Bank-specific vs. macro-economic factors: what drives profitability of commercial banks in Saudi Arabia

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The goal of this study is to determine the elements that contribute to the profitability of commercial banks in Saudi Arabia. The study is important due to the fact that Saudi vision 2030 foresees Saudi Arabia as a global investment powerhouse and fulfilling this objective requires a profitable banking sector. The method chosen for the study is multiple regression analysis. The sample data is taken for the period ranging 2009 and 2015 for the 12 local banks. The research concludes that bank’s internal factors specifically, bank size, liquidity, credit risk and operational efficiency are significantly determining the profitability in the banks as compared to the economy’s macro-economic variables.

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    • Table 1. Descriptive statistics
    • Table 2. Year-wise descriptive statistics
    • Table 3. Descriptive statistics (means) by banks
    • Table 4. Variance inflation factor
    • Table 5. Regression analysis