Macro and Micro Determinants of Bank’s Profitability: Evidence from United States

Haozhen Liu

doi:10.54691/bcpbm.v26i.1896

Authors

Haozhen Liu

DOI:

https://doi.org/10.54691/bcpbm.v26i.1896

Keywords:

Bank Profitability, United States, Financial Institutions.

Abstract

This study investigates the macro and micro variables affecting commercial bank profitability in the United States from 2017 to 2021. The research sample is the nine commercial US banks and the research study develops a panel regression model to analyze the data. This research regards the probability indexes return on average assets (ROAA) and return on average equity (ROAE). The study finds that liquidity risk is one of the most crucial factors affecting profitability, both on ROAA and ROAE. The leverage ratio and capital adequacy negatively influence profitability, especially on ROAE. However, the profitability of these US commercial banks is not influenced by the bank size and the macro determinants, which include the pace of growth of the economy, the rate of inflation, and the rate of lending interest are all factors to consider. The paper also presents recommendations for decreasing the liquidity risks and controlling the risk to maintain a healthier economic environment for the US commercial banks based on the empirical findings.

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