IMPACT OF FIRM SPECIFIC CHARACTERISTICS ON PROFITABILITY OF COMMERCIAL BANKS

Abstract

Impact of firm specific characteristics on profitability of Commercial Banks is representative vision of reality. Main thrust of the present study is to examine the firm specific factors and profitability of the sampled bank, to examine the relationship between firms specific factors and profitability of the sample banks and to analyze the effects of firm specific factors on profitability of sampled bank. Descriptive and casual Comparative research designs have been adopted. The study involved the data from published financial statements of commercial banks operating in Nepal. Among the 20 commercial banks only 3 banks are taken as sample of using purposive sampling method these are: Rastriya Banijya Bank, Nepal Bank and Agricultural Development Bank. Based on the analysis and interpretation of data, the study suggests that Nepalese commercial banks should focus on maintaining liquidity, capital structure, business growth rate, asset quality, and governance practices to enhance their performance. Market reputation, diversified services, and corporate social responsibility should also be considered. The study aims to bridge the gap in research about capital structure and profitability analysis of Nepalese commercial banks and suggests avenues for future research, such as exploring liquidity level components and extending the study to different sector companies over more years. It includes pooled OLS regression, regression analysis of ROA, regression model of independent variables and ROA, analysis of variance (ANOVA), association with correlation with EPS, regression analysis of EPS, regression model of independent variables and EPS, ANOVA of EPS, and major findings. ANOVA tests indicate that return on assets has a significant effect on the performance of banks in Nepal, with a p-value of 0.000. This implies that the linear regression model is xii significant. Additionally, the study concludes that debt ratio and debt-equity ratio are negatively related to firms' profitability measured by ROA and EPS.