Determinants of commercial bank profitability in Mexico

Chavarín, Rubén (2015): Determinants of commercial bank profitability in Mexico. Published in: EconoQuantum , Vol. 12, No. 1 (2015): pp. 97-123.

Abstract

The aim of the present work is to identify the main determinants of profitability for commercial banks established in Mexico. A data base of 45 banks representing virtually the whole world of commercial banking in the period 2007-2013 was used. Dynamic models using Arellano-Bover/Blundell-Bond estimators with an error that follows an MA(1) process were employed along with static models having random effects and Hausman-Taylor estimator. Findings suggest that the profitability of commercial banking is sustained by the level of capital, the charging of commissions and fees, and control of operating expenses, as well as certain market entry barriers and obstacles to competition that provoke a relatively high persistence of profitability.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bank profitability, Dynamic panel-data, Latin America
• Subjects: G - Financial Economics > G0 - General > G00 - General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance

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