Unlocking Profitability: Exploring the Impact of Bank-Specific and Macroeconomic Determinants on Return on Equity in Commercial Banking Sector of Bangladesh


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Authors

  • Nishat Rumaly Department of Finance and Banking, Jashore University of Science and Technology, Bangladesh.

DOI:

https://doi.org/10.32479/ijefi.15274

Keywords:

Profitability, Return on Equity, Dif-GMM, PCSE, Driscoll-Kraay, Bangladesh

Abstract

This study investigates the factors influencing Return on Equity (ROE) within the banking sector of Bangladesh by analyzing a comprehensive dataset spanning from the year 2011 to 2020. Utilizing a combination of econometric techniques, including the one-step difference GMM, Driscoll-Kraay estimator, and Panel-Corrected Standard Errors (PCSE) methods, this study analyzes the influence of various bank-specific and macroeconomic variables. The findings reveal a nuanced pattern of impact on ROE. Earnings Per Share (EPS), Capital Adequacy Ratio (CAR), and Bank Spread exhibit a significant positive influence on ROE, reflecting the importance of profitability, capital strength, and interest rate spreads. Conversely, asset size, operating cost-to-loans ratio, total equity-to-debt ratio, and inflation exert a significant negative impact on ROE, highlighting the challenges associated with growth, cost efficiency, leverage, and inflationary pressures. These findings provide a multifaceted perspective on the dynamics of ROE, offering valuable insights for banks and policymakers striving to optimize financial performance and stability in the ever-changing economic landscape.

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Author Biography

Nishat Rumaly, Department of Finance and Banking, Jashore University of Science and Technology, Bangladesh.

Nishat Rumaly is working as a lecturer (Dept. of Finance and Banking) at Jashore University of Science and Technology. She has completed her graduation and post-graduation from the Department of Banking and Insurance, University of Dhaka. She achieved the most prestigious Dean's Honor Award and Dean's Merit Award from the University of Dhaka because of her outstanding results. She participated in different workshops, training programs, and national and international conferences held at the premises of the University of Dhaka. She also engaged herself in lots of extra-curricular and social welfare activities. Formerly, she served herself as an Adjunct Faculty at Fareast International University, Dhaka. After that, she joined at Jashore University of Science and Technology. She is very curious about research work. She has already published research papers in international journals and many others are on the processing to publish in high indexed journals. Her areas of research include Stock Market, Green Banking, Capital Structure, Financial Inclusion, Corporate and Development finance, Fintech, and ongoing financial issues. She wants to be a prominent researcher conducting fruitful research studies crucial for the economy and nation.

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Published

2023-11-11

How to Cite

Rumaly, N. (2023). Unlocking Profitability: Exploring the Impact of Bank-Specific and Macroeconomic Determinants on Return on Equity in Commercial Banking Sector of Bangladesh. International Journal of Economics and Financial Issues, 13(6), 107–115. https://doi.org/10.32479/ijefi.15274

Issue

Vol. 13 No. 6 (2023)

Section

Articles