مجلة المنتدى للدراسات والابحاث الاقتصادية
Volume 9, Numéro 2, Pages 574-582
2025-12-07

Determinants Of Financial Performance In Algerian Banks: A Dynamic Panel Data Analysis Using System-gmm



Authors : Guettoufi Yacine .

Abstract

This study examines the determinants of financial performance in Algerian commercial banks using a comprehensive dataset spanning 2015-2024. Employing a two-step system-GMM estimator on a balanced panel of 18 banks (180 bank- year observations), we investigate the impact of bank-specific and macroeconomic factors on Return on Assets (ROA) and Return on Equity (ROE). Our robust specification tests confirm instrument validity and absence of serial correlation concerns. Results reveal that credit risk (NPL ratio) exerts the strongest negative impact on bank performance, while net interest margin emerges as the most significant positive determinant. Capital adequacy demonstrates differential effects: improving ROA while reducing ROE, indicating a leverage-safety trade-off. Private banks consistently outperform public institutions across both performance metrics. The study also documents significant sensitivity to GDP growth and oil price fluctuations, reflecting Algeria's oil-dependent economic structure. These findings provide crucial insights for bank management strategies, supervisory frameworks, and policy formulation in emerging oil-dependent economies. Keywords: Banking performance, System-GMM, Credit risk, Operational efficiency, Algeria, Financial intermediation JEL Classification: G21, G28, G32, C23

Keywords

Banking performance ; System-GMM ; Credit risk ; Operational efficiency ; Algeria, Financial intermediation

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