Bank Specific, Industry-Specific and Macroeconomic Determinants of Bank Profitability

This publication examines bank profitability using bank-specific, industry-specific and macroeconomic determinants using the structure-conduct-performance (SCP) hypothesis. A generalized method of moments (GMM) technique is applied to banks in Greece from 1985 to 2001 to account for profit persistence. The GMM technique illustrates that profitability persists to a moderate level, which suggests the departure from perfectly competitive markets may not be that substantial. Most bank-specific determinants performed as expected. No evidence is found of the SCP hypothesis. The authors also found the business cycle has an overall positive effect on profitability.