IMPACT FACTORS ON BANKING ACTIVITY PERFORMANCE IN CENTRAL AND EASTERN EUROPEAN COUNTRIES

Filip Bogdan Florin ()
Additional contact information
Filip Bogdan Florin: Al.I.Cuza University of Iasi, Faculty of Economics and Business Administration

Annals of Faculty of Economics, 2015, vol. 1, issue 2, 416-424

Abstract: The paper has as premise the need to analyse the factors that impact on banking activity’s performance in the context of some strong interdependencies between it and the overall socio-economic climate, given the essential role played by the banks in financing the economy and in the overall development of society. Starting from the scientific studies that have addressed the issue of bank profitability and hence the performance of banking activities there are identified different factors e.g. internal (bank size, capital adequacy, liquidity risk, expenses management, activity mix, credit risk etc.), industry specific (concentration, etc.) and macroeconomic (GDP growth, inflation, unemployment) but also the manifestation of financial crises that could have, rationally, major impacts on the results of banking activity, the latter being estimated through the most representative indicators ROA and ROE. The analysis is conducted on the scale and direction of the effects of factors that impact on banking performance by processing statistical data for 12 countries from Central and Eastern Europe over the period 2000-2011, using econometric methods such as Pearson correlation and Panel Least Squares. The empirical results for the group of countries which was analysed, reveals, first, a significant positive impact of the factors GDP growth and inflation on the performance of the banking business. It is noteworthy, yet, the fact that the internal factors expenses management and, especially, credit risk have the most profound negative impact on bank profitability. This leads us to consider necessary further efforts of the banks in the CEE countries to improve their expenses management by reducing the number of branches and by shifting towards selling banking products through alternative channels such as the Internet or Mobile Banking, respectively to reduce their credit risk, especially by preventing the deterioration of bank loan portfolio quality, but also by mitigation measures for the existing NPLs, aiming their recovery or, ultimately, by selling them and cleaning thus their balance sheets.

Keywords: ROA; ROE; bank specific factors; industry specific factors; macroeconomic factors; crisis (search for similar items in EconPapers)
JEL-codes: C23 G21 M21 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
http://anale.steconomiceuoradea.ro/volume/2015/n2/049.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ora:journl:v:1:y:2015:i:2:p:416-424

Access Statistics for this article

More articles in Annals of Faculty of Economics from University of Oradea, Faculty of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Catalin ZMOLE ( this e-mail address is bad, please contact ).