THE EFFECT OF THE SYRIAN CRISIS ON THE PROFITABILITY OF THE COUNTRY'S PRIVATE BANKING SECTOR

Abstract

This research analyses the effect of the Syrian crisis on the profitability of local private banks during the period from 2011 to 2018 using fixed effects estimator on panel data. The research studies all of the 14 Syrian private banks and includes bank-specific variables calculated from the published quarterly and annual reports of all the banks, as well as a variable for the Syrian crisis measured by the following macro-economic factors: the number of crisis-related casualties, the number of Syrians who fled the country as refugees or asylum seekers, and the Syrian Pound exchange rate against U.S. Dollar during the studied period. Using return on average assets (ROAA) as the dependent variable, the research results found that bank capital, deposits, and loans to assets all have a statistically significant positive effect on profitability at 1%, while operating efficiency and asset quality have a statistically significant negative effect on profitability at 1% and 5% respectively. Furthermore, the macro-economic variable of the Syrian crisis has a statistically significant negative effect on profitability at 1%. The results of this paper enhance the understanding of profitability determinants during crisis times and provide supervisory authorities and banks with important indicators regarding profitability in economic distress periods.