Vol 2, No 1 (2014)
An analysis of bank profitability in Macedonia
Nadica Iloska
Abstract
The aim of this paper is to examine the impact of the factors that affect bank profitability, first in a theoretical way, then empirically on a sample of Macedonian banks. We measure profitability by the return on assets (ROA) while the explanatory variables are chosen from the broader group of bank-specific factors. Based on a bank-level data for the period between 2008 and 2011, we employ the multiple regression model to determine the important factors that drive bank profitability. The empirical findings indicate that operating expenses and loan-loss provisions exhibit negative relationship with bank profitability, while the staff expenses, bank size and the share of loans in total assets affect the profitability positively. In addition, the results suggest that liquid assets, deposits and non-interest income have very weak influence on profitability. The knowledge of the factors that influence bank profitability is not essential just for the bank managers, but also for other stakeholders like the central bank, government and other financial authorities. The analysis of these factors can help both the bank managers and regulators in formulating future policies and actions towards improving the profitability of Macedonian banks.
Full text: 
PDF
Keywords
Bank profitability, Bank-specific factors, Multiple regression model.
Publication information
Volume 2, Issue 1
Year of Publication: 2014
ISSN: 1857 - 8721
Publisher: EDNOTERA
How to cite
Iloska, N. (2014). An analysis of bank profitability in Macedonia. Journal of Applied Economics and Business, Vol 2, No. 1, 31-50.