Determinants of Banking Sector Performance in Some Selected OIC Member Nations: Turkey, Islamic Republic of Iran, Saudi Arabia, Egypt, Indonesia and Algeria

Abstract

The objective of this paper is to establish the determinants of banking sector in some selected OIC member Nations including; Turkey, Islamic Republic of Iran, Saudi Arabia, Egypt, Indonesia and Algeria. The study which specifically examined some internal and external factors affecting the profitability of banking performance of these selected countries adopted econometrics techniques of static models by employing fixed effects of panel regression models starting the period from 2010-2019. This result shows that the increase in liquidity, efficiency, capitalization economic growth leads the increase in banking performance, whereas , Inflation and bank size could result in decreasing banks' profitability. The result implies that the performance of banking sector of these six selected nations are mainly from internal banking factors and change in increase may lead change in performance which reveals that there are positive relations among the majority of internal variables and the performance of banks in OIC selected nations . On the other hand, most of external factors including inflation has negative relation with banking performance which means change in increase of inflation leads decrease in banking performance proportionally. The study recommends further research by adding variables that are not mentioned in our study such as; interest margins, bank risk measurement variables, GNP and etc. The limitation of the model could be another factor which if employed dynamic model may come up with other conclusion and result for the strengthening the effectiveness of the model.