Volume 9, Issue 34 (12-2018)
jemr 2018, 9(34): 201-254 |
Back to browse issues page
Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:
Pourmehr M, Sepehrdoust H, Naziri M K. Impact of Macroeconomic and Management Quality Variables on the Profitability of Private Banks; Using Structural Panel VAR Approach. jemr 2018; 9 (34) :201-254
URL: http://jemr.khu.ac.ir/article-1-1727-en.html
URL: http://jemr.khu.ac.ir/article-1-1727-en.html
1- Bu-Ali-Sina University
2- Bu-Ali-Sina University , hamidbasu1340@gmail.com
2- Bu-Ali-Sina University , hamidbasu1340@gmail.com
Abstract: (5145 Views)
Considering the importance of the Banking system in Iran economy and taking into account the strategic objectives of bank’s activities to improve their performance indicators, the main objective of the present study was to investigate the impact of internal and external factors affecting the three profitability components; including the return on assets (ROA), return on equity (ROE) and the net income margin (NIM) indicators of 13 private banks' in Iran for the period 2006 to 2016; using structural autoregressive vector panel model. For this purpose, the macro level factors responsible for profitability of banks are divided into internal components; including the quality of management, asset quality, capital adequacy and liquidity and external components such as inflation rate, interest rates, the growth of GDP, and the development of the stock market. The results indicate that the percentage of coverage of liquidity and the ratio of Non-performing loans to total loan as internal bank variables have a negative effects and the growth of GDP as the external variable has positive effect on the profitability components.
Type of Study: Applicable |
Subject:
پولی و مالی
Received: 2018/05/12 | Accepted: 2018/09/25 | Published: 2019/02/25
Received: 2018/05/12 | Accepted: 2018/09/25 | Published: 2019/02/25
References
1. Aburime, T. U. (2008). Determinants of Bank Profitability: Macroeconomics Evidence from Nigeria. Lagos Journal of Banking, Finance and Economics. Available at http://ssrn.com/abstract=1231064. [DOI:10.2139/ssrn.1231064]
2. Adelopo, I., Lloydking, R. & Tauringana, V. (2018). Determinants of bank profitability before, during, and after the financial crisis. International Journal of Managerial Finance, 14(4), 378-398. [DOI:10.1108/IJMF-07-2017-0148]
3. Alper, D., & Anbar, A. (2011). Bank Specific and MacroeconomicDeterminants of Commercial Bank Profitability: Empirical Evidencefrom Turkey. Business and Economic Research Journal. (2) 2; 139-152.
4. Ameur, G. B. & Mhiri, S. M. I. (2013). Explanatory factors of bank performance in Tunisia: A panel model approach. Global Journal of Management and Business Research, 13 (5); 1-12.
5. Ariff, M. & Can, L. (2008). Cost and profit efficiency of Chinese banks: A non-parametric analysis. China Economic Review. 19. 260-273. [DOI:10.1016/j.chieco.2007.04.001]
6. Azariadis, C. & Smith, B. D. (1996). Private Information, Money, and Growth: Indeterminacy, Fluctuations, and the Mundell-Tobin Effect. Journal of Economic Growth, No. 1, 309-332. [DOI:10.1007/BF00141041]
7. Azlan, A. J., Masyhuri, H. (2012). Determinants of commercial Banks' Return on Asset: Panel Evidence from Malaysia. International Journal of Commerce. Business and Management (IJCBM), 1(3); 55-63.
8. Bain, J.S. (1956). Barriers to new competition. Harvard University Press. Cambridge. [DOI:10.4159/harvard.9780674188037]
9. Baltagi, B. H. (1995). Econometric Analysis of Panel Data. John Wiley & Sons Ltd. ISBN 0-471-95299, 35.
10. Bashir, A.M. (2000). Determinants of profitability and rates of return margins in Islamic Banks: Some evidence from the Middle East. Paper presented at the ERF Seventh Annual Conference.
11. Baum, C. F. (2013). Applied Econometrics, Boston College. VAR, SVAR and VECM models.
12. Ben Naceur, S. (2003). The Determinants of the Tunisian Banking Industry Profitability: Panel Evidence. Paper Presented at the Economic Research Forum (ERF) 10th Annual Conference, Marrakesh-Morocco, 16-18 December.
13. Ben Naceur, S., Goaied. M. (2008). The determinants ofcommercial bank interest margin and profitability: Evidence fromTunisia. Frontiers in Finance and Economics, 5(1); 106-130.
14. Ben Naceur, S., Omran, M. (2011). The Effects of Bank Regulation, Competition, and Financial Reforms on Banks Performance. Emerging Market Review, 12; 1-20. [DOI:10.1016/j.ememar.2010.08.002]
15. Berger, A. N. (1995). The profit-structure relationship in banking-tests of market-power and efficient-structure hypotheses. Journal of Money, Credit and Banking, 27, 404-431. [DOI:10.2307/2077876]
16. Berger, A. N. & DeYoung, R. (1997). Problem Loans and Cost Efficiency in Commercial Banks. Journal of Banking and Finance, 21, 849-870. [DOI:10.1016/S0378-4266(97)00003-4]
17. Bernanke, B. (1986). Alternative Explanations of the Money-Income Correlation. Carn. Roch. Conf. Serie, 25, 49-99. [DOI:10.3386/w1842]
18. Bernanke, B. S. & Gertler, M. (1995). Inside the Black Box: The Credit Channel of Monetary Policy". The Journal of Economic Perspectives, 9(4), 27-48. [DOI:10.1257/jep.9.4.27]
19. Bikker, J. & Vervlietm T. (2017). Bank Profitability and Risk-Taking Under Low Interest Rates, DNB Working paper. 560. [DOI:10.2139/ssrn.3002480]
20. Bikker, J. A. & Hu, H. (2002). Cyclical Patterns in Profits; Provisioning and Lending of Banks and Procyclicality of the New Basel Capital Requirements. BNL Quarterly Review, 221; 143-175.
21. Blanchard, O. J. & Watson. M. (1986). Are business cycles all alike? University of Chicago Press, Chicago. Il.
22. Blanchard, O. & Quah, D. (1989). The dynamics of aggregate demand and supply disturbances. American Economic Review, 79; 655-673. [DOI:10.3386/w2737]
23. Boldrin, M., Lawrence. J. C. & Jonas, D. M. F. (2001). Habit Persistence, Asset Returns, and the Business Cycle. American Economic Review. 91(1);149-166. [DOI:10.1257/aer.91.1.149]
24. Bothra, P. & Ashwinpurohit. (2018). A Camel Model Analaysis of Selected Public and Private Sector Banks in INDIA. International Journal of Management and Applied Science, 4(3), 1-9.
25. Busch, R., Koziol, P. & Mitrovic, M. (2014). Many a Little Makes a Mickle: Macro Portfolio Stress Test for Small and Medium-Sized German Banks. Discussion Paper Deutsche Bundesbank. forthcoming.
26. Cai, h., Wang, w. (2004). The effects of interest rate changes on bank stock returns and profitability. Simon Fraser university. Business Administration.
27. Calem, P.S. & Rob, R. (1996). Impact of Capital Based Regulation on Banks' Risk Taking: A dynamic model. Board of Governors of the Federal Reserve System Finance and Economic Discussion Series. 36.
28. Chaudron, R. F. (2018). Bank's interest rate risk and profitability in a prolonged environment of low interest rates. 89, 94-104. [DOI:10.1016/j.jbankfin.2018.01.007]
29. Chen, H. J. & Ling, G. T. (2016). How do Banks Make the Trade-offs among Risks?The Role of Corporate Governance. Journal of Banking & Finance, 1-59. [DOI:10.1016/j.jbankfin.2016.05.010]
30. Choi, S. & Smith, B. D. (1996). Inflation, Financial Markets, and Capital Formation. Federal Reserve Bank of St. Louis Review. [DOI:10.20955/r.78.9-35]
31. Christiano, L. J., Eichenbaum, M. & Charles, L. E. (1999). Monetary policy shocks: What have we learned and to what end? Handbook of macroeconomics, 1, 65-148. [DOI:10.1016/S1574-0048(99)01005-8]
32. Clarida, R. & Gali, J. (1994). Sources of Real Exchange Eate Fluctuations: How Important are Nominal Shocks? Carn. Roch. Conf, 41; 1-56. [DOI:10.1016/0167-2231(94)00012-3]
33. Demiralp, S., Eisenschmidt, J. & Vlassopoulos, T. (2017). Negative Interest Rates, Excess Liquidity, and Bank Business Models: Banks' Reaction to Unconventional Monetary Policy in the Euro Area, Mimeo, February. [DOI:10.2139/ssrn.2941377]
34. Demirguc-Kunt, A. & Huizinga, H. (1999). Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence. World Bank Economic Review, 13(2); 379-408. [DOI:10.1093/wber/13.2.379]
35. Desa, K. A. (2003). An analysis of the determinants of commercial banks profitability in Malaysia. University Utara Malaysia. Sintok. Kedah.
36. Diamond, D. W. & Dybvig, P. H. (1983). Bank runs, deposit insurance, and liquidity, Journal of Political Economy, 91, 401-419. [DOI:10.1086/261155]
37. Diamond, D.W. & Rajan, R. G. (2005). Liquidity shortages and banking crises. Journal of Finance, 60, 615-647. [DOI:10.1111/j.1540-6261.2005.00741.x]
38. EbrahimI, S., Bahraminasab, A. & Seyedi, F. S. (2017). The Impact of CAMEL Indexes on Profit Management in Banks Listed on Tehran Stock Exchange. International Review of Management and Marketing, 7(2), 421-429.
39. Edirin, J. (2014). Assessing the Relationship between Non Performing Loans and the Financial Soundness of Banks in Nigeria (2003-2012), Journal of Arts and Social Sciences, 3(1), 115-125
40. Ejoh, N. O. & Lovara, U. U. (2014). Impact of Capital Adequacy on Deposit Money Banks Profitability in Nigeria. Research Journal of Finance and Accounting, 5 (12).
41. English, W. B. Heuvel, S. V. d. & Zakrajsek, E. (2012). Interest rate risk and bank equity valuations. [DOI:10.2139/ssrn.2055292]
42. Eslamolian, K., Yazdanpanah, H. & Khalilnejad, Z. (2018). Investigating the existence of a risk-taking channel for monetary policy in Iran's banking system, Journal of Economic Modeling Research, 8(31), 7-40. [In Persian]
43. Flamini, V., McDonald, C., & Schumacher, L. (2009). The Determinants of Commercial Bank Profitability in Sub-Saharan Africa. International Monetary Fund. [DOI:10.5089/9781451871623.001]
44. Genay, H. (2014). What is the impact of a low interest rate environment on bank profitability? The Federal Reserve Bank, 324.
45. Ghasemi, H. (2017). The Effect of Factors Affecting Profitability of Banks in Iran. Master's thesis. Department of Management and Commerce. Faculty of Economics. Tabriz University. [In Persian]
46. Ghayouri, M.A., Alipour, S., Nematollahi, Z. & Asghari, I. (2017). Determining the cost-benefit efficiency of banks using the data envelopment analysis technique and examining its determinants. Empirical Accounting Research, 7 (25); 105-83. [In Persian]
47. Goodarzi, A. & Zabiidi, H. (2008). The Effect of Electronic Banking on Profitability of Iranian Commercial Banks. Quarterly Journal of Iranian Economic Research. 35, 140-111. [In Persian]
48. Guru, B. K., Staunton, J. & shanmugam, B. (2002). Determinants of commercial bank profitability in Malaysia. Journal of Money, Credit and Banking, 17, 69-82.
49. Hamilton, J. D. (1994). Time Series Analysis. Princeton: Princeton University Press.
50. Hasan, I., Schmiedel, H., & Song, L. (2012). Returns to retail banking and payments. Journal of Financial Services Research. 41(3); 163-195. [DOI:10.1007/s10693-011-0114-y]
51. Holmstrom, B. & Tirole, J. (1989). Public and private supply of liquidity, Journal of Political Economy, 106, 1-40. [DOI:10.1086/250001]
52. Huybens, E. & Smith, B. (1999). Inflation, Financial Markets, and Long-Run Real Activity. Journal of Monetary Economics, 43, 283-315. [DOI:10.1016/S0304-3932(98)00060-9]
53. Işık, Ö. & Belke, M. (2018). An empirical analysis of the determinants of net interest margins of Turkish listed banks: Panel data evidence from post-crisis Era. Sosyoekonomi, 25(34), 227-245. [DOI:10.17233/sosyoekonomi.322057]
54. Kashyap, A. K., Rajan, R. G. & Stein, J. C. (2002). Banks as liquidity providers: An explanation for the coexistence of lending and deposit-taking. Journal of Finance, 57, 33-73. [DOI:10.1111/1540-6261.00415]
55. Kashyap, A. K., Rajan, R. G. & Stein, J. C. (2002). Banks as liquidity providers: An explanation for the coexistence of lending and deposit-taking, Journal of Finance, 57, 33-73. [DOI:10.1111/1540-6261.00415]
56. Kerbl, S. & Sigmund, M. (2018). Negative Interest Rates: Forecasting Banks' Profitability in a New Environment. Available at: https: //ssrn.com /abstract=2901932 or http: //dx. doi.org/ 10.2139 / ssrn.2901932. [DOI:10.2139/ssrn.2901932]
57. Klein, N. (2013). Non-Performing Loans in CESEE; Determinants and Impact on Macroeconomic Performance. IMF Working Papers 13(72). [DOI:10.5089/9781484318522.001]
58. Klevmarken, A. (1989). Modelling Labor Supply in a Dynamic Economy. Working Paper Series 247. Research Institute of Industrial Economics.
59. Komejani, A. and Fallahi, S. (2016). Identification of internal factors affecting credit risk of banks. Journal of Economic Research, 51 (3), 652-635. [In Persian]
60. Kosmidou, K. (2008). The determinants of banks' profits in Greece during the period of EU financial integration. Managerial Finance, 34(3); 146-159. [DOI:10.1108/03074350810848036]
61. Kumbirai, M. & Webb, R. (2010). A financial ratio analysis of commercial bank performance in South Africa. African Review of Economics and Finance, 2(1); 30-53.
62. Lopez, J. A., Rose, A. K., & Spiegal, M. M. (2018). Why Have Negative Nominal Interest Rates Had Such a Small Effect on Bank Performance? Cross Country Evidence. Working Paper, https://www.frbsf.org/economic-research/publications/working-papers/2018/07/ [DOI:10.3386/w25004]
63. Lutkepohl, H. (2005). New Introduction to Multiple Time Series Analysis. New York: Springer. [DOI:10.1007/978-3-540-27752-1]
64. Lynch, R., Cross, K. (1991). Measure up Yardsticks for Continuous Improvement.
65. Maleki, M., Mokhtari, K. & Sobhani, A. (2016). Investigating Factors Affecting Profit Margin (Iranian Private Banks). Master's thesis. Department of Economics. Faculty of Economics Azad University of Arak. [In Persian]
66. Martinho, R., Oliveira, J. & Oliveira, V. (2017). Bank Profitability and Macroeconomic Factors, Lisbon.
67. Mason, E. S. (1939). Price and production policies of large scale enterprises. AmericanEconomic Review, 29; 61 - 74.
68. Mehrabanpour, M., Naderi, N., Mohammadmehdi, I., & Ashari, E. (2017). Factors Affecting Bank Profitability. Quarterly Journal of Empirical Financial Accounting Studies, 14 (54), 113-134. [In Persian]
69. Mishkin, f. (2007). The economics of money and banking and financial markers. Banking and the Management of Financial Institutions.
70. Mohammadi, T., Eskandari, F. & Karimi, D. (2016). The Effect of Macroeconomic Variables and Specific Banking Characteristics on Non-Claims in Iran's Banking System. Quarterly Journal of Economic Research, 16 (62), 83-104. [In Persian]
71. Moore, B. J. (1986). Inflation and Financial Deepening. Journal of Development Economics, 20, 125-133. [DOI:10.1016/0304-3878(86)90008-8]
72. Murty, A.V.N. & Chowdary, E. R. (2018). Effective of Interest Rates Changes on Profitability of Banking Industry in India (An Empirical Research on the Profitability Performance of Nationalized Banks in India). IOSR Journal of Business and Management, 20(2), 82-91
73. Musau, S., Muathe, S. & Mwangi, L. (2018). Financial inclusion, GDP and credit risk of commercial banks in kenya. International Journal of Economics and Finance, 10(3), 181-195. [DOI:10.5539/ijef.v10n3p181]
74. Nadali, M. (2013). Calculation of Tension Index in Iranian Money Market. Quarterly journal of Economic Research and Policy, 21; 142-115. [In Persian]
75. Najafi shariatzadeh, I., Shabanzadeh, M. & Zomorodian, G. (2016). Investigating the Effective Components on Profitability of Iranian Commercial Banks Using the ARDL Panel Model. Journal of Financial Engineering and Management of Securities, 29; 172-151. [In Persian]
76. Nazriyan, R. & Azizianfard, R. (2016). Investigating the Factors Affecting the Profit Margin of Banks in Iran. Quarterly Journal of Financial and Economic Policy, 4 (14); 73-106. [In Persian]
77. Nucera, F., Andre, L., Julia, S. & Bernd, S. (2017). Do Negative Interest Rates Make Banks Less Safe?" Tinbergen Institute Discussion Paper. [DOI:10.2139/ssrn.2958763]
78. Odunga, R. M., Nyangweso, P. M., Carter D. A. & Mwarumba, M. (2013). Credit Risk, Capital Adequacy and Operating Efficiency of Commercial Banks in Kenya. International Journal of Business and Management Invention, 2(91), 6-12.
79. Olalekan, A. & Adejunka S. (2013) Capital Adequacy and Bank Profitability: An Empirical Evidence from Nigeria. American International Journal of Contemporary Research, 3(10).
80. Omrani, M. & Naji Azimi, Z. (2015), Modeling of Asset Management and Debt Management with Liquidity Risk Management Approach in Banking System Using Fuzzy Ideal Planning Model Case Study: Mellat Bank, Quarterly Journal of Economic Modeling Research, No. 1, p. 91 -128. [DOI:10.18869/acadpub.jemr.7.25.91]
81. Ongore, V. O. & Kusa, G. B. (2013). Determinants of financial performance of commercial banks in Kenya. International Journal of Economics and Financial Issues, 3 (1); 237-252.
82. Pedroni, P. (2013). Structural Panel VARs. econometrics. Econometrics. 2. 180-206. [DOI:10.3390/econometrics1020180]
83. Ramlall, I. (2009). Bank-Specific. Industry-Specific and Macroeconomic Determinants of Profitability in Taiwanese Banking System: Under Panel Data Estimation. International Research Journal of Finance and Economics, ISSN 1450-2887, (34).
84. Rekik, M. & Kalai, M. (2018). Determinants of banks' profitability and efficiency: Empirical evidence from a sample of Banking Systems. Journal of Banking and Financial Economics, 1(9), 5-23 [DOI:10.7172/2353-6845.jbfe.2018.1.1]
85. Romer, C. D. & Romer, D. H. (2004). A new measure of monetary shocks: Derivation and implications. The American Economic Review, 94(4), 1055-1084. [DOI:10.1257/0002828042002651]
86. Samuelson, P. A. (1945). The effect of interest rate increases on the banking system. The American Economic Review, 35(1), 16-27.
87. Sayari, K. & Shamki, D. (2016). Commercial Banks Profitability and Stock Market Developments. Journal of Applied Finance & Banking, 6(4), 43-52.
88. Shahchera, M. and Abul-Fatheh, F. (2016). Investigating factors affecting the quality of bank assets in the banking system of Iran. Journal of Economic Development Policy, Quarterly Journal of Alzahra University, Vol. 4, No. 3, pp. 151-181. [In Persian]
89. Shaihakitash, M., Mahmodpour, K. & Nyayini, M. (2015). Investigating the Relationship Between Market Structure and Profitability in Iran's Banking System, SCP Approach. Quarterly Journal of Trends, No. 72; 37-13. [In Persian]
90. Sims, C. (1986). Are Forecasting Models Usable for Policy Analysis? Fed. Reserve Bank Minneapolis Quart. Rev, 10. 2-16.
91. Sophie, C. & Vander Vennet, R. (2008). Determinants of Bank Interest Margins in Central and Eastern Europe: A Comparison with the west. Economic Systems, 32(2), 197-216. [DOI:10.1016/j.ecosys.2007.04.001]
92. Tan, Y. A. & Floros, C. (2012). Bank profitability and GDP growth in China: A note. Journal of Chinese Economic and Business, 10(3), 267-273· [DOI:10.1080/14765284.2012.703541]
93. Titko, J., Skvarciany, V. & cien, D. J. (2016). Drivers of bank profitability: Case of Latvia and Lithuania. Intellectual Economics, 9, 120-129 [DOI:10.1016/j.intele.2016.02.003]
94. Tomuleasa, I. & Cocrish, V. (2014). Measuring the financial performance of the European systemically important banks. Financial Studies, 4; 31-51.
95. Torbira, L. L. & Zaagha, A.S. (2016). Capital Adequacy Measures and Bank Financial Performance in Nigeria: A Cointegration Analysis. Journal of Finance and Economic Research, 3 (1).
96. Udom, I. S. & Onyekachi, E. R. (2018). Effect of Capital Adequacy Requirements on the Profitability of Commercial Banks in Nigeria. International Research Journal of Finance and Economics, 165, 79-89.
97. Vong, P.I.A. & Chan, S.H. (2009). Determinants of Bank Profitability in Macao. University of Macao. working paper.
98. Wasiuzzaman, S. & Tarmizi, H. A. A. (2009). Profitability of Islamic Banks in Malaysia: An Empirical Analysis. Journal of Islamic Economics. Banking and Finance, 6(4).
99. Yüksel, S., Mukhtarov, S., Mammadov, E. & Özsarı, M. (2018). Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries. Economies, 6(41), 1-15. [DOI:10.3390/economies6030041]
100. Zimmermann, K. (2017). Breaking Banks? Monetary Policy and Bank Profitability.https://www.bde.es/f/webbde/.../171005_15.30-17.00_1_ZIMMERMANN_paper.pdf.
Send email to the article author
| Rights and permissions | |
 | This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. |
