The Determinants of Commercial Bank Profitability in Zimbabwe: A Dynamic Panel Data Model

Abstract

This study examined profitability of 15 commercial banks in Zimbabwe that survived the economic crisis experienced in Zimbabwe from 2003 to 2008. The first objective of the study was to determine whether the profitability of these banks significantly changed over the post crisis period. Using annual financial accounts data, from 2011 to 2014, the results from the one-way repeated measures ANOVA show that the mean profit ratios significantly changed over the four year period. The second objective was to determine factors influencing bank profitability under a multicurrency regime and the results from a dynamic panel data model show that diversification, funding cost and market share significantly affected profitability of commercial banks in Zimbabwe during the period under study.

Keywords: bank profitability, dynamic panel data, diversification, funding cost, market share.