-specific) and external (industry and macroeconomic) factors. Its primary objective is to identify how these factors influence profitability metrics—specifically Return on Assets (ROA) and Return on Equity (ROE)—and to provide evidence-based recommendations for management and policy formulation.
- Analysis of bank-specific determinants including size, asset management, credit risk, and capital adequacy.
- Evaluation of the impact of macroeconomic variables such as GDP growth, inflation, and exchange rates.
- Empirical assessment using quantitative regression models and panel data for 16 commercial banks.
- Integration of qualitative insights from unstructured interviews with bank finance executives.
- Comparative analysis of profitability across distinct bank groups within the Albanian banking system.
Excerpt from the Book
3.4.1 Bank Size and Profitability
In the study the size of the bank is measured by the natural logarithm of total assets (Idriz, 2011). In most studies, attempting to analyze bank profitability determinants, total assets are used as a measure for bank size (Marshall, 2009). Empirical evidence suggests that this variable influences the profitability of commercial banks (Naceur, 2003; Athanasoglou, Brissimis and Delis, 2005; Srairi, 2008; Kosmidou, 2008; Hubbard and O'Brien, 2012; Haslem, 2012; Yilmaz, 2013). Smirlock (1985), Akhavein et al., (1997) and Goddard et al., (2004) found a significant positive relationship between bank size and profitability.
Pasiouras and Kosmidou (2007), Dietrich and Wanzenried (2011), Alper and Anbar (2011) have found a positive and statistically significant relationship between bank size and bank profitability because large banks have higher credit rates and diversification of product than small and medium-sized banks. Micco et al., (2007) also found a positive but not significant correlation. According to Berger et al., (1987), small cost savings can be achieved by increasing the size of a banking firm, which suggests that ultimately large banks may face inefficiencies in the scale. But one of the most important questions in a bank's policy is to determine the optimal size to maximize bank profitability.
Summary of Chapters
CHAPTER 1: This chapter introduces the study topic, the research problem, and defines the general and specific objectives, followed by the research questions and organizational structure.
CHAPTER 2: Provides a historical overview of the Albanian banking system, discusses the economic role of commercial banks, and details the performance developments of the sector from 2009 to 2014.
CHAPTER 3: Reviews the literature on bank profitability, examining theories and empirical findings regarding both internal and external determinants.
CHAPTER 4: Outlines the research methodology, including the quantitative approaches, data sources, and the specification of the empirical models used for analysis.
CHAPTER 5: Presents the empirical results, including diagnostic tests, regression analysis for ROA and ROE models, group-based analysis, and findings from interviews with finance managers.
CHAPTER 6: Concludes the dissertation by summarizing the findings of the empirical analysis and providing relevant recommendations for stakeholders.
Key Keywords
Albania, Commercial Banks, Profitability, ROA, ROE, Bank Specific Factors, Industry Specific Factors, Macroeconomic Factors, Financial Performance, Banking Sector, Panel Data, Regression Analysis, Economic Growth, Capital Adequacy, Credit Risk
Frequently Asked Questions
What is the core focus of this research?
The study focuses on identifying and analyzing the determinants of profitability for commercial banks operating in Albania during the 2009-2014 period.
Which factors are categorized as internal determinants?
Internal determinants include factors within bank management control, such as bank size, asset management, credit risk, asset liquidity, capital adequacy, operational efficiency, and financing costs.
What is the primary objective of this dissertation?
The main objective is to empirically determine which internal and external factors influence bank profitability and to formulate recommendations for management and policy making.
What research methods are employed in this study?
The study utilizes a mixed-methods approach, relying primarily on quantitative empirical analysis of panel data using regression models, supplemented by qualitative data collected via unstructured interviews.
How is bank profitability measured in this work?
Profitability is measured using two dependent variables: Return on Assets (ROA) and Return on Equity (ROE).
Which variables characterize this research?
The research is characterized by the use of 11 independent variables across internal, industry-specific, and macroeconomic categories, including bank size, liquidity, GDP growth, and inflation.
Why was the 2009-2014 period chosen for this analysis?
The specific timeframe was selected because data on banks became considered homogeneous only after 2009.
What was a key finding regarding the bank groups?
The analysis revealed that discriminating banks into groups (1, 2, and 3) by size allows for a more realistic and qualitative understanding of the determinants impacting their specific profitability.
- Citation du texte
- Arjeta Hallunovi (Auteur), 2018, Determinants of profitability in commercial banks in Albania, Munich, GRIN Verlag, https://www.grin.com/document/429323
