Has the Financial Crisis Affected the Profitability of Banks in Croatia?

Tomislava Pavic Kramaric, Marina Lolic Cipcic and Marko Miletic

Journal of Applied Finance & Banking, 2017, vol. 7, issue 3, 2

Abstract: The authors wanted to find out how recent financial crisis influenced performance of Croatian banks measured with ROA, ROE, NIM and Tobin's Q. Having this aim in mind, we have used many bank-specific, industry-specific or structural variables and macroeconomic variables. The analysis refers to 2007-2015 period. The research is conducted using static panel model on a balanced sample of Croatian banks listed on Zagreb Stock Exchange. The results of the analysis show that crisis dummy variable significantly influences performance but its direction is not uniform. Specifically, the research shows that bank performance improves in crisis period measured with accounting measure of performance, namely ROA, whereas, when employing stock-based measure of performance, i.e. Tobin's Q performance deteriorates during recession. Other explanatory variables that proved to be significant factors when explaining banks' profitability are leverage, growth rate of assets on bank level, interest income to interest expenses ratio, market share and inflation. However, their direction varies depending on measure of performance being used as well as on the period covered by the analysis. The authors have also reported the results of the analysis for the whole period, i.e. 2007-2015, as well as for the crisis period, i.e. 2009-2013 and non-crisis period, covering 2007-2008 and 2014-2015, separately.JEL classification numbers: G21, O16, L25Keywords: Financial crisis, commercial bank, bank performance

Date: 2017
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