An Empirical Analysis of Determinants of Bank Profitability from Listed UK Banks and its Implication on Risk Management Practice
Wu, Yang (2014) An Empirical Analysis of Determinants of Bank Profitability from Listed UK Banks and its Implication on Risk Management Practice. [Dissertation (University of Nottingham only)] (Unpublished)
This paper examines the determinants of bank profitability from 52 listed banks in UK for the period of 2004-2013. The financial ratios are employed to examine the effect of bank specific and macroeconomic factors on bank profitability. To evaluate the impact of the recent financial crisis, we split up the total period into before and during the crisis period (2004-2008), and post-crisis period (2009-2013). The persistence of profit confirm the dynamic system GMM model are applied on unbalanced panel data. The estimation results exhibit that bank capital, liquidity risk and bank size contribute to higher bank's profitability significantly in the anticipated way. However, higher credit risk are associated with lower asset quality and lower bank's profitability. Besides, we find that real GDP growth and real interest rate has a significant positive impact on bank profitability. Finally, our study reveals the importance of bank specific factors provide further implication on bank risk management with aim to indicate efficiently risk management in order to protect the long run interest of profit-making.
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