Profitability Determinants of Commercial Banks: in the Context of Bangladesh

Abstract

This study investigates the effects of both the bank-specific and macroeconomic factors on the performance of Dhaka Stock Exchange (DSE) listed traditional commercial banks. To explore the association, the present study has analyzed the panel data collected from 23 listed traditional commercial banks during a period of eight years starting from 2009 to 2016. The results of the random effect-GLS method indicate that total loan to total asset (TLTA), equity to total assets (EQTA), loan to deposit (LTDEP), and interest margin (INTMARGIN) exert a positive effect on both the performance measures (ROA and ROE), while logarithm of total assets (LNASSET), and GDP growth rate (GDPGR) affect the banks’ performance negatively. Moreover, the dummy variable representing the banks’ size influence the performance of commercial banks positively, thereby supporting the better operating efficiency of large commercial banks. The research would cater to the needs of different stakeholders such as top managements, regulatory authority, and investors, providing the knowledge of the factors related to banks’ profitability.

Keywords: Bank Performance, Profitability, Commercial Banks, Bangladesh