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The determinants of profitability of nationalised banks in Bangladesh

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  • Md. Tofael Hossain Majumder
  • Mohammad Jashim Uddin

Abstract

This study intends to investigate the determinants of profitability of four nationalised banks in Bangladesh, during the period of 2010 to 2014. Eight variables are drawn from the banking literature as proxies for bank-internal and macroeconomic determinants such as risk (NPLTL), capital regulation (CAR), liquidity (LIQD), income diversification (INDIV), bank size (SIZE), non-traditional activities (OFBSTA), growth in GDP (GGDP), and inflation (INFLR), and one variable is considered as a measurement of profitability, i.e., return on assets (ROA). This study employs various financial ratios and using SPSS software descriptive statistics, correlation analysis, and multivariate regression analysis run to measure the significant determinants of profitability. The empirical results show that among the independent variables, CAR, INDIV, and INFLR are positive and significantly associated with the dependent variable ROA; on the other hand, NPLTL, LIQD, SIZE, and OFBSTA, are negative and significantly associated with the dependent variable ROA. GGDP also negatively associated with profitability, but insignificant impact on ROA. The findings of this study have considerable potential as a tool for exploring bank profitability determinants and for suggesting optimal policies to the policy maker of bank management.

Suggested Citation

  • Md. Tofael Hossain Majumder & Mohammad Jashim Uddin, 2017. "The determinants of profitability of nationalised banks in Bangladesh," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 13(4), pages 335-348.
    • Handle: RePEc:ids:ijecbr:v:13:y:2017:i:4:p:335-348
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    Citations

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    Cited by:

    1. Alouane, Nour & Kahloul, Ines & Grira, Jocelyn, 2022. "The Trilogy of Ownership, Income Diversification, and Performance Nexus: Empirical Evidence from Tunisian Banks," Finance Research Letters, Elsevier, vol. 45(C).
    2. Sujan Chandra Paul & Mohammad Rakibul Islam & Sharmin Akter Mitu, 2021. "Nexus Unclassified Loans, Classified Loans, and Profitability: Evidence from Commercial Banks of Bangladesh," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 10(4), pages 99-114, October.
    3. Olufemi Adewale Aluko & Funso Tajudeen Kolapo & Patrick Olufemi Adeyeye & Patrick Olajide Oladele, 2019. "Impact of Financial Risks on the Profitability of Systematically Important Banks in Nigeria," Paradigm, , vol. 23(2), pages 117-129, December.
    4. Ning Wu & Jingyi Zhao & Mohammed Musah & Zhiqiang Ma & Lijuan Zhang & Yutong Zhou & Yongzheng Su & Joseph Kwasi Agyemang & Juliana Anyei Asiamah & Siqi Cao & Linnan Yao & Kaodui Li, 2023. "Do Liquidity and Capital Structure Predict Firms’ Financial Sustainability? A Panel Data Analysis on Quoted Non-Financial Establishments in Ghana," Sustainability, MDPI, vol. 15(3), pages 1-21, January.

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