Determinants of profitability of Non Bank Financial Institutions:Evidence from Bangladesh.

Author(s)

Md. Sogir Hossain Khandoker , Professor Dr. R. K. Raul , S. M. Galibur Rahman ,

Download Full PDF Pages: 31-42 | Views: 657 | Downloads: 135 | DOI: 10.5281/zenodo.3405875

Volume 2 - April 2013 (04)

Abstract

This project examines the determinants of profitability of Non Bank Financial Institutions (NBFIs) of Bangladesh in the context of strengthening and aligning the financial sectors with that of operating at the global level. Profitability provides a clue of effectiveness of firms’ decisions and operational policies. The key factors emerged from the study like; liquidity, operating expenses, capital structure, total assets, etc significantly influence the financial performance of NBFIs. Different Statistical techniques such as correlation matrix, multiple regressions, Run test, and K-W test for randomness were used for the analysis of secondary data. The study highlighted the necessity of strategic financial decision of NBFIs in the emerging economy like Bangladesh to gain competitive edge in the changing global financial arena. 

Keywords

profitability, operational efficiency, capital structure, competitive edge.

References

  1. Abbasoglu, O. F., Aysan, A. F., & Gunes, A. (2007). Concentration, competition, efficiency and profitability of the Turkish banking sector in the post-crisis period. Banks and Bank Systems 2(3), 106–115.
  2. Akhavein, J., Berger, A. N., & Humphrey, D. B. (1997). The effects of megamergers on efficiency and prices: Evidence from a bank profit function. Review of Industrial Organization 12(1), 95–139.
  3. Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank specific, industry specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money 18(2), 121–136.
  4. Beck, T., Demirguc-Kunt, A., & Levine, R. (2009). Financial institutions and markets across countries and over time: Data and analysis. World Bank Policy Research Working Paper No. 4943.
  5. Ben Naceur, S., & Goaied, M. (2008). The determinants of commercial bank interest margin and profitability: Evidence from Tunisia. Frontiers in Finance and Economics 5(1), 106– 130.
  6. Berger, A. N. (1995). The relationship between capital and earnings in banking. Journal of Money, Credit and Banking 27, 432– 456.
  7. Berger, A. N., Hanweck, G. A., & Humphrey, D. B. (1987). Competitive viability in banking: Scale scope and product mix economies. Journal of Monetary Economics 20(3), 501–520.
  8. Bikker, J., & Hu, H. (2002). Cyclical patterns in profits, provisioning and lending of banks and procyclicality of the new basel capital requirements. BNL Quarterly Review 221, 143– 175.
  9. Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking and Finance 13, 65–79.
  10. Boyd, J., & Runkle, D. (1993). Size and performance of banking firms: Testing the predictions theory. Journal of Monetary Economics 31, 47–67.
  11. Cooper, M., Jackson, W., & Patterson, G. (2003). Evidence of predictability in the cross section of bank stock returns. Journal of Banking and Finance 27, 817–850.
  12. Christos K. Staikouras & Geoffrey E. Wood “The Determinants of European Bank Profitability”, International Business & Economics Research Journal Volume 3, Number 6
  13. Davydenko A., (2011) "Determinants of Bank Profitability in Ukraine," Undergraduate Economic Review, 7, 1-30.
  14. Demirguc-Kunt, A., & Huizinga, H. (1999). Determinants of commercial bank interest margins and profitability: Some international evidence. World Bank Economic Review 13, 379–408.
  15. Duca, J., & McLaughlin, M. (1990). Developments affecting the profitability of commercial banks. Federal Reserve Bulletin, 477–499.
  16. Fadzlan Sufian, and Royfaizal Razali Chong “Determinants of Bank profitability in a developing economy: Empirical evidence from the Philippines”, AAMJAF, Vol. 4, No. 2, 91– 112, 2008
  17. Goddard, J., Molyneux, P., & Wilson, J. (2004). Dynamic of growth and profitability in banking. Journal of Money, Credit and Banking 36, 1069–1090.
  18. Golin, J. (2001). The Bank Credit Analysis Handbook: A Guide for Analysts, Bankers and Investors. New York: John Wiley and Sons.
  19. Hassan, M. K., & Bashir, A. H. M. (2003). Determinants of Islamic banking profitability. Paper presented at the 10th ERF Annual Conference, Morocco, 16–18 December.
  20. Hauner, D. (2005). Explaining efficiency differences among large German and Austrian banks. Applied Economics 37, 969–980.
  21. Jahangir N., Shill S. and Haque A. J., (2011) „Examination of profitability in the context of Bangladesh banking industry‟, ABAC Journal, 27, 36-46.
  22. James W. Scott and José Carlos Arias “Banking profitability determinants”, Business Intelligence Journal - July, 2011 Vol.4 No.2
  23. Kosmidou, K. (2008). The determinants of banks' profits in Greece during the period of EU financial integration. Managerial Finance 34(3), 146–159.
  24. Levine, R. (1998). The legal environment, banks, and long run economic growth. Journal of Money, Credit and Banking 30, 596–613.
  25. Mamatzakis, E. C., & Remoundos, P. C. (2003). Determinants of Greek commercial banks profitability, 1989–2000. Spoudai 53(1), 84–94.
  26. Miller, S. M., & Noulas, A. (1997). Portfolio mix and large bank profitability in the USA. Applied Economics 29, 505–512.
  27. Molyneux, P., & Thornton, J. (1992). Determinants of European bank profitability: A note. Journal of Banking and Finance 16, 1173– 1178.
  28. Molyneux, P. (1993). Structure and performance in European Banking. Working paper, University of Wales Bangor.
  29. Pasiouras, F., & Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance 21, 222–237.
  30. Rajan, R. G., & Zingales, L. (1998). Financial dependence and growth. American Economic Review 88, 559–586.
  31. Rivard, R. J., & Thomas, C. R. (1997). The effect of interstate banking on large bank holding company profitability and risk. Journal of Economics and Business 49, 61–76.
  32. Shah-Noor Rahman, Tazrina Fara / IJARBAE (March 2012) Vol. 1, Issue 1 / Page No: 26 – 32
  33. Staikouras, C., & Wood, G. (2003). The determinants of bank profitability in Europe. Paper presented at the European Applied Business Research Conference, Venice, 9–13 June.
  34. Staikouras, C., Mamatzakis, E., & Koutsomanoli-Filippaki, A.(2008). An empirical investigation of operating performance in the new European banking landscape. Global Finance Journal 19(1),32–45.
  35. Stiroh, K. J., & Rumble, A. (2006). The dark side of diversification: The case of US financial holding companies. Journal of Banking and Finance 30(8), 2131–2161.
  36. Thakor, A. (1987). Discussion. Journal of Finance 42, 661–663.
  37. Whalen, G. (1988). Actual competition, potential competition and bank profitability in rural markets. Federal Reserve Bank of Cleveland Economic Review 3, 14–21.
  38. White, H. J. (1980). A heteroskedasticityconsistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 48, 817–838.

Cite this Article: