چکیده:
The main purpose of this research is to examine profitability
determinants in the Middle Eastern banking systems. In particular, the
impact of bank-specific and macroeconomic factors on bank profitability is
examined. Using both the OLS and the GMM techniques, the results show
the persistence of profit, confirming the dynamic character of the model
specification. The crucial point is that the findings from the dynamic
model confirm a non-linear relationship between size and profitability.
Although no evidence is found in support of the traditional SCP hypothesis
in the static model, the dynamic model confirms such hypothesis strongly.
We also find that capital strength, liquidity, and efficiency are the main
determinants of profitability. Off-balance-sheet activities reduce bank
profits and the Middle Eastern banks don’t seem to anticipate inflation,
meaning that the influence of inflation is negative for the Middle East at
least for the period under consideration.
خلاصه ماشینی:
Table 4: Some Macroeconomic Indicators in the Middle East by Country- All Variables are Averaged over the Period 1999-2008-Source: BankScope, IMF and World Bank Databases1 {مراجعه شود به فایل جدول الحاقی} 4-2- Methodology This paper investigates in a multi-variable and a single equation framework, the effect of internal and external determinants on bank profitability.
The explanatory variables are defined as follows: LOG(SIZE) as logarithm total assets, CTI as cost to income ratio, E/SIZE as equity to total assets, LA/SIZE as liquid assets to total assets, OFF/SIZE as off balance activities to total assets, LLP/L as loan loss provisions to loans, NL/DSF as net loans to deposit and short term funds, OVE/SIZE as overhead expenses to total assets, GA as total assets growth, MS as market share ratio (which measured by dividing a bank total assets to total assets of all banks in the country); INF as inflation rate, DCP as domestic credit to the private sector, GDPPC as GDP per capita, and PG as population growth.
Furthermore, the empirical results indicate that although the coefficient of off-balance sheet activities to total assets (OFF/SIZE) is positive; the effect of this variable on profitability is statistically insignificant.
This result confirms the findings of Sufian and Chong (2008) that observed a negative correlation between inflation and profits in the Philippines banking sector, but contradicts the study by Al Manaseer (2007) who found a positive relationship in some Middle East countries.