Determinants of Bank Profitability and Basel Capital Regulation: Empirical Evidence from Nigeria

Ozili, Peterson K (2015): Determinants of Bank Profitability and Basel Capital Regulation: Empirical Evidence from Nigeria.

Abstract

This study, empirically, investigates the determinants of bank profitability. After including the regulatory variable into the model, I find no significant difference in bank profitability during pre-and post-capital regulation regime. Second, after employing NIM and ROA profitability metrics, I find that the determinants of bank profitability, and its significance, depends on the profitability metric employed. Third, I find that asset quality is a strong determinant of bank interest margin, relative to return on asset. Also, I observe that economies of scale and scope enables larger banks to be profitable (ROA) relative to smaller banks. Overall, the insignificant effect of Basel capital regime on bank profitability seems to suggest that such regulation might not be aimed at decreasing bank profits.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bank Profitabilty, Basel Capital Regulation
• Subjects: E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E58 - Central Banks and Their Policies; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; N - Economic History > N2 - Financial Markets and Institutions; N - Economic History > N2 - Financial Markets and Institutions > N20 - General, International, or Comparative; N - Economic History > N2 - Financial Markets and Institutions > N27 - Africa ; Oceania

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