MICROECONOMIC FACTORS AFFECTING BANKS’ FINANCIAL PERFORMANCE: THE CASE OF ROMANIA

Abstract

Banks are important cells in the economy as they have a significant role by maintaining and encouraging the development of economic sectors. They refocus the resources from those who have surplus to those which have a deficit. Therefore, as any other enterprises, performance is highly desirable for banks and, then, it is crucial to discover what the main factors that influence this objective are. So, this paper analyzes the microeconomic factors affecting bank’s financial performance focusing on 11 entities for the period between 2003 and 2013. The performance is measured by return on assets. The independent variables used are bank’s size, financial leverage,loans to assets ratio, deposits to assets ratio, number of employees, liquidity, net result and monetary policy rate. The results show that bank’s size, loans to assets ratio and liquidity have not a significant impact on performance. Financial leverage has a negative impact, meanwhile the number of employees, deposits to assets ratio and net result have a positive effect.

Keywords

• Financial performance
• Return on assets
• Microeconomic factors
• Bank performance