Determinants of Commercial Banks Profitability in Malaysia

Abstract

The study critically examines the factors that influence the profitability level of commercial banks in Nigeria. Panel data method was employed to analyze time series and cross-sectional data gathered from 2000 to 2013 on a sample of fourteen banks. Profitability is measured with return on assets as a function of some internal and external determinants, which includes; capital adequacy ratio, asset quality, management efficiency, liquidity ratio, inflation, and economic growth. The findings revealed that asset quality, management efficiency, and economic growth are the determinants of commercial banks’ profitability. They were found to be statistically significant on profitability in both the fixed effect and random effect models. Asset quality was highly significant in all the models; thus concluding that credit risk is a major determinant of commercial banks’ profitability. Keywords: