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Profitability Analysis of Banks: Comparative Study of Domestic and Foreign Banks in Kosovo

Author

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  • Halil Kukaj
  • Fisnik Morina
  • Valdrin Misiri

Abstract

Purpose: The purpose of this study is to compare the financial performance of domestic and foreign banks in the banking sector of Kosovo over the period 2008-2018. In order to evaluate the financial performance of banks in Kosovo, both domestic and foreign ones, we have analyzed the financial reviews of these banks for 10 years (2008-2018), subsequently drawing the financial reports. Design/Methodology/Approach: To give an answer to the research question whether banks with foreign capital in Kosovo are more profitable than banks with local capital we have firstly revies the literature to find out what different authors have found in recent researches concerning this area and the methods and models used in collecting, processing and analyzing data. The processing of the data of the above-mentioned reports has been done by the STATA software program, specifically using linear regression, Fixed Effect, Random Effect, Hausman Taylor Regression and GMM modelling. Findings: Based on the empirical results of this study, we conclude that all independent variables (return on equity, net sales to net assets ratio, profit margin ratio) are significant at 5% level of statistical confidence. Return on equity and profit margin have a positive impact on increasing the return on assets of commercial banks in Kosovo, while increasing the ratio of net sales / net assets has a negative impact on return on assets. Practical Implications: This paper will provide a detailed analysis of the profitability of commercial banks in Kosovo, and through comparative analysis will determine which banks are most profitable, those with foreign capital or banks with domestic capital. Originality/Value: This research paper highlights an empirical analysis based on real data, financial reports of the Central Bank of Kosovo and on the financial statements of commercial banks in Kosovo. Given that these results are evident, they are a good reflection for all decision-makers in regulating and supervising commercial banks.

Suggested Citation

  • Halil Kukaj & Fisnik Morina & Valdrin Misiri, 2020. "Profitability Analysis of Banks: Comparative Study of Domestic and Foreign Banks in Kosovo," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 87-99.
    • Handle: RePEc:ers:ijebaa:v:viii:y:2020:i:2:p:87-99
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    More about this item

    Keywords

    Foreign and domestic banks in Kosovo; financial indicators; profitability indicator.;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G0 - Financial Economics - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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