Do business strategies vary across firms in the banking industry? New perspectives from the bank size–profitability nexus

Abstract

This study examines the roles of interdependence and policy variations across firms in the causality between bank size and profitability in Nigeria, using second‐generation estimators and the Dumitrescu–Hurlin panel Granger non‐causality test. The findings support different business strategies and policy variances across banks. Causality is found non‐existent in the cases of 11 banks. A unidirectional causality from size to profitability is established in two banks while evidence of a unidirectional causality is established from profitability to bank size in the other two banks. This study concludes that cross‐sectional dependence and policy variations across firms matter in the bank size–profitability nexus.

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