The determinants of Serbian banking industry profitability

Figures & data

Table 1. Description of variables.

Type of variable	Variable symbol	Description	Expected sign
Dependent variable	ROAA	Return on average assets
Bank-specific variables	SIZE	Size of a bank (log of total assets)	+ or -
	COINC	Cost-to-income ratio	-
	EQAS	Capitalisation of a bank (equity-to-total assets)	+
	LODEP	Liquidity of a bank (loans-to-deposit ratio)	+ or -
Market-specific variables	C5	Market concentration (ratio of total assets of the five largest banks and total assets of banking sector	+ or -
	ASSGDP	Total assets of commercial banks divided by GDP	-
	MACPASS	Market capitalisation to total assets of the commercial banks	+
	MACGDP	Market capitalisation to GDP	+ or -
Macroeconomic variables	INF	The annual inflation rate	+ or -
	GDP	Gross domestic product growth	+ or -

Source: Created by the authors.

Table 2. Regression results – Model 1.

	All banks in sample	Domestic banks	Foreign banks
SIZE	-3.951735 (-3.44)***	-1.450545 (-0.80)	-2.685173 (-4.04)***
COINC	-17.23976 (-20.58)***	-17.40953 (-15.32)***	-16.57383 (-14.78)***
EQAS	-3.187134 (-1.27)	7.129268 (1.55)	-9.519028 (-3.59)***
LODEP	-0.2954157 (-4.69)***	-0.2602072 (-4.13)***	0.5719412 (1.35)
INF	-0.1388173 (-1.02)	-0.1539467 (-0.68)	0.0628157 (0.43)
GDP	-0.073352 (0.69)	0.1678484 (0.99)	-0.1890214 (-1.48)
C5	0.614015 (1.94)*	0.4929238 (0.97)	0.2672463 (0.82)
ASSGDP	-0.000774 (-2.08)**	-0.0008881 (-1.53)	-0.00002888 (-0.67)
MACPASS	-4.454364 (-1.85)*	-5.968515 (-1.57)	-0.5332301 (-0.19)
MACGDP	0.0015942 (2.17)**	0.0016873 (1.48)	0.0006649 (0.79)
constant	18.78905 (2.04)**	8.940684 (0.60)	21.79526 (1.97)**
R^2 within	0.7104	0.8188	0.6884
R^2 between	0.5359	0.5343	0.7802
R^2 overall	0.6559	0.7468	0.7093
Number of obs	232	80	152
F value	47.35 (0.0000)	27.12 (0.0000)
Wald chi^2			333.29 (0.0000)
Hausman test	263.02 (0.0000)	57.80 (0.0000)	9.30 (0.3178)
Wooldridge test	3.082 (0.0901)	0.031 (0.8638)	10.383 (0.2392)

***, **, * indicates significant at 1, 5 and 10% levels respectively. t values in parenthesis.

Source: Created by the authors.

Table 3. Comparison of the results for banks in Serbia (Model 1) and for banks in the EU countries.

	Significant variables (Model 1)			Pasiouras and Kosmidou (2007)
	All banks in sample	Domestic banks	Foreign banks	All banks in sample	Domestic banks	Foreign banks
SIZE	-3.951735 (-3.44)***		-2.685173 (-4.04)***	-0.005713 (-21.15411)***		-0.009339 (-5.378429)***
COINC	−17.23976 (-20.58)***	-17.40953 (-15.32)***	-16.57383 (-14.78)***	-0.198939 (-48.87565)***	-0.143611 (-30.10036)***	-0.309044 (-36.14324)***
EQAS			-9.519028 (-3.59)***			0.240276 (41.46373)***
LODEP	-0.2954157 (-4.69)***	-0.2602072 (-4.13)***		0.040155 (14.42604)***	0.046915 (9.738826)***
C5	0.614015 (1.94)*			0.037344 (32.73005)***
ASSGDP	-0.000774 (-2.08)**			-0.021273 (-45.93489)***
MACPASS	-4.454364 (-1.85)*			0.015120 (25.77822)***
MACGDP	0.0015942 (2.17)**			0.066306 (80.14221)***

***, **, * indicates significant at 1, 5 and 10% levels respectively. t values in parenthesis.

Source: Created by the authors.

Table 4. Regression results – Model 2.

	All banks in sample	Domestic banks	Foreign banks
SIZE	-3.949163 (-3.38)***	-1.329691 (-0.75)	-6.845345 (-4.34)***
COINC	-17.2399 (-20.53)***	-17.4587 (-15.60)***	-16.25565 (-14.18)***
EQAS	-3.188413 (-1.27)	4.477414 (0.93)	-9.00288 (-2.97)**
LODEP	-0.2954128 (-4.67)***	-0.2705413 (-4.34)***	0.1131158 (0.23)
INF	-0.1410891 (-0.64)	-0.6550101 (-1.78)*	0.2517243 (0.98)
GDP	-0.0733204 (0.69)	0.1797452 (1.07)	-0.2319007 (-1.84)*
C5	0.6187905 (1.28)	1.548817 (1.95)*	0.0031697 (0.01)
ASSGDP	-0.0007807 (-1.23)	-0.002385 (-2.29)**	0.0004282 (0.58)
MACPASS	-4.512167 (-0.90)	-18.69059 (-2.25)**	6.587829 (1.11)
MACGDP	0.0016072 (1.30)	0.0046025 (2.26)**	-0.0006786 (-0.47)
Crisis	-0.0185477 (-0.01)	-3.952985 (-1.72)*	3.355345 (1.94)*
constant	18.64759 (1.31)	-19.45975 (-0.88)	47.63095 (2.79)**
R^2 within	0.7104	0.8274	0.7098
R^2 between	0.5363	0.6304	0.1083
R^2 overall	0.6561	0.7763	0.5435
Number of obs	232	80	152
F value	42.83 (0.0000)	25.72 (0.0000)	27.13 (0.0000)
Hausman test	210.59 (0.0000)	59.98 (0.0000)	17.60 (0.0401)
Wooldridge test	3.071 (0.0907)	0.148 (0.7090)	10.1478 (0.2548)

***, **, * indicates significant at 1%, 5% and 10% levels respectively. t values in parenthesis.

Source: Created by the authors.

Pasiouras, F., & Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance, 21, 222–237. 10.1016/j.ribaf.2006.03.007

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