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Bank-specific and Macroeconomic Determinants of Profitability in Middle Eastern Banking

Author

Listed:
  • Ali Mirzaei

    (Department of Economics and Finance, Brunel University, Kingston Lane, Uxbridge, London, UK)

  • Zeynab Mirzaei

    (Department of Economics, Shiraz Azad University, Shiraz, Iran)

Abstract

The main purpose of this research is to examine profitability determinants in the Middle Eastern banking systems. In particular, the impact of bank-specific and macroeconomic factors on bank profitability is examined. Using both the OLS and the GMM techniques, the results show the persistence of profit, confirming the dynamic character of the model specification. The crucial point is that the findings from the dynamic model confirm a non-linear relationship between size and profitability. Although no evidence is found in support of the traditional SCP hypothesis in the static model, the dynamic model confirms such hypothesis strongly. We also find that capital strength, liquidity, and efficiency are the main determinants of profitability. Off-balance-sheet activities reduce bank profits and the Middle Eastern banks don’t seem to anticipate inflation, meaning that the influence of inflation is negative for the Middle East at least for the period under consideration.

Suggested Citation

  • Ali Mirzaei & Zeynab Mirzaei, 2011. "Bank-specific and Macroeconomic Determinants of Profitability in Middle Eastern Banking," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 16(2), pages 101-128, spring.
    • Handle: RePEc:eut:journl:v:16:y:2011:i:2:p:101
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    References listed on IDEAS

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    1. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    2. Karim Ben Khediri & Hichem Ben-Khedhiri, 2009. "Determinants of Islamic bank profitability in the MENA region," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 2(3/4), pages 409-426.
    3. Uhomoibhi Toni Aburime, 2008. "Impact of Ownership Structure on Bank Profitability in Nigeria," Journal of Global Economy, Research Centre for Social Sciences,Mumbai, India, vol. 4(3), pages 170-183, September.
    4. Albertazzi, Ugo & Gambacorta, Leonardo, 2009. "Bank profitability and the business cycle," Journal of Financial Stability, Elsevier, vol. 5(4), pages 393-409, December.
    5. Athanasoglou, Panayiotis & Delis, Manthos & Staikouras, Christos, 2006. "Determinants Of Bank Profitability In The South Eastern European Region," MPRA Paper 10274, University Library of Munich, Germany.
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    Cited by:

    1. Jordan Kjosevski, 2024. "Examining the relationship between bank profitability and economic growth: insights from Central and Eastern Europe," Bank i Kredyt, Narodowy Bank Polski, vol. 55(2), pages 181-200.
    2. Shinta Amalina Hazrati Havidz & Chandra Setiawan, 2015. "A Comparative Study of Efficiency between Conventional and Islamic Banks in Indonesia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(5), pages 790-804, May.
    3. Aslam Mahmud, 2020. "Bank-specific and Macroeconomic Determinants of Profitability: Evidence from Conventional Private Commercial Banks Listed on Dhaka Stock Exchange," International Journal of Science and Business, IJSAB International, vol. 4(10), pages 99-107.
    4. Mehmet Sabri Topak & Nimet Hulya Talu, 2017. "Bank Specific and Macroeconomic Determinants of Bank Profitability: Evidence from Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 574-584.
    5. Saima Javaid & Suha Alalawi, 2018. "Performance and Profitability of Islamic Banks in Saudi Arabia: An Empirical Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(1), pages 38-51, January.

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