Kalterina Abazi Jusufi1, Adriatik Abazi2
Authors country of origin: North Macedonia1/2
Institutional affiliation: 1University “St. Cyril and Methodius”, Skopje, Economics Faculty, 2” the State University of Tetova”, Economics Faculty
E-mail: kalterinaabazi@hotmail.com, adriatik.abazi@hotmail.com
Abstract
This study examined the impact of bad loans on banks profitability because banks are the most important participants in the financial system, but also the most significant and largest financial institutions around the world, measured through their share in the total financial sector assets and for this, the purpose of this paper is to study the impact of bank-specific and macroeconomic determinants on bank profitability in the Republic of North Macedonia.
A strong financial system is very important for a country to flourish. The economic progress of a nation and the development of banking is invariably interrelated. The banking sector is an important financial service sector because channelizing funds for productive purposes.
The objective of this study is to examine the impact of bank-specific and major macroeconomic factors on the profitability of the banking sector in the Republic of North Macedonia by using the data over the period 1994-2016. This study used unbalanced time series data with OLS methods, which were collected from the World Bank and National bank in the Republic of North Macedonia. This paper employs the Ordinary Least Square method to investigate also the effect of loans, economic growth, and other determinants shown with the level of the profitability in the Republic of North Macedonia because the purpose of this study is to find out the causes of loans in the Republic of North Macedonia. However, some of these loans usually fall into non-performing loans and adversely affect the performance of bank profitability.
The main goal of this paper is the impact of internal and external factors which can be classified also into bank-specific and macroeconomic factors on bank profitability in the Republic of North Macedonia as one of the countries that are in transition.
The paper sets out to determine the main factors and their level of impact on the profitability of banks in the Republic of North Macedonia and showed that the loans hurt the bank profitability in the Republic of North Macedonia, but also results showed the individual effects on profitability where in some variables coefficients are statistically significant. Moreover, results showed a positive but insignificant impact of the macroeconomic determinants such as growth.
Keywords: financial system, banking profitability, non-performing loans, OLS, Republic of North Macedonia.
Volume 2.No.1(2019): April
ISSN 2661-2666 (Online) International Scientific Journal Monte (ISJM)
ISSN 2661-264X (Print)
DOI : 10.33807/monte.202004663
DOI URL: https://doi.org/10.33807/monte.202004663
Full Text: PDF
This is an open-access article under the CC BY-NC-ND license (creativecommons.org/licenses/by-nc-nd/4.0/)