The determinants of financial performance in Maghreb Banks

Abstract

The purpose of this research is to study and analyze the determinants of commercial banks' Net Interest Margin in Maghreb countries. Both internal factors (bank specific factors) and external factors (macroeconomic factors) are considered. Internal factors selected in this study include Loan to Asset ratio, Government Securities to Asset ratio, Total Debt to Asset ratio, Funds Borrowed to Asset ratio, and Size. Meanwhile external factors included are: Inflation and Economic Growth Rate. This study applies Fixed Effect panel data regression model to 51 Maghreb commercial banks covering the period 2014 - 2017. Fisher's test show that fixed effect model is more appropriate than pooled model. The results show that Net Interest Margin of Maghreb banks is affected only by Size, Loan to Asset Ratio and Funds Borrowed to Asset Ratio. Furthermore, while Economic Growth Rate is significant, the Inflation Rate is not significant.