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This study investigates the determinants of the profitability of banks in developing countries. We estimate multiple linear regression models by the least-squares fixed effects estimator, using bank-level panel data for 230 banks from 31 countries, for the years 2011 to 2016. The results of this study show that many bank-specific factors significantly affect banks’ profitability, including capital ratio, bank size, management efficiency, credit risk, and diversification. Furthermore, we find that there is a quadratic relationship between profitability and capital ratio, and there is an optimum level of capital ratio that maximizes profitability. Similarly, we find a quadratic relationship between profitability and bank size. The results show that various country-specific variables significantly affect banks’ profitability, including per capita GDP, inflation, and corruption perception index. The findings of this study would be useful to the policymakers in the management of banks

Kiran Lohano, Muhammmad Kashif. (2019) Factors Affecting the Profitability of Banks in Developing Countries, NUML International Journal of Business & Management, Volume 14, Issue 2.
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