Empirical evidence from the Kingdom of Saudi Arabia for the factors affecting the financial performance of commercial banks

Abstract

This study aimed to measure the impact of the determinants of the financial performance of commercial banks listed on the Saudi Stock market (Tadawul) for the period 2008-2018. Using the standard estimation of the panel models by applying the Driscoll-Kraay standard error estimator to a balanced panel data set. In light of these experimental effects, the results of the study show that there is a negative impact (an inverse relationship) with a statistical significance between the operating efficiency rate and all measures of financial performance of the commercial banks under study. There is a positive effect (a positive relationship) with a statistical significance between the liquidity ratio and the financial performance measures of commercial banks. There is a negative impact (an inverse relationship) with a statistical significance between the concentration rate and the return on average assets (ROAA) and the return on average equity (ROAE) as measures of the internal financial performance of the commercial banks under study. Also, there is a positive effect (a positive relationship) with a statistical significance between the inflation rate and the return on average equity (ROAE) as a financial measure of internal performance and Tobin's Q as a financial measure of the external performance of the commercial banks under study. There is also a negative effect (an inverse relationship) with a statistical significance between the GDP growth rate and the net interest margin (NIM) as a financial measure of internal performance and Tobin's Q as a financial measure of the external performance of the commercial banks under study