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Determinants of Banking Sector Profitability: Empirical Evidence from Palestine

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  • Abugamea, Gaber

Abstract

The objective of this study is to examine the impact of bank-specific and major macroeconomic factors on the profitability of banking sector of Palestine by using the aggregate bank balance sheet data over the time period 1995-2015. This paper employs the Ordinary Least Square method to investigate the effect of bank’s asset size, capital, loans, deposits, economic growth and inflation on key bank profitability indicators, i.e., return on assets (ROA), return on equity (ROE) and net interest margin (NIM), separately. The main findings show that size has positive impact on ROE. Capital is positively related to ROA. Loans are positively correlated with both ROA and ROE. Deposits are negatively related to both ROA and ROE. Also, it is found that neither internal nor external factors have significant impact on NIM, despite the fact that overall internal and external factors have a significant effect as denoted by F-statistics value. Moreover, banking sector has not benefited significantly from both the inflationary environment and economic growth. These findings are of value to both academicians and policy makers.

Suggested Citation

  • Abugamea, Gaber, 2018. "Determinants of Banking Sector Profitability: Empirical Evidence from Palestine," MPRA Paper 89772, University Library of Munich, Germany, revised 2018.
    • Handle: RePEc:pra:mprapa:89772
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    File URL: https://mpra.ub.uni-muenchen.de/89772/1/MPRA_paper_89772.pdf
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    Cited by:

    1. Maha Haroon & Danish Ahmed Siddiqui, 2019. "Determinants of Allocative, Cost and Scope Efficiencies: A Comparative Analysis of Banks and Insurance Companies in Pakistan," Business Management and Strategy, Macrothink Institute, vol. 10(2), pages 285-312, December.
    2. Abugamea, Gaber, 2021. "Determinants of Islamic Banking Profitability: Empirical Evidence from Palestine," MPRA Paper 107527, University Library of Munich, Germany.
    3. 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.
    4. Mohammad ALAWIN, 2024. "The Degree Of Competitiveness Of Islamic Banks Compared To Commercial Banks In Kuwait," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 24(1), pages 121-136.

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    More about this item

    Keywords

    Banking Sector; Banking Profitability; Internal & External Factors; OLS; Palestine;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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