Paper title: Determinants of Private Commercial Banks’ Profitability: Evidence from Bangladesh
Abstract: Empirical literatures examining the drivers of commercial banks’ profitability have identified a gamut of factor variables. This research explores the nature of causal relationship between these bank-specific, industry-specific, and macro-economic factors and private commercial banks’ profitability in Bangladeshi context. It was a positivism-led, deductive research covering a 13-years time-frame (2012-2024). Private commercial banks were selected based on convenience sampling, and secondary data was collected from these banks’ annual report. Advanced multivariate analysis techniques namely principal component analysis and factor analysis were initially employed to reduce dimensionality. The causal relationship between the private commercial banks’ profitability and factor variables was assessed through panel data regressions. It is evident from the regression results that banks’ size, capital adequacy, activity mix, asset quality, net interest margin, industry competitiveness, cost management, interest rate, inflation, and GDP growth rate are the key determinants of Bangladesh-based private commercial banks’ profitability. The estimated effects are robust to omitted variable biases, measurement issues, and model over fitting concerns. Keywords: Profitability, Endogeneity, PCA, Factor analysis DOI: https://www.doi.org/10.61607/JFB.V21N1-2.A8 Article Info: Submission Date: September 08, 2024; Acceptance Date: November 27, 2024.
