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Title: The Determinants of Profitability in Banking Industry: Empirical Research on Selected Balkan Countries
Authors: Bucevska, Vesna 
Hadzi misheva, Branka
Keywords: bank profitability, bank-specific control variables, efficiency hypothesis, macroeconomic variables, structure-conduct-performance hypothesis
Issue Date: Mar-2017
Publisher: Taylor and Francis
Source: Vesna Bucevska & Branka Hadzi Misheva, 2017. "The Determinants of Profitability in the Banking Industry: Empirical Research on Selected Balkan Countries," Eastern European Economics, Taylor & Francis Journals, vol. 55(2), pages 146-167, March.
Journal: Eastern European Economics, Vol. 55, Issue 2
Abstract: The determinants of bank profitability in general, and of the impact of market structure and efficiency on bank performance in particular, remain a much- researched topic in bank performance analysis. The purpose of this article is to investigate the relevance of the structure-conduct-performance (SCP) hypothesis versus the efficiency hypothesis in explaining bank performance by analyzing 127 commercial banks from six Balkan countries (Slovenia, Croatia, Serbia, Bosnia and Herzegovina, Montenegro, and Macedonia) over the period 2005–2009. In order to account for the dynamic nature of bank profits, it uses a GMM estimator in testing the determinants of bank profitability. The estimation results suggest that profits persist to some extent, indicating that the deviation from a perfectly competitive market structure is marginal. In addition, the findings suggest that efficiency is significantly and positively associated with profitability, whereas the industry concentration variable is insignificant in explaining profitability, indicating support in favor of the efficiency hypothesis. Moreover, among the bank-specific control variables, only size is reported insignificant, and the rest of the variables affect bank profitability in the anticipated manner. Finally, the results suggest that neither inflation nor economic growth has an impact on bank profitability.
DOI: 10.1080/00128775.2016.1260473
Appears in Collections:Faculty of Economics 03: Journal Articles / Статии во научни списанија

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