THE SIGNIFICANT CONTRIBUTION OF BANGLADESHI COMMERCIAL BANKS’ LIQUIDITY POSITION, BANK SIZE, AND INTERNAL CAPITAL GENERATING ABILITY TO INCREASE PROFITABILITY

Özet

The banking system is the lifeblood of an economy. This study aims to inspect the extent of the impact of banks’ managerial issues in terms of liquidity position, bank size and internal capitalgenerating capacity on the profit-making ability of commercial banks in Bangladesh during the period of 2007 to 2018. To examine data, a static panel model is constructed by considering 57 commercial banks. Indicators of a bank’s profitability include return on assets, return on equity, and net interest margin. The Fixed Effect model and the Random Effect models are considered as the baseline estimations and the Ordinary Least Square estimation was performed to inspect the robustness of the data. The study suggests that the liquidity position and internal capital generation rate have a highly positive and significant impact on bank profitability. But bank size is significantly negatively correlated with banking profit. The rivalry, as assessed by the HerfindahlHirschman Index, has a strong beneficial impact on the profitability of banks, supporting the impact of industry-specific variables. Inflation and spread are two macroeconomic factors that have a detrimental but minor effect on bank profitability. The findings might increase management’s awareness of the banking sector in Bangladesh as well as provide a proposition to policymakers.

Abstract

The banking system is the lifeblood of an economy. This study aims to inspect the extent of the impact of banks’ managerial issues in terms of liquidity position, bank size and internal capitalgenerating capacity on the profit-making ability of commercial banks in Bangladesh during the period of 2007 to 2018. To examine data, a static panel model is constructed by considering 57 commercial banks. Indicators of a bank’s profitability include return on assets, return on equity, and net interest margin. The Fixed Effect model and the Random Effect models are considered as the baseline estimations and the Ordinary Least Square estimation was performed to inspect the robustness of the data. The study suggests that the liquidity position and internal capital generation rate have a highly positive and significant impact on bank profitability. But bank size is significantly negatively correlated with banking profit. The rivalry, as assessed by the HerfindahlHirschman Index, has a strong beneficial impact on the profitability of banks, supporting the impact of industry-specific variables. Inflation and spread are two macroeconomic factors that have a detrimental but minor effect on bank profitability. The findings might increase management’s awareness of the banking sector in Bangladesh as well as provide a proposition to policymakers.

Yazarlar

Rana Al Mosharrafa

Anahtar Kelimeler

Profitability, Liquidity, Internal Capital Generation Rate, Bank size, and Inflation

JEL Codes

G21, C23, H12

Yayın Bilgileri

Cilt 3, Sayı 2, 2023 · Sayfa 11-31

DOI: 10.52898/ijif.2023.7

Dosyalar