Bank-Specific, Industry-Specific and Macroeconomic Determinants of Bank Profitability

Panayiotis P. Athanasoglou (), Sophocles N. Brissimis () and Manthos D. Delis ()

No 25, Working Papers from Bank of Greece

Abstract: The aim of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants of bank profitability, using an empirical framework that incorporates the traditional Structure-Conduct-Performance (SCP) hypothesis. To account for profit persistence, we apply a GMM technique to a panel of Greek banks that covers the period 1985-2001. The estimation results show that profitability persists to a moderate extent, indicating that departures from perfectly competitive market structures may not be that large. All bank-specific determinants, with the exception of size, affect bank profitability significantly in the anticipated way. However, no evidence is found in support of the SCP hypothesis. Finally, the business cycle has a positive, albeit asymmetric effect on bank profitability, being significant only in the upper phase of the cycle.

Keywords: Bank profitability; business cycles and profitability; dynamic panel data model (search for similar items in EconPapers)
JEL-codes: G21 C23 L2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-mac
Date: 2005-06
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Forthcoming in Journal of International Financial Markets, Institutions & Money

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Journal Article: Bank-specific, industry-specific and macroeconomic determinants of bank profitability (2008)
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