A Cross-ASEAN comparative analysis of commercial banks on profitability determinants for the years 2006-2013

This study analyzed how bank-specific variables and macroeconomic factors affect the profitability of commercial banks (35 domestic commercial banks) in selected ASEAN countries namely, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam for the period 2006-2013. Furthermore, this study aimed to help primarily the commercial banks in the ASEAN region to find out how to improve their performance by identifying the impact of the said determinants towards the profitability measures, return on assets, and return on equity. The independent variables that were utilized in this study were Net Interest Margin, Credit Risk, Loans to Deposit Ratio, Cost to income ratio, liquidity ratio, capital adequacy ratio, gross domestic product growth, and inflation growth. The unbalanced panel data underwent several tests namely Breusch-Pagan test for heteroskedasticity, Hausman test, and Breusch and Pagan Lagrangian multiplier. Before this, Simple ordinary least squares (OLS) regression, fixed-effects model, random effects model were utilized. The tests stated above were used to find out which of the regression models is the most fit to use, and a test, namely Breusch-Pagan test for heteroskedasticity determines whether a simple OLS regression model with the option robust needs to be used or not. The findings in the selected countries in the ASEAN region were as follows Indonesia exhibit ratios that positively influence profitability are: NIM, LIQ AND GDP (ROA) GDP (ROE). On the other hand, ratios that negatively affect profitability is CIR (ROA & ROE). Philippines exhibits ratios that positively affect profitability are: NIM, CIR and CAR (ROA). On the other hand, ratios that negatively affect profitability are: LOAN and LIQ (ROA) LOAN, LIQ and INF (ROE). Singapore only exhibits a ratio that negatively influences profitability: LOAN (ROA). Thailand exhibits ratios that positively influence profitability are: NIM, LDR and CAR (ROA). On the other hand, ratios that negatively affect profitability are: LOAN, CIR and LI