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Determinants of Banking Profitability in Portugal and Spain: Evidence with Panel Data

In: Banking and Accounting Issues

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  • Maria Elisabete Duarte Neves
  • Joana Monteiro
  • Carmem Leal

Abstract

This article aims to study the determinants of banking performance in the countries of the Iberian Peninsula, Portugal and Spain. To achieve the proposed objective, the methodology of panel data was used, specifically the estimation method Generalized Method of Moments (GMM-system). An unbalanced panel of 267 banks was used, of which 122 belong to the Portuguese banking sector and 145 to the Spanish banking sector. Two variables were used as performance measures, the average return on total assets (ROAA) and the average return on equity (ROAE). The results show that bank profitability is generally influenced by internal variables, and not so much by sector-specific or macroeconomic variables. Therefore, the results suggest that management decisions are the ones that most influence performance. We conclude that bordering countries, despite having different economies, have very similar influences on bank profitability.

Suggested Citation

  • Maria Elisabete Duarte Neves & Joana Monteiro & Carmem Leal, 2022. "Determinants of Banking Profitability in Portugal and Spain: Evidence with Panel Data," Chapters, in: Nizar Mohammad Alsharari (ed.), Banking and Accounting Issues, IntechOpen.
    • Handle: RePEc:ito:pchaps:261216
    DOI: 10.5772/intechopen.103142
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    References listed on IDEAS

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    4. Mester, Loretta J., 1996. "A study of bank efficiency taking into account risk-preferences," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 1025-1045, July.
    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

    Keywords

    determinants of Bank profitability; Portugal; Spain; Iberian Peninsula; GMM system;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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