Determinants of Commercial Banks profitability in Bahrain : An Empirical Research

Abstract

Abstract : The main purpose of the present study is to implement an academic research to highlight the main factors that effect on the commercial banks profitability in Bahrain. The sample consist of 18 commercial banks, six of them are local commercial banks and the other are branches of foreign banks. The period covered in this study was from 1984 to 1991. The data are gathered from Bahrain Monetary Agency which consist of the profit and loss account and the balance sheet of the commercial banks from 1984 to 1991. The methodology applied in this study is a multiple linear regression of time series cross-section of the pooled data under-study. The econometrics computer package (SHAZAM) was used to calculate the correlation and the multiple regression. The profitability measurement which were used are the return on assets (ROA) and return on capital (ROC). These measurement were used as dependent variables in the regression models. The result show in both models return on assets ROA and return on capital ROC that, there is a positive relationship between the profitability ratio with capital ratio and the government ownership. On the other hand, the result show there is an inverse relationship between the profitability ratios and operating cost, liquidity ratio, interbank deposit, size and interest rate.