International Journal of Economics and Financial Modelling

Market competition and bank performance - empirical evidence from the European Union banking sector

2025-03-15T02:12:33-05:00

The main aim of this paper is to empirically test the contribution of market competition to bank performance and the influence of the crises that affected the EU banking sector over the years 2006-2021. Using data sourced from the Moody’s Analytics BankFocus database, the paper presents the results obtained with panel fixed, random, and dynamic GMM estimations. Bank performance is proxied with two variables: bank profitability and bank capitalization. Bank profitability is measured with the return on equity ratio, and bank capitalization is represented with the equity to total assets ratio. Bank competition is measured with Boone indicators and Herfindahl-Hirschman Indices. These two competition measures are separately computed for banks’ profits, loans, and deposits. The findings suggest that competition, evaluated from an efficiency perspective, plays a more crucial role than market concentration in the banking sector in explaining bank performance. Furthermore, the profitability of banks does not appear to be directly linked to their traditional activities. The paper highlights the significant role of political and regulatory authorities in ensuring that legislation and conditions are in place to maintain bank market competition without exacerbating crisis risks while also fostering economic growth.

An assessment of the impact of non-performing loans and macroeconomic indicators on bank performance

2025-06-14T05:57:35-05:00

The purpose is to explores the impact of NPLs and macroeconomic indicators on bank performance in Ghana. Non-performing loans pose significant challenge to banks, with detrimental implications for financial and economic stability. This study used secondary data obtained from financial reports of nine firms in Ghanaian, covering 2007 to 2021. The investigation focused on bank’s ROA and ROE as proxies for measuring performance, while NPLs, GDP, bank size, and inflation were adopted as predictor factors. The random effects model was employed, using Ordinary Least Squares and autoregressive methods. The outcomes show insignificant direct, and negative connection between NPLs and bank ROA and ROE respectively. Additionally, the study demonstrates that inflation rate and bank size posit statistically important inverse, and direct influence on ROA and ROE respectively. NPL does not influence bank’s ROE and ROA. Inflation and bank size have impact on performance. Considering the diverse influences of NPLs on financial metrics, and the significant impact of inflation and bank size on performance, policymakers and institutional managers must prioritize effective risk management, rigorous customer screening and close monitoring of macroeconomic conditions to ensure that strategic financial planning aligns with current economic environment for sustainable performance.