International Journal of Accounting, Finance and Risk Management

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The Impact of Credit Risk, Liquidity, Capital, and Market Structure on Bank Profitability: Evidence from a Developing Economy

Received: 3 May 2022    Accepted: 8 July 2022    Published: 20 July 2022
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Abstract

In this ever-changing competitive environment, the banking business, compared to other types of business, is ultimately exposed to risks. Banks now days are operating in a rapidly innovative industry with a lot of profit pressure that encourage them to create more and more value-added services to offer and better satisfy the customers. The Palestinian banking system operate in a risky, complex, changeable economic and political environment, bank managements should be aware of these circumstances. This study attempts to examine the impact of credit risk, liquidity, capital, and market structure on banks' profitability in a developing economy (Palestine) over eleven years (2010 - 2020). A dynamic panel analysis is applied to the sample of 12 banks with three econometric models representing profitability indicators employed by the study. In addition to the linear regression models, we used a Generalized Method of Moments (GMM) estimator. The results revealed that credit risk, liquidity, capital, and market structure impact bank profitability measured by ROA, ROE, and NPM. Cost efficiency, income diversification, and loan growth have been used as control variables had a significant impact on profitability except for loan growth had no impact.

DOI 10.11648/j.ijafrm.20220703.12
Published in International Journal of Accounting, Finance and Risk Management (Volume 7, Issue 3, September 2022)
Page(s) 99-107
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Bank Performance, Non-performing Loans, Palestine, Income Diversification

References
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  • APA Style

    Khaled Zedan Zedan. (2022). The Impact of Credit Risk, Liquidity, Capital, and Market Structure on Bank Profitability: Evidence from a Developing Economy. International Journal of Accounting, Finance and Risk Management, 7(3), 99-107. https://doi.org/10.11648/j.ijafrm.20220703.12

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    ACS Style

    Khaled Zedan Zedan. The Impact of Credit Risk, Liquidity, Capital, and Market Structure on Bank Profitability: Evidence from a Developing Economy. Int. J. Account. Finance Risk Manag. 2022, 7(3), 99-107. doi: 10.11648/j.ijafrm.20220703.12

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    AMA Style

    Khaled Zedan Zedan. The Impact of Credit Risk, Liquidity, Capital, and Market Structure on Bank Profitability: Evidence from a Developing Economy. Int J Account Finance Risk Manag. 2022;7(3):99-107. doi: 10.11648/j.ijafrm.20220703.12

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  • @article{10.11648/j.ijafrm.20220703.12,
      author = {Khaled Zedan Zedan},
      title = {The Impact of Credit Risk, Liquidity, Capital, and Market Structure on Bank Profitability: Evidence from a Developing Economy},
      journal = {International Journal of Accounting, Finance and Risk Management},
      volume = {7},
      number = {3},
      pages = {99-107},
      doi = {10.11648/j.ijafrm.20220703.12},
      url = {https://doi.org/10.11648/j.ijafrm.20220703.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijafrm.20220703.12},
      abstract = {In this ever-changing competitive environment, the banking business, compared to other types of business, is ultimately exposed to risks. Banks now days are operating in a rapidly innovative industry with a lot of profit pressure that encourage them to create more and more value-added services to offer and better satisfy the customers. The Palestinian banking system operate in a risky, complex, changeable economic and political environment, bank managements should be aware of these circumstances. This study attempts to examine the impact of credit risk, liquidity, capital, and market structure on banks' profitability in a developing economy (Palestine) over eleven years (2010 - 2020). A dynamic panel analysis is applied to the sample of 12 banks with three econometric models representing profitability indicators employed by the study. In addition to the linear regression models, we used a Generalized Method of Moments (GMM) estimator. The results revealed that credit risk, liquidity, capital, and market structure impact bank profitability measured by ROA, ROE, and NPM. Cost efficiency, income diversification, and loan growth have been used as control variables had a significant impact on profitability except for loan growth had no impact.},
     year = {2022}
    }
    

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    T1  - The Impact of Credit Risk, Liquidity, Capital, and Market Structure on Bank Profitability: Evidence from a Developing Economy
    AU  - Khaled Zedan Zedan
    Y1  - 2022/07/20
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    N1  - https://doi.org/10.11648/j.ijafrm.20220703.12
    DO  - 10.11648/j.ijafrm.20220703.12
    T2  - International Journal of Accounting, Finance and Risk Management
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    PB  - Science Publishing Group
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    UR  - https://doi.org/10.11648/j.ijafrm.20220703.12
    AB  - In this ever-changing competitive environment, the banking business, compared to other types of business, is ultimately exposed to risks. Banks now days are operating in a rapidly innovative industry with a lot of profit pressure that encourage them to create more and more value-added services to offer and better satisfy the customers. The Palestinian banking system operate in a risky, complex, changeable economic and political environment, bank managements should be aware of these circumstances. This study attempts to examine the impact of credit risk, liquidity, capital, and market structure on banks' profitability in a developing economy (Palestine) over eleven years (2010 - 2020). A dynamic panel analysis is applied to the sample of 12 banks with three econometric models representing profitability indicators employed by the study. In addition to the linear regression models, we used a Generalized Method of Moments (GMM) estimator. The results revealed that credit risk, liquidity, capital, and market structure impact bank profitability measured by ROA, ROE, and NPM. Cost efficiency, income diversification, and loan growth have been used as control variables had a significant impact on profitability except for loan growth had no impact.
    VL  - 7
    IS  - 3
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Author Information
  • Finance and Banking Department, Faculty of Economics and Social Studies, An-Najah National University, Nablus, Palestine

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