Determinants of Financial Performance of Nepalese Commercial Banks: Evidence from Panel Data Approach

Abstract

The impact of bank specific factors on the financial performance of Nepalese commercial banks is analyzed in this paper. The financial performance is measured by using return on assets (ROA). Similarly, managerial efficiency (ME), liquidity (LIQ), credit risk (CR), assets quality (AQ) and operational efficiency (OE) is used as proxy of bank specific factors. This study used panel data of 17 commercial banks for the period of 2010/11 to 2017/18. Breusch and Pagan Lagrangian multiplier test showed that Pooled Regression model is not appropriate and Hausman test concluded that Fixed Effect model is appropriate rather than Random Effect model. Using the Fixed Effect model; this study concludes that bank specific factors have significant impact on financial performance of Nepalese commercial banks. Finally, this study reveals that ME, AQ and OE have significant positive impact, and CR has negative impact on the financial performance of Nepalese commercial banks.