Drivers of Bank Solvency, Risk Provisioning and Profitability in the Armenian Banking System

Suren Pakhchanyan, Jörg Prokop and Gor Sahakyan

Journal of Emerging Market Finance, 2018, vol. 17, issue 3, 307-332

Abstract: The aim of this study is to examine the effects of bank-specific, regulatory and macroeconomic determinants on solvency, risk provisioning, and profitability in the Armenian banking sector. We show that abnormal loan growth is associated with a decrease in regulatory capital ratios, an increase in loan loss provisions, and a reduction in loan portfolio profitability. In addition, we observe an inverse relationship between GDP growth and bank solvency as well as profitability. Regarding regulation, we identify a decrease in regulatory capital ratios as well as a drop in profitability after the implementation of the Basel II Accord. JEL Classification: G32, G21, G28

Keywords: Risk management; profitability; solvency; credit risk; Armenian banks; loan growth (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:17:y:2018:i:3:p:307-332

DOI: 10.1177/0972652718797815

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