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The Relationship between Risk Management and Profitability of Commercial Banks in Albania

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  • Arjeta Hallunovi
  • Miranda Berdo

Abstract

Profitability is an indicator of the capacity of commercial banks to cope with their risk and/or capital growth, showing their competitiveness and measuring the quality of management. Credit risk is one of the significant risks of commercial banks by the nature of their activities. By effectively managing the exposure of commercial banks to credit risk, they not only support the viability and profitability of their business but also contribute to the system, stability and efficient allocation of capital to the economy. The purpose of the study was to determine whether there is a relationship between credit risk management and profitability in commercial banks in Albania. In this paper, there are four variables: ROA and ROE are the dependent variables, whereas non-performing loans (NPLs) and capital adequacy (CAR) are the independent variables. The main source of data collection are the annual reports for a 7-year period (2008-2015) by the Albanian Association of Banks. For quantitative data analysis, multiple regression model was used (SPSS).

Suggested Citation

  • Arjeta Hallunovi & Miranda Berdo, 2018. "The Relationship between Risk Management and Profitability of Commercial Banks in Albania," Asian Themes in Social Sciences Research, Knowledge Press, vol. 1(2), pages 44-49.
    • Handle: RePEc:kpr:atissr:v:1:y:2018:i:2:p:44-49:id:15
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    Cited by:

    1. Davis, E Philip & Ali Abdilahi, Ridwa, 2022. "Econometric Analysis of the Determinants of Bank Profitability in Three Major African Counties: Kenya, Nigeria and South Africa," National Institute of Economic and Social Research (NIESR) Discussion Papers 536, National Institute of Economic and Social Research.
    2. Munna Rani Biswas & Subrata Deb Nath & Prasenjit Kumar Biswas & Md. Aminur Rashid, 2021. "Effect of credit risk on commercial banks’ profitability: A case study of Bangladesh," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 12(1), pages 44-50, January.
    3. Ozili, Peterson, 2021. "Bank profitability determinants: comparing the United States, Nigeria and South Africa," MPRA Paper 105638, University Library of Munich, Germany.

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