Determinants of Bank Profitability: Empirical Evidence from the Iran

Profitability is one of the most important goals of any bank or any financial institution, so knowing about the affecting factors and how they effect on banks profitability seem important subjects. Determinants of bank can be segregated into internal factors which can be controlled and external factors which are beyond control. This paper discusses the determinants of Iran banks profitability during the period 2008–2016. The results suggest that most of the bank-specific determinant variables have a statistically significantly impact on bank profitability. The empirical findings suggest that size, credit risk, and expense preference behavior are negatively related to banks profitability, while non-interest income and capitalization have a positive impact. During the period under study, the results suggest that economic growth has a positive impact on bank profitability, while the impact of inflation, money supply, and stock market capitalization have not significantly explained the variations in the profitability of the Iran’s banks.

Keywords:

profitability , internal determinants , external determinants , banks , multivariate regression analysis , Iran