Effect of bank specific determinants on profitability of Nepalese Development Banks

Abstract

This study aimed to analyze the bank specific factors determining profitability of development banks in Nepal. To achieve the specific objective of the study, descriptive and causal comparative research has been carried out. The study is conducted using panel data of 9 years development banks of Nepal for the period 2013/14 to 2021/22. The dependent variable is profitability (ROA and ROE) which measures liquidity while the independent variables are Bank size, loan to deposits ratio, equity to assets ratio, cash reserve ratio and NPL ratio. For the purpose of this study, the secondary data have been used. Ordinary least square regression (OLS) of panel data analysis is used as a major tool of analysis. Loan to total assets ratio has significant positive correlation with ROA also bank size has negative effect on ROA. Cash reserve ratio, total equity to assets ratio, cash reserve ratio and NPL ratio have insignificant relation with ROA. The regression result found that the Size of bank and cash reserve ratio (CRR) as independent variable is statistically significant. At the same time, equity to assets (ETA) and loan to deposit ratio (LDR) is also statistically significant with ROE

Keywords: Profitability, Development Banks, ROE, ROA, Liquidity