Determinants of Greek commercial banks, 1989-2000

Abstract

This paper attempts to examine the determinants of the performance of Greek commercial banks over the last decade. This is of interest because of the markedly changes in the structure of the Greek banking system in the nineties. The Greek banking system is still going through a transformation period so as to compete within a rapidly changing international economic environment and to meet the new financial needs of the economy. In the empirical section, we measure the profitability of the commercial banks using the ratios return on assets (ROA) and return on equity (ROE). Our results provide weak evidence of the phenomenon of persistence in profitability. We report that the deregulation of the market in the last decade and the process of European integration with the introduction of the Euro have enhanced the competitiveness of the banking sector. On the strong side of the evidence, the variables related to management decisions are found to assert a major impact on the profitability of Greek commercial banks.

JEL Classification: G21, G24, G31