Abstract
Bangladesh is a developing country. The vital role of banking sector in permanent, sustainable and continuous economic growth is undeniable. Bangladeshi banking sectors consist of private commercial banks, specialized banks, Islamic banks and public sector banks. Covering the period of 50 years banking sector Bangladesh has apparent serious changes in terms of growth of profitability and development which is the main concern of this study. The main objective of this research is to determine the factors affecting profitability in the banking sector of Bangladesh. The study attempts to investigate firms' specific factors and macroeconomics factors' impact on the profitability in the Bangladeshi banking sector. In this regard, 32 banks have been considered as sample and the scenario of these banks over the last 10 years has been observed (2011-2020). In this case, panel data research methodology has been used. OLS regression model is used to analyze data. Moreover, a general to specific modeling approach is used in this case. The result of this study reveals that both firms' specific variables (i.e. Equity to Asset Ratio, Deposit to Asset ratio, Debt to Equity Ratio, Loan to Deposit Ratio) and macroeconomic variable (GDP growth rate) have statistically significant impact on the profitability, represented by Return on Asset (ROA) and Return on Equity (ROE). All the research findings are very useful to the investors, shareholders, bank's authority, policy makers, and government for the improvement of the performance in the banking sector of Bangladesh.
Highlights
Banking sector as a prominent financial institute contributes a vigorous development role of economy of a country [1, 2]
According to the results of Return on Asset (ROA) and ROE being 0.9% and 1107% respectively which indicates the performance of banking sector in Bangladesh based on profitability is not so good
The matrix shows that BS, Equity to Asset Ratio (EAR), Debt to Equity Ratio (DER), Loan to Deposit Ratio (LDR), ROE are positively associated with ROA where as Deposit to Asset ratio (DTAR) and Gross Domestic Product Growth Rate (GDPGR) are negatively associated with ROA
Summary
Banking sector as a prominent financial institute contributes a vigorous development role of economy of a country [1, 2]. The economic activities as well as social activities are performed by the banking sector in Bangladesh after independent. It leads to economic growth of Bangladesh [4]. Since many years have passed and till banking sector plays the most significant role for the country’s development, it is important to evaluate the performance of the banking sector [2]. Profitability indicates the financial performance of an institution. It is required to study the impact factors related to the profitability of a bank [11]
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