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Do the Same Determinants Affect Banks’ Profitability and Liquidity? Evidence from West Balkan Countries Using a Panel Data Regression Analysis

Author

Listed:
  • Boris Radovanov

    (Faculty of Economics in Subotica, University of Novi Sad, 24000 Subotica, Serbia)

  • Nada Milenković

    (Faculty of Economics in Subotica, University of Novi Sad, 24000 Subotica, Serbia)

  • Branimir Kalaš

    (Faculty of Economics in Subotica, University of Novi Sad, 24000 Subotica, Serbia)

  • Aleksandra Marcikić Horvat

    (Faculty of Economics in Subotica, University of Novi Sad, 24000 Subotica, Serbia)

Abstract

This study aims to determine whether the same bank-specific and macroeconomic determinants affect banks’ profitability and liquidity. To achieve the set goal, panel data regression analysis was applied with fixed effects or random effects depending on the results of the Hausman test, as explained in the Results. The research is based on the use of aggregate data on bank-specific and macroeconomic determinants of banks’ profitability and liquidity in West Balkan countries during the period from 2007 to 2022. The dependent variables in the study are ROA, ROE used as proxies for banks’ profitability, and banks’ liquid reserves to banks’ total assets as a proxy for banks’ liquidity. The findings confirm that the bank-specific and macroeconomic determinants affect both banks’ profitability and liquidity in the same direction, except for a few variables. The main contribution of this research is a comprehensive and parallel view of banks’ profitability and liquidity determinants that enables a guide for bank management to better understand the significance of bank-specific and macroeconomic determinants’ effects on their business. The obtained results can improve the balance between the two important principles of banking business.

Suggested Citation

  • Boris Radovanov & Nada Milenković & Branimir Kalaš & Aleksandra Marcikić Horvat, 2023. "Do the Same Determinants Affect Banks’ Profitability and Liquidity? Evidence from West Balkan Countries Using a Panel Data Regression Analysis," Mathematics, MDPI, vol. 11(19), pages 1-20, September.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:19:p:4072-:d:1247511
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    References listed on IDEAS

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