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Determinants of bank performance: evidence for Latin America

Mauricio Jara‐Bertin (School of Economics and Business, Universidad de Chile, Santiago, Chile)
José Arias Moya (School of Economics and Administrative Sciences, Universidad Católica de la Santísima Concepción, Concepción, Chile)
Arturo Rodríguez Perales (School of Economics and Business, Universidad de Chile, Santiago, Chile)

Academia Revista Latinoamericana de Administración

ISSN: 1012-8255

Article publication date: 29 July 2014

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Abstract

Purpose

The purpose of this paper is to analyze the impact of macroeconomic‐industrial and bank‐specific factors on Latin American banks’ performance.

Design/methodology/approach

Using the data panel system estimator version of the generalized method of moments, the authors estimate the determinants of return on assets and interest margin for a sample of 78 commercial banks from Argentina, Brazil, Chile, Colombia, México, Paraguay, Peru, and Venezuela over the period from 1995 to 2010.

Findings

On the one hand, the results show that bank performance is positively related to both idiosyncratic factors, such as service diversification, size, capital ratio, and specialization degree, and to macroeconomic‐industrial factors such as economic growth, inflation, and bank concentration. On the other hand, the results show that bank performance is negatively related to credit risk, liquidity risk, and operational inefficiencies.

Originality/value

The authors provide new evidence from the Latin American bank industry and incorporate the effect of diversification through noninterest activities.

Keywords

Acknowledgements

The authors wish to thank José Luis Ruiz and Jorge Gregoire (Universidad de Chile), Félix López Iturriaga (Universidad de Valladolid) and Paolo Saona (Saint Louis University). Authors also thank the funding provided by Fondecyt, project number 11110021.

Citation

Jara‐Bertin, M., Arias Moya, J. and Rodríguez Perales, A. (2014), "Determinants of bank performance: evidence for Latin America", Academia Revista Latinoamericana de Administración, Vol. 27 No. 2, pp. 164-182. https://doi.org/10.1108/ARLA-04-2013-0030

Publisher

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Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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