School of Economics, Business Administration and Legal Studies, Executive MBA
Leventis, Stergios, prof.
This dissertation was written as part of the Executive Master of Business Administration
programme at the International Hellenic University.
The purpose of this study is to theoretically conceptualize and empirically validate some
of the pertinent drivers of banks' profitability in the context of the FYROM’s developing
Econometric analysis on panel data using random effect model was employed and the
proposed research model was evaluated based on commonly reported statistical
measures. Using balanced panel of 13 banks for the period from 2007 until 2015, it was
found that main drivers of banks profitability are GDP growth, market concentration,
ownership, credit risk, operating expenses and operational efficiency, while inflation,
market share, bank size and liquidity risk do not influence the banks’ profitability. Banks
operating in developing economy context need to focus on credit risk, operational
expenses and operational efficiency as drivers that can be controlled in order to improve
the financial performance and carefully monitor other drivers that significantly affect
the profitability. To date, prior studies have mainly focused on analysing banks taking
into consideration the banks ownership (domestic or foreign-owned banks). This study
offers evidence-based insights on the relationships between each of the analysed
variables and profitability, amended with dummy variable depending not on whether
the banks are domestic or foreign-owned but whether they are owned and controlled
by a foreign bank.
Key words: banking sector, profitability, panel data, ownership, operational efficiency.