Developments in the profitability of the Thailand banking sector: panel evidence from the post Asian crisis period

Abstract

The present paper employs various commonly used accounting based measures of financial institutions performance and examines the developments in the Thailand banking sector's profitability during the post Asian financial crisis period of 1999-2005. The empirical findings suggest that bank specific characteristics, in particular size and capitalisation exhibits positive and significant impacts on Thailand banks' profitability, while credit risk, non-interest income, and overhead costs have negative relationship with bank profitability. The results suggest that credit risk has negative impact on return on assets, while the opposite is true for return on equity. As for the impact of macroeconomic indicators, we find that higher economic growth and inflation contributes positively to Thailand banks' profitability, while per capita GDP has a negative impact.