Determinants of bank performance: evidence for Latin America
Academia Revista Latinoamericana de Administración
ISSN: 1012-8255
Article publication date: 29 July 2014
Abstract
Purpose
The purpose of this paper is to analyze the impact of macroeconomic‐industrial and bank‐specific factors on Latin American banks’ performance.
Design/methodology/approach
Using the data panel system estimator version of the generalized method of moments, the authors estimate the determinants of return on assets and interest margin for a sample of 78 commercial banks from Argentina, Brazil, Chile, Colombia, México, Paraguay, Peru, and Venezuela over the period from 1995 to 2010.
Findings
On the one hand, the results show that bank performance is positively related to both idiosyncratic factors, such as service diversification, size, capital ratio, and specialization degree, and to macroeconomic‐industrial factors such as economic growth, inflation, and bank concentration. On the other hand, the results show that bank performance is negatively related to credit risk, liquidity risk, and operational inefficiencies.
Originality/value
The authors provide new evidence from the Latin American bank industry and incorporate the effect of diversification through noninterest activities.
Keywords
Acknowledgements
The authors wish to thank José Luis Ruiz and Jorge Gregoire (Universidad de Chile), Félix López Iturriaga (Universidad de Valladolid) and Paolo Saona (Saint Louis University). Authors also thank the funding provided by Fondecyt, project number 11110021.
Citation
Jara‐Bertin, M., Arias Moya, J. and Rodríguez Perales, A. (2014), "Determinants of bank performance: evidence for Latin America", Academia Revista Latinoamericana de Administración, Vol. 27 No. 2, pp. 164-182. https://doi.org/10.1108/ARLA-04-2013-0030
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited