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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. Published in: Research Journal of Finance and Accounting , Vol. 2, No. 6 (2015): pp. 124-131.

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Abstract

This study, empirically, investigates the determinants of bank profitability. Overall, I find that the Basel capital regime had no significant effect on bank profitability. This result is significant because it lends support to the view that modified Basel accord in different countries might be aimed to meet other prudential objectives other than the intended objective - to reduce excessive bank risk-taking. 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 loan quality significantly influences bank interest margin while bank size and cost efficiency significantly influences return on asset. Finally, bank capital adequacy is observed to be a significant determinants of bank profitability.

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