Bank-specific and Macroeconomic Determinants of Profitability: Evidence from Conventional Private Commercial Banks Listed on Dhaka Stock Exchange

Abstract

This paper intends to indicate the bank-specific and macroeconomic determinants of bank profitability. The study was conducted using panel data set from 18 conventional private commercial banks listed in Dhaka Stock Exchange over a period of 2010 to 2019. Return on Asset (ROA) was used as dependent variable as a proxy for profitability; nine bank-specific variables and three macroeconomic variables were used as independent variables. The study was conducted using panel data regression model and Hausman test was conducted to choose between fixed effect and random effects model. Empirical results show that Non-performing loan ratio, Equity multiplier, cost to income ratio, Net interest margin, Non-interest income to total asset ratio among the bank-specific variables and Real rate of interest, Economic growth among the macroeconomic variables have significant impact on profitability. An interesting finding is that banks profitability over this period has significant negative relationship with economic growth.