The Effect of Specific Factors on Bank Profitability: Evidence from Nepalese Banks

Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 20 January 2020

The Effect of Specific Factors on Bank Profitability: Evidence from Nepalese Banks

Prem Bahadur Budhathoki, Chandra Kumar Rai

Tribhuvan University, Nepal

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10.31014/aior.1992.03.01.179

Pages: 82-89

Keywords: Capitalization, Asset Quality, Operating Efficiency, Bank Diversification

Abstract

This paper examines the impact of assets quality, capital adequacy ratio, assets diversification and operating efficiency on banks’ profitability. This study employs bank scope data of eight commercial banks during the period of 2002/03 – 2016/17. Altogether, there are 96 observations are made in the study. The ordinary least squares model is used to analyze the data. The results indicate that three predictor variables assets quality, operating efficiency, and capital adequacy ratio significantly affect bank profitability. But the predictor variable diversification does not affect banks’ profitability significantly. The results of this study help the bankers and policymakers to take effective action in order to improve banks’ profitability.

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