Effects of Firm Specific Factors on Profitability of Non Bank Financial Institutions in Bangladesh: Evidenced from Dhaka Stock Exchange (DSE)

As the arena of the NBFIs is widening day by day in Bangladesh, it has attracted many investors of the country for which the profitability analysis of these NBFIs is getting popularity. This paper intends to analyze the firm-specific profitability indicators of the NBFIs in Bangladesh. To conduct this study, panel data of the nineteen NBFIs have been collected for the last 10 years (from 2007 to 2017). The main objectives of this paper to identify the fundamental determinants and to assess their contribution to the NBFIs’ profitability. Three measures of profitability- ROA, ROE and NIM, have been considered as the dependent variables in this paper. The fixed effect model was used in Model I- ROA and Model II- ROE. But the appropriate model for the Model III- NIM is undecided as the panel data for this model did not meet the asymptotic assumptions. To address this problem, Panel Corrected Standard Error (PCSE) Regression Method has been used in this study. The paper has been concluded by saying that ROE and NIM of the NBFIs are not influenced by their deposits and size which indicates that the ROE and NIM of the NBFIs are not sensitive to the sources from the NBFIs collect their funds. Non bank financial Institution should focus on the generation of capital from market using financial instruments with more diversified portfolios. Returns in these institutions can be backed by internally generated capital fund. However, sustainable growth in non bank institution needs to raise a minimum portion of deposit from the market with deliberate earnings from more systematic and dynamic asset class available in the market. Utilization of assets and earning s of mortgage loan and other financial assets should get more attention in Bangladeshi non bank financial institutions.