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Factors Affecting Return on Assets (ROA) in the Banking Sector of Selected Arab Countries: Is There a Role for Financial Inclusion and Technology Indicators?

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  • Rami Obeid

Abstract

The objective of this study is to examine, using a dynamic panel data framework, the effects of financial inclusion on the performance of the banking sector, as measured by the return on assets, for eleven Arab countries during the period 2012-2019. In addition to financial inclusion and technologies indicators, our analysis incorporates banking and macroeconomic variables. The study reveals that bank-specific variables have a greater impact on the profitability of banks than macroeconomic variables. The results show that there is a positive and significant impact of the bank’s assets, the bank solvency, the credit growth, the economic growth rate, and the inflation rate on the profitability of the banking sector. However, the return on assets is unaffected by fluctuations in nonperforming loans and the interbank lending rate. Regarding indicators of financial inclusion and technologies, the study finds no evidence of significant effects of automated teller machines (ATM) distribution and bank branch density on return on assets.

Suggested Citation

  • Rami Obeid, 2023. "Factors Affecting Return on Assets (ROA) in the Banking Sector of Selected Arab Countries: Is There a Role for Financial Inclusion and Technology Indicators?," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 15(9), pages 1-1, September.
    • Handle: RePEc:ibn:ijefaa:v:15:y:2023:i:9:p:1
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    References listed on IDEAS

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    1. Rami Obeid & Mohammad Adeinat, 2017. "Determinants of Net Interest Margin: An Analytical Study on the Commercial Banks Operating in Jordan (2005-2015)," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 515-525.
    2. Emanuel Kohlscheen & Andrés Murcia Pabón & Juan Contreras, 2018. "Determinants of bank profitability in emerging markets," BIS Working Papers 686, Bank for International Settlements.
    3. Ahamed, M. Mostak & Mallick, Sushanta K., 2019. "Is financial inclusion good for bank stability? International evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 403-427.
    4. Naceur, Sami Ben & Omran, Mohammed, 2011. "The effects of bank regulations, competition, and financial reforms on banks' performance," Emerging Markets Review, Elsevier, vol. 12(1), pages 1-20, March.
    5. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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