The determinants of Bank Profitability: Does Liquidity Creation matter?

Ahmad Sahyouni () and Man Wang ()
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Ahmad Sahyouni: Dongbei University of Finance and Economics
Man Wang: Dongbei University of Finance and Economics

Journal of Economics and Financial Analysis, 2018, vol. 2, issue 2, 61-85

Abstract: Using a panel data set of 4995 banks across 11 developed and emerging countries during the period (2011-2015), this report analyses the amount of liquidity created by banks, how liquidity creation, bank-specific and the macroeconomic factors affecting bank profitability. The results show evidence of increased creation of liquidity over the period. By applying the panel data fixed effect technique, banks that create more liquidity, are set up to have lower profitability. As well as, Asset management, bank size and capital ratio are positively correlated with bank profitability. While, credit quality and operating efficiency affect bank's profits negatively. Additionally, macroeconomic factors have different impact on profitability indicators in each market. Our findings may help decision makers inside and outside bank to determine important factors affecting bank profitability.

Keywords: Liquidity Creation; Bank Profitability; Emerging Countries; Developed Countries. (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:trp:01jefa:jefa0018

DOI: 10.1991/jefa.v2i2.a18

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