What Determines the Profitability of Banks During and before the International Financial Crisis? Evidence from Tunisia

The current international financial crisis has highlighted that a well-functioning financial system is significantly important for economic growth. The aim of this study is to specify an empirical framework to investigate the impact of bank-specific, industry-specific and macroeconomic determinants on the profitability, before (2000-2006) and during (2007-2010) the international financial crisis, in the large Tunisian commercial banks. The measures of profitability that have been used in the study are the return on equity (ROE), return on assets (ROA) and net interest margin (NIM). We adopt the dynamic panel approach to correct for these potential problems by using the generalized method of moments in system (GMM in system). Our empirical study allowed us to conclude that the Tunisian banking sector was slightly exposed to the effects of the international financial crisis because of its low integration in international financial markets