Abstract
Our purpose is to investigate how bank-specific, macroeconomic indicators and political stability in the country impact commercial banks’ profitability in CIS (Commonwealth of Independent States) countries during the period of 1991-2017.Methodology. To conduct empirical analysis, we applied feasible generalized least square (FGLS) method.The originality / value of the research is the contribution to the existing literature is twofold: first, to estimate profitability determinants we used broad range of years from 1991 to 2017, secondly, the application of FGLS model was employed for the first time to conduct the research in CIS region using new indicators such as political stability, corruption and global financial crisis dummy.Findings. Results of our empirical analysis state that some bank specific factors have positive and significant impact on profitability, while macroeconomic factors affect financial performance negatively. Political stability has no effect on profitability of banks in CIS countries.
Highlights
Banks hold a money creation function by putting together savers and consumers and by doing so banks increase investment and consumption in the country
External bank profitability determinants are concerned with variables that are not affected by the actions and policies of individual banks, but by events outside the banks control
There are only two negative signs stand for profitability indicators
Summary
Banks hold a money creation function by putting together savers and consumers and by doing so banks increase investment and consumption in the country. This in turn is boosting the economic activity in the country, so the banking sector is very important for countries’ economies [1]. Yuksel et al [3] states that as per banking literature banks’ profitability is identified as a function of both micro and macro determinants. Micro determinants are related to internal processes of the banks’, so they are named as bank-specific variables and include size, capital, risk management, etc.
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