Do Profitable Banks Make a Positive Contribution to the Economy?

Do Profitable Banks Make a Positive Contribution to the Economy?

A number of studies have investigated the relationship between financial sector development and economic growth; however, the impact of bank profitability on economic growth is still unclear. We investigate the link between bank profitability and economic growth in the Asia-Pacific region over the p...

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Main Authors: Vijay Kumar, Ron Bird
Format: Article
Language:English
Published: MDPI AG 2020-07-01
Series:Journal of Risk and Financial Management
Subjects:
economic growth
financial sector development
global financial crisis
bank profitability
Online Access:https://www.mdpi.com/1911-8074/13/8/159
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spelling doaj-80b5295c49d84ac3a68aca02df6bec322020-11-25T03:29:03ZengMDPI AGJournal of Risk and Financial Management1911-80661911-80742020-07-011315915910.3390/jrfm13080159Do Profitable Banks Make a Positive Contribution to the Economy?Vijay Kumar0Ron Bird1New Zealand Institute for Business Research, The University of Waikato, Hamilton 3240, New ZealandSchool of Accounting, Finance and Economics, The University of Waikato, Hamilton 3240, New ZealandA number of studies have investigated the relationship between financial sector development and economic growth; however, the impact of bank profitability on economic growth is still unclear. We investigate the link between bank profitability and economic growth in the Asia-Pacific region over the period 2004–2014. Using the system GMM estimator, our findings suggest that a profitable banking sector is a prerequisite for economic growth in the Asia-Pacific region and that the impact of bank profitability on economic growth is more prominent in small banking sectors. Perhaps surprisingly, we found that the bank size has a negative impact on GDP growth, with the influence of bank profitability on economic growth reducing as the size of the banking sector increases. Our results also show that the impact of profitability on economic growth is much larger in developed economies compared to small emerging and large emerging economies.https://www.mdpi.com/1911-8074/13/8/159economic growthfinancial sector developmentglobal financial crisisbank profitability
collection DOAJ
language English
format Article
sources DOAJ
author Vijay Kumar
Ron Bird
spellingShingle Vijay Kumar
Ron Bird
Do Profitable Banks Make a Positive Contribution to the Economy?
Journal of Risk and Financial Management
economic growth
financial sector development
global financial crisis
bank profitability
author_facet Vijay Kumar
Ron Bird
author_sort Vijay Kumar
title Do Profitable Banks Make a Positive Contribution to the Economy?
title_short Do Profitable Banks Make a Positive Contribution to the Economy?
title_full Do Profitable Banks Make a Positive Contribution to the Economy?
title_fullStr Do Profitable Banks Make a Positive Contribution to the Economy?
title_full_unstemmed Do Profitable Banks Make a Positive Contribution to the Economy?
title_sort do profitable banks make a positive contribution to the economy?
publisher MDPI AG
series Journal of Risk and Financial Management
issn 1911-8066
1911-8074
publishDate 2020-07-01
description A number of studies have investigated the relationship between financial sector development and economic growth; however, the impact of bank profitability on economic growth is still unclear. We investigate the link between bank profitability and economic growth in the Asia-Pacific region over the period 2004–2014. Using the system GMM estimator, our findings suggest that a profitable banking sector is a prerequisite for economic growth in the Asia-Pacific region and that the impact of bank profitability on economic growth is more prominent in small banking sectors. Perhaps surprisingly, we found that the bank size has a negative impact on GDP growth, with the influence of bank profitability on economic growth reducing as the size of the banking sector increases. Our results also show that the impact of profitability on economic growth is much larger in developed economies compared to small emerging and large emerging economies.
topic economic growth
financial sector development
global financial crisis
bank profitability
url https://www.mdpi.com/1911-8074/13/8/159
work_keys_str_mv AT vijaykumar doprofitablebanksmakeapositivecontributiontotheeconomy
AT ronbird doprofitablebanksmakeapositivecontributiontotheeconomy
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