Internal factors affecting commercial banks’ Financial Performance

Evidence from the Arab Maghreb countries.

Abstract

This paper investigates internal factors that could affect commercial banks’ financial performance in the Maghreb countries. To explore the effect, we perform panel-corrected standard errors (PCSEs) estimates on a balanced panel data set of 23 commercial banks from 2011 to 2020. Studied internal factors include apital adequacy, operational efficiency, asset quality, revenue diversification, liquidity, bank size, intellectual capital, and deposits. The results of this study revealed that Internal Factors (bank-specific variables) factors significantly affect the financial performance of commercial banks as measured by return on average assets (ROAA), except for the measure representing operational efficiency variable. Likewise, the overall effect of internal factors affect the financial performance of commercial banks as measured by return on average equity (ROAE), with the exception of the capital adequacy, asset quality, and liquidity metrics.was significance level. Thus, it can be concluded that the commercial banks’ financial performance in the Maghreb countries is driven mainly by many internal factors.