Explanatory Factors of Bank Performance in Tunisia: A Panel Model Approach

Abstract

Using the GMM estimator technique described by Blundell and Bond (1998), this paper tend to identify factors explaining Tunisian bank performance. Retaining the main 10 commercial Tunisian banks during the 1998 to 2011 period, we look at whether, for banks operating in similar macro-economic and financial structure environments, one can make judgments concerning the success of their competitive strategies and other managerial procedure by using different profitability measures. Our investigation includes bank-specific as well as industry-specific and macroeconomic factors affecting bank performance. The empirical results reveal a high degree of persistence of bank performance. By the other hand, our findings suggest that the bank capitalization, as well as the best managerial efficiency, have a positive and significant effect on the bank performance. Private owned banks seem to be more profitable than state owned ones. That’s why, privatizing state-owned Tunisian banks is recommended in order to improve their performance. Industry-specific factors, as the concentration and that of the system bank size have a negative and a significant effect on performance. As for the impact of the macroeconomic indicators, we conclude overall that the variables do not have a significant effect on bank performance. However Inflation seems to affect negatively bank’s net interest margin.