Journal of Finance and Accounting
ISSN (Print): 2333-8849 ISSN (Online): 2333-8857 Website: Editor-in-chief: Apply for this position
Open Access
Journal Browser
Journal of Finance and Accounting. 2017, 5(2), 53-60
DOI: 10.12691/jfa-5-2-4
Open AccessArticle

The Determinants of Bank Performance: The Case of Tunisian Listed Banks

Aziz Chouikh1, and Youssef Blagui2

1Department of Finance, Assistant Professor of Finance at the Mediterranean School of Business, South Mediterranean University, Tunis, Tunisia, and Assistant Professor of Finance at FSJEG, University of Jendouba, Jendouba, Tunisia

2Department of Finance, the Mediterranean School of Business, South Mediterranean University, Tunis, Tunisia

Pub. Date: July 05, 2017

Cite this paper:
Aziz Chouikh and Youssef Blagui. The Determinants of Bank Performance: The Case of Tunisian Listed Banks. Journal of Finance and Accounting. 2017; 5(2):53-60. doi: 10.12691/jfa-5-2-4


This paper studies the relationship between Tunisian listed banks performance and two types of determinants; internal and external. The internal explanatory variables are: (1) the bank size, (2) privatization, (3) board size, (4) capital-to-assets ratio, and (5) cost of efficiency. The macro-economic (external) exogenous variables are: (1) gross domestic product growth rate and (2) inflation. Our panel-data analyses suggest a statistically significant and negative relationship between bank profitability (endogenous variable) and board size. However, the remaining variables were found to be statistically insignificant. This can be explained by two main sub-hypotheses: (a) state-owned banks included in the sample disturb the statistical significance of the results and (b) the year 2011 is a cut-off point that changed the Tunisian bank performance determinants.

bank performance panel data determinants exogenous variable endogenous variable

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit


[1]  Abreu M. and V. Mendes. (2002). Commercial bank interest margins and profitability: evidence from E.U countries. Porto Working paper series.
[2]  Aladwan, S. M. (2015). The Impact of bank Size on profitability: An Empirical Study on Listed Jordanian Commercial Banks. European Scientific Journal December 2015 edition vol.11, No.34.
[3]  Arpa, M., Giulini, I., Ittner, A., & Pauer, F. (2001). The influence of macroeconomic developments on Austrian banks: implications for banking supervision, Basel, Bank for International Settlements, BIS Paper, No. 1.
[4]  Asutay, M., & Izhar, H. (2007). Estimating the Profitability of Islamic Banking: Evidence from Bank Muamalat Indonesia. Review of Islamic Economics, Vol. 11, No. 2, 2007.
[5]  Batten, A. J., & Vinh, X. Vo. (2013). Determinants of Bank Profitability – Evidence from Vietnam. Department of Banking & Finance, Monash University, Caulfield Campus.
[6]  Beck, Thorsten, Robert Cull, & Afeikhena Jerome. (2005). Bank Privatization and Performance: Empirical Evidence from Nigeria. Journal of Banking and Finance 29, 2355-2379.
[7]  Beckmann, R. (2007). Profitability of Western European banking systems: Panel Evidence on structural and cyclical determinants. Series 2: Banking and Financial Studies. No. 17, 2007.
[8]  Belkhir, M. (2008). Board of Directors' Size and Performance in the Banking Industry. International Journal of Managerial Finance, Vol. 5, No. 1, 2009.
[9]  Ben Amar, A., & Abaoub, E. (2010). Earnings Management Thresholds: The Case in Tunisia. AAMJAF, Vol. 6, No. 2, 35-56, 2010.
[10]  Ben Arab, M., & Riahi, Y. (2011). Disclosure Frequency and Earnings Management: Analysis in the Tunisian context. Journal of Accounting and Taxation Vol. 3(3), pp. 47-59, July 2011.
[11]  Ben Gamra, S., Homrani, K., & Abouab, E. (2013). The Determinants of Earnings Management: Empirical Evidence in the Tunisian Banking Industry (1999-2010). Journal of Business Studies Quarterly 2013, Volume 4, No.3.
[12]  Ben Naceur, S & Ghazouani, S. (2005). Does Inflation Impact on Financial Sector Performance in the MENA Region? Panel Data Evidence. Working paper.
[13]  Berger, A., Hanweck, G. and Humphrey, D. (1987). Competitive viability in banking: Scale, scope and product mix economies. Journal of Monetary Economics 20, 501-520.
[14]  Berger, A., and Humphrey, D. (1997). Efficiency of financial institutions: international survey and directions for future research. European Journal of Operational Research 98, 175-212.
[15]  Berger, A., Mester, L.J. (2003). Explaining the dramatic changes in performance of US banks: technological change, deregulation and dynamic changes in competition. Journal of Financial Intermediation, 12, 57-95.
[16]  Bikker, J.A. and H. Hu. (2002). Cyclical Patterns in Profits, Provisioning and Lending of Banks and Procyclicality of the New Basle Capital Requirements. BNL Quarterly Review, 221, pp. 143-175.
[17]  Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking & Finance, 13(1), 65-79.
[18]  Boyd, J. H., Levine, R., & Smith, D. B. (2000). The Impact of Inflation on Financial Sector Development. Journal of Economic Literature E31, pp. 1-19.
[19]  Boyd, J.H., Runkle, D.E. (1993). Size and Performance of Banking Firms: Testing the Predictions of Theory. Journal of Monetary Economics 31, 47-67.
[20]  Calza, A., Manrique, M., &Sousa, J. (2006). Credit in the euro area: An empirical investigation using aggregate data. The Quarterly Review of Economics and Finance, 46(2), 211-226.
[21]  Clementina, K., & Isu, O. H. (2013). The Impact of Capitalization on Bank Performance in Nigeria 1970–2010: An Assessment. International Review of Management and Business Research Vol. 2 Issue.3.
[22]  Clementina, O. N., Adanma, E. S., & Chioma, O. D. (2014). Empirical Study of the Impact of Inflation on Bank Performance: Implication for Investment Decision Making in Banking Industry in Nigeria. Humanity & Social Sciences Journal 9 (2): 61-71, 2014.
[23]  DeYoung, R., Rice, T. (2004). Non-interest income and financial performance at US commercial banks. The Financial Review, vol. 39, pp. 101-127.
[24]  Diamond, W. D., & Rajan, G. R. (1999). A Theory of Bank Capital. Working paper 431.
[25]  Dietrich, A., Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21(3), 307-327.
[26]  Eisenberg, T., Sundgren, S., Wells, M.T. (1998). Larger board size and decreasing firm value in small firms. Journal of Financial Economics, 48(1), 35-54.
[27]  Fanta, B. A., Kemal, S. K., & Waka,K. Y. (2013). Corporate Governance and impact on Bank Performance. Journal of Finance and Accounting. Vol. 1, No. 1, 2013, pp. 19-26.
[28]  Fries, S., & Taci, A. (2004). Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries. Journal of Banking and Finance, 29, 55-81.
[29]  Ganesan, P. (2001). Determination of profits and profitability of public section banks in India: A profit function. Journal of Financial Management and Analysis, 14(1), 27-37.
[30]  Goddard, J., Molyneux, P., & Wilson, J. O. S. (2004). The profitability of european banks: a cross‐sectional and dynamic panel analysis. The Manchester School, 72(3), 363-381.
[31]  Goddard, J., Molyneux, P. and Wilson, J. (2004). Dynamics of growth and profitability in banking. Journal of Money, Credit and Banking 36, 1069-1090.
[32]  Guest, P. M. (2009). The Impact of Board Size on Firm Performance: Evidence from the UK. European Journal of Finance, Vol. 15 (4), pp. 385-404.
[33]  Hughes, J.P. and Mester, L.J. (1998). Bank capitalization and cost: evidence of scale economies in risk management and signaling. Review of Economics and Statistics 80, 314-325.
[34]  Jaap, W. B., & Bikker, A. J. (2014). Bank Performance: A Theoretical and Empirical Framework for the Analysis of Profitability, Competition, and Efficiency.
[35]  Jensen, M., (1993). The modern industrial revolution, exit, and the failure of internal control system. Journal of Finance, 48, 831–880.
[36]  Kagecha, K. P. (2014). Bank Performance: Does Bank Size Matter?. Research paper submitted to the School of Economics, University of Nairobi.
[37]  Kasman, A. 2010. Consolidation and Commercial bank net interest margins: evidence from the old and new European union members and candidate countries. Economic Modeling 27. 648-655.
[38]  Kasman, A., Carvallo, O. (2013). Efficiency and risk in Latin American banking: explaining resilience. Emerging Markets Finance and Trade, 49(2), 105-130.
[39]  Khalfaoui, H., & Ben Saada, M. (2015). The Determinants of Banking Performance: Empirical evidence from Tunisian Listed Banks. International Journal of Finance & Banking Studies IJFBS ISSN: 2147-4486 Vol.4 No.2, 2015.
[40]  Košak, M. and Zajc, P. (2006). “The East-West efficiency gap in European banking.” In Balling M., Lierman F. and Mullineux A. (eds.): Competition and Profitability in European Financial Services. Strategic, systemic and policy issues.” Routledge / SUERF, pp. 63-79.
[41]  Kosmidou, K., Tanna, S. & Pasiouras, F. (2005). «Determinants of Profitability of Domestic UK Commercial Banks: Panel Evidence from the Period 1995-2002», Money Macro and Finance (MMF) Research Group Conference 2005.
[42]  Lipton, M. and Lorsch, J. W. (1992). A modest proposal for improved corporate governance, Business Lawyer, 48, 59-77.
[43]  Liu, H., Wilson, J.O.S. (2010). The profitability of banks in Japan. Applied Finanial Economics, 20(24), 1851-1866.
[44]  Makhokha, A. P. (2013). The Effect of Privatization on Financial Performance of Firm Listed at the Nairobi Securities Exchange. Research paper submitted to the School of Economics, University of Nairobi.
[45]  Molyneux, P., Thornton, J. (1992). The determinants of European Bank profitability. Journal of Banking and Finance, 16, 1173-1178.
[46]  Murad, W. M., Alam, M. M. & Hussien, E. M. (2014). The Performance of Islamic Banks during the 2008 Global Financial Crisis: Evidence from Gulf Cooperation Council Countries.
[47]  Naceur, S. & Kandil, M. (2009). The impact of capital requirements on banks' cost of intermediation and performance: the case of Egypt. Journal of Economics and Business, 61, 70-89.
[48]  Nippani, S., and K. W. Green. (2002). The Banking Industry after the Riegle-Neal Act: Restructure and Overall Performance. The Quarterly Review of Economics and Finance. 42(5), 901-909.
[49]  Ongore, O.V., & Kusa, B. G. (2013). Determinants of Financial Performance of Commercial Banks in Kenya. International Journal of Economics and Financial Issues Vol. 3, No. 1, 2013, pp.237-252.
[50]  Pasiouras, F. and Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. International Business and Finance, 21, 222-237.
[51]  Pasiouras, F., Molyneux, P., & Loannidis, C., (2009). The Relationship between Bank Efficiency and Stock Returns: Evidence from Asia and Latin America. University of Bath, School of Management, Working Paper No. 2008. 10.
[52]  Pradhan, S. R., & Shrestha, R. (2016). Impact of Bank Specific and Macroeconomic Variables on the Performance of Commercial Banks of Nepal.
[53]  Revell JRS (1980). Costs and margins in banking: an international survey. Paris: Organization for Economic Co-operation and Development.
[54]  Royfaizal, R. C & Fadzlan, S. (2008). Determinants of Bank profitability in a Developing Economy: Empirical Evidence from the Philippines. AAMJAF, Vol. 4, No. 2, 91-112, 2008.
[55]  Saddique, A., Ahmad, M., Mumtaz. R., & Arif, M. (2016). The Effect of Financial Variables on Bank Performance Pre and Post Financial Crisis. Journal of Finance and Accounting 2016; 4(6): 378-382.
[56]  Sanchez, B., Hassan, K. M., Bartkus, J. R. (2013). Efficiency Determinants and Dynamic Efficiency Changes in Latin American Banking Industries. Journal of CENTRUM Cathedra: The Business and Economics Research Journal, 6, 27-52.
[57]  Shelagh, H & Maggie, F. (2008). The Determinants of Bank Performance in China.
[58]  Smith, B. D., Levine, R., & Smith, D. B. (2000). The Impact of Inflation on Financial Sector Performance. Working paper.
[59]  Spathis Ch., Kosmidou Κ., & Doumpos Μ. (2002). Assessing Profitability Factors in the Greek Banking System. International Transactions in Operational Research, Vol. 9, No. 5, 517-530.
[60]  Srairi, S. A. (2009). Factors influencing the profitability of conventional banks and Islamic banks in GCC countries. Review of Islamic Economics, 13(1), 5-30.
[61]  Terraza, V. (n. d). The effect of bank size on risk ratios: Implications of banks’ performance. Working paper. Centre for Research in Economics and Management (CREA), University of Luxembourg.
[62]  Togbenou, A., & Combey, A. (2017). The Bank Sector Performance and Macroeconomics Environment: Empirical Evidence in Togo. International Journal of Economics and Finance; Vol. 9, No. 2; 2017.
[63]  Tomuleasa, L., & Cocris, V. (2014). Measuring the Financial Performance of the European Systemically Important Banks. Working paper.
[64]  Trabelsi, M. A. (2010). Governance and Performance of Tunisian Banks. International Journal of Economics and Finance.
[65]  Tumin, H. M., & Said, M. R. (2010). Performance and Financial Ratios of Commercial Banks in Malaysia and China.
[66]  Umar, M., Maijamai’a, D., & Adamu, M. (2014). Conceptual exposition of the effect of inflation on bank performance. Journal of World Economic Research. Vol. 3, No. 5, 2014, pp. 55-59.
[67]  Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40, 185-212.