AN EMPIRICAL STUDY OF BANK PROFITABILITY: A PANEL DATA ANALYSIS FOR EUROPEAN UNION COUNTRIES

Adela Socol and Nina Sinitin
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Adela Socol: 1 DECEMBRIE 1918 UNIVERSITY OF ALBA IULIA, FACULTY OF ECONOMIC
Nina Sinitin: 1 DECEMBRIE 1918 UNIVERSITY OF ALBA IULIA, DOCTORAL SCHOOL OF ACCOUNTING

Annals - Economy Series, 2021, vol. 4, 125-134

Abstract: This study intends to find if the main proxy of bank profitability, represented by the Return on Equity ROE is impacted by Non-Performing Loans and by two additional banking indicators that play a role in the mechanism of establishing the profitability - the ratio between cost and income (Cost to Income Ratio CIR) and the Net Interest Income NII. For the empirical data analysis, we have chosen a panel that comprises 19 countries from the European Union, for the three aforementioned indicators, to be dynamically analyzed, between 2008 and 2020. The econometric research method was Ordinary Least Squares OLS regression, using STATA, in order to determine the connection between the mentioned variables. The results show that profitability (measured by Return on Equity ROE) was negatively influenced by Non-Performing Loans and positively impacted by Cost to Income Ratio and Net Interest Income.

Keywords: Profitability; Banks; Return on Equity; Non-performing loan; IFRS 9 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:cbu:jrnlec:y:2021:v:4:p:125-134

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