2026· International journal of research and innovation in social science· Vol 10, pp. 12488-12497· 0 citations
Abstract
This study examines the bank specific and macroeconomic determinants of commercial bank profitability in Kenya using a balanced panel of eleven leading banks observed annually over the ten year period from 2014 to 2023, yielding 110 bank year observations. Profitability is proxied by the return on assets, while the explanatory variables comprise bank size, capital adequacy, liquidity, asset quality measured by the non performing loans ratio, operational efficiency measured by the cost to income ratio, the loan to deposit ratio and two macroeconomic controls, namely real gross domestic product growth and inflation. Three competing estimators were applied: pooled ordinary least squares, a one way fixed effects model and a random effects model. Specification testing through the redundant fixed effects F test rejected the pooled specification in favour of a panel structure, while the Hausman test could not reject the orthogonality of the individual effects, indicating that the random effects estimator is both consistent and efficient for these data. The random effects results show that asset quality, operational efficiency and liquidity exert statistically significant negative effects on profitability, whereas bank size and the rate of economic growth exert significant positive effects. Capital adequacy, the loan to deposit ratio and inflation are not statistically significant once unobserved heterogeneity is accounted for. The non performing loans ratio emerges as the single most influential variable, underscoring the centrality of credit risk management to bank earnings in the Kenyan market. The findings carry direct implications for bank managers seeking to protect margins and for the regulator in calibrating prudential expectations.
This paper re-examines the determinants of profitability in Bangladeshi private commercial banks, using a panel-corrected standard errors (PCSE) analysis of ten listed banks over 2014–2023 (n = 100 bank-year observations), together with a post-sample assessment of the sector's extraordinary deterioration through 2024–2025. Profitability is measured by return on assets (ROA), with return on equity (ROE) and net interest margin (NIM) used as robustness checks. Results show that capital adequacy and management efficiency significantly enhance profitability, while asset-quality deterioration and non-performing loans (NPLs) exert strong negative effects; liquidity management and bank size are largely insignificant, pointing to inefficiencies in deployment and scale. GDP growth is statistically negligible within-sample and inflation shows mixed effects, underscoring structural weaknesses in financial intermediation. A winsorization check (1st/99th percentiles) confirms that the capital-adequacy and NPL effects are stable to outlier treatment, while the management-efficiency effect is more sensitive. Extending the analysis with Bangladesh Bank, IMF, and World Bank data through 2025 shows that the sector-wide NPL ratio rose from below 10 percent in 2023 to more than 30 percent by late 2025, alongside a collapse in aggregate capital adequacy a trajectory consistent with, and considerably amplifying, the credit-quality channel identified in the panel results. The study contributes methodologically by applying PCSE in a South Asian context, and offers policy implications for strengthening credit discipline, addressing regulatory forbearance, and improving banking efficiency.
Md. Jahidul Islam, M. Moniruzzaman, A. Haq et al.· Global Disclosure of Economi...· 0 citations
This study examines how banking-specific internal determinants shape financial performance, positioning bank size as a moderating construct. Inconsistent empirical evidence concerning the roles of capital adequacy, asset quality, management quality, liquidity, and cost efficiency in driving profitability motivated this inquiry. Employing a quantitative design with secondary data drawn from 32 banks listed on the Indonesian Stock Exchange over 2020–2024, the research applies panel data regression under a fixed effects specification. The primary contribution to the existing body of knowledge lies in simultaneously testing multiple internal determinants while incorporating bank size as a moderating variable. The novelty of this study rests on the inclusion of cost efficiency ratio as a profitability factor within the moderation framework. Evidence reveals that liquidity and cost efficiency exert a statistically positive and significant influence on financial performance, whereas capital adequacy, asset quality, and management quality yield no discernible effects. Bank size contributes positively to financial performance on a direct basis; however, it attenuates the effects of both liquidity and cost efficiency. These outcomes carry practical implications for bank managers seeking to enhance liquidity practices and control operational expenditures.
Keywords : Bank size; Capital adequacy; Cost efficiency ratio; Financial performance; Liquidity.
Salsa Kira Husnanda, Naya Lutfiyah Anas, Farah Margaretha Leon· Jurnal Ilmu Keuangan dan Per...· 0 citations
The financial performance of commercial banks remains a subject of considerable interest in both academic and policy circles, particularly in emerging markets where the banking sector constitutes a critical pillar of economic intermediation. This study examines the determinants of financial performance among Tier II and Tier III commercial banks in Kenya, using data extracted from audited financial statements for the fiscal year ending December 2025. The study employs Return on Assets (ROA) as the dependent variable and considers five bank specific explanatory variables: the Non-Performing Loan (NPL) ratio, Loan to Deposit ratio, Capital Adequacy ratio, Net Interest Income to Assets ratio and Operating Income to Assets ratio. Using Ordinary Least Squares (OLS) regression analysis on a sample of 28 banks, the study finds that the model explains approximately 70.83% of the variation in ROA (R² = 0.7083; Adj. R² = 0.6419), which is statistically significant at the 1% level (F (5, 22) = 10.68; p < .0001). The NPL ratio exerts a significant negative effect on performance (β = −0.0408; p = 0.006), while capital adequacy (β = 0.0913; p = 0.026) and operating income efficiency (β = 0.4214; p = 0.012) are significant positive drivers of ROA. The Loan to Deposit ratio and Net Interest Income ratio do not yield statistically significant effects. Diagnostic tests confirm the absence of multicollinearity (Mean VIF = 1.74), homoskedasticity (Breusch-Pagan p = 0.3153) and correct model specification (Ramsey RESET p = 0.8894). The findings suggest that beyond bank size, credit quality management, capital strength and income diversification are the primary levers of financial performance in Kenya's mid-tier banking segment.
Keywords: Financial performance, ROA, Tier II and III banks, NPL ratio, capital adequacy, OLS regression.
Yegon Kiprotich Festus, Charles Githira· African Development Finance...· 0 citations
This study examined the relationship between bank-run prediction indicators and the operational
efficiency of listed Deposit Money Banks (DMBs) in Nigeria from 2015 to 2024. Using an ex
post facto research design, the study employed panel data obtained from the annual financial
reports of 15 listed DMBs, including Access Bank, Zenith Bank, GTCO, First Bank, and UBA.
Panel data estimation techniques were implemented using E-Views 9.0, applying both fixed and
random effects models. The Hausman test confirmed the random effects model as most
appropriate. Diagnostic tests such as the panel unit root, Pedroni cointegration, and cross
sectional dependence tests validated the robustness of the results. The findings reveal that
Liquidity Coverage Ratio (LCR) has a negative and statistically significant effect on Return on
Assets (ROA), indicating that excessive liquidity reduces profitability. The Loan-to-Deposit Ratio
(LDR) positively affects ROA, showing that efficient credit intermediation improves performance.
Capital Adequacy Ratio (CAR) also positively and significantly influences ROA, emphasizing the
role of strong capitalization in sustaining profitability. Conversely, Non-Performing Loans Ratio
(NPLR) negatively affects ROA, demonstrating that poor asset quality erodes profitability. The
study concludes that maintaining an optimal balance between liquidity, lending efficiency,
capital strength, and asset quality is crucial for bank stability and profitability. It recommends
enhanced liquidity optimization strategies, prudent credit management, and sustained capital
strengthening measures. The study contributes to knowledge by integrating prudential ratios as
predictors of both bank-run vulnerability and operational efficiency within a unified empirical
framework.
Chiyenum Comfort Ekule· IIARD INTERNATIONAL JOURNAL...· 0 citations
In recent years, the banking system has been affected by several economic and financial shocks, increasing the importance of analyzing bank profitability and its determinants. This study examines bank profitability in selected Balkan countries over the period 2010–2024 by combining econometric panel data methods with machine learning techniques. Bank profitability is proxied by two commonly used indicators, ROA and ROE, while the explanatory variables include bank-specific factors such as efficiency, capital adequacy, non-performing loans, net interest margin, and the credit-to-deposit ratio, as well as macroeconomic variables such as GDP, inflation and unemployment. The econometric results indicate that efficiency and capital adequacy are key determinants of bank profitability, with efficiency negatively associated with ROA and ROE, while capital adequacy is positively associated with both indicators. The machine learning analysis, based on Random Forest and XGBoost, further evaluates the predictive role of the explanatory variables. Overall, the results show that bank-specific variables have a stronger influence on profitability than macroeconomic variables. In particular, feature importance highlights the relevance of the credit-to-deposit ratio, while SHAP values emphasize the contribution of NPLs. Overall, the findings suggest that bank profitability in selected Balkan countries is mainly driven by internal banking factors rather than macroeconomic conditions.
Sauda Nerjaku, Valentina Sinaj· Journal of Risk and Financia...· 0 citations
This study investigates the impact of liquidity risk on asset quality and financial stability in Uzbekistan’s commercial banking sector. Using quarterly time-series data from 2016 to 2024, the study employs Ordinary Least Squares (OLS) regression with quadratic specifications to capture potential non-linear effects of liquidity. Two models are estimated to examine (i) the relationship between liquidity risk and asset quality, and (ii) the impact of liquidity risk on financial stability, proxied by net profit. The results indicate that liquidity risk does not have a statistically significant effect on asset quality, suggesting that credit performance is primarily driven by structural and macroeconomic factors rather than liquidity conditions. In contrast, the financial stability model demonstrates high explanatory power (R2 = 0.883), although individual coefficients are statistically insignificant due to severe multicollinearity among banking sector variables. The findings do not support the conventional liquidity–profitability trade-off hypothesis, as no evidence of a linear or non-linear relationship between liquidity and profitability is observed. Regulatory capital emerges as the most influential variable, indicating the importance of capital strength in supporting banking stability. This study contributes to the literature by providing novel empirical evidence from a transition economy, highlighting the limitations of isolating liquidity effects in rapidly expanding banking systems. The results suggest that in reform-oriented financial environments, banking stability is shaped more by structural growth and capital adequacy than by liquidity trade-offs, offering important implications for macroprudential policy design.
Akrom A. Omonov, B. Izbosarov, Erlane K. Ghani· Journal of Risk and Financia...· 0 citations
