An empirical analysis of internal factors affecting bank performance in Albanian case - Economicus

By Dr. Teuta ÇERPJA, Rosela BAJRAKTARI

Abstract
Purpose: Commercial banks play a crucial and dynamic role in driving a country’s economic development. An efficient, effective, and well-regulated banking sector contributes to accelerated growth in multiple sectors of the economy. This paper analyzes the impact of internal factors on the performance of banks in Albania. Return on assets (ROA) is used as a proxy to measure the performance of commercial banks in Albania. Additionally, evaluates the impact of the COVID-19 pandemic on the performance of Albanian commercial banks. Methodology: This study combines two primary lines of data research. Initially, descriptive statistics are provided for both independent and dependent variables. The regression model utilized in the analysis relies on panel data, specifically quantitative data that explains the performance of commercial banks through the explanatory variables. Focusing on nine commercial banks in Albania from 2017 to 2021, the fixed effects model assesses the relevance of specific bank-related factors affecting their performance. Furthermore, this research paper investigates the impact of a COVID-19 dummy variable included in the analysis, hypothesizing that strong banking systems help economies survive adverse shocks and maintain the financial system’s stability.

Findings: The findings show that all internal factors such as bank size, efficiency ratio, and liquidity risk, are statistically significant, while the COVID-19 pandemic dummy variable did not have a statistically significant impact on bank performance in the case of Albanian banks.

Value: This study makes a significant contribution by examining the performance of banks in Albania over recent years, utilizing the latest publicly available data. Additionally, it enhances the existing literature by introducing a focus on the COVID-19 dummy variable, a subject that has received limited attention from other researchers to its impact on banking performance. This investigation is expected to motivate a variety of stakeholders, including bankers, banking regulatory authorities, and the broader financial system, to engage with its findings.

Keywords: Bank performance, commercial banking, Covid-19, ROA, internal factors, banking system.