On the profitability of commercial banks: the Sri Lankan case

Chatura Ariyadasa · Eliyathamby A. Selvanathan · M.A.B. Siddique · Saroja Selvanathan

25 citations0/0 files storedApplied Economics

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Banking stability, regulation, efficiency Monetary Policy and Economic Impact Banking Sector Performance and Management

Abstract

This study determines the factors affecting the profitability of licensed commercial banks (LCBs) in Sri Lanka, including the effect of the prolonged conflict which ended in 2009. Using an error correction model together with data for the period 2006–2014 of 10 major LCBs, the results reveal that, in the short run, capital and liquidity have a positive effect on bank profitability and default loans, interest margin (IM), operating cost, and interest rates (IRs) have a negative effect. In the long run, bank profitability is significantly impacted by default loans, IM, real GDP, inflation, IRs, capital, operating cost, and conflict. The ending of the prolonged conflict has significantly contributed to improved bank performance.

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References

2001Bounds testing approaches to the analysis of level relationships 2012An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis 1999Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence 2019Journal of Economics and Sustainable Development 1992Determinants of European bank profitability: A note 1989Concentration and other determinants of bank profitability in Europe, North America and Australia 1995The Profit-Structure Relationship in Banking--Tests of Market-Power and Efficient-Structure Hypotheses 1995The Relationship between Capital and Earnings in Banking

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