Determinants of Bank Profitability in the Lao PDR

 

 

Received:
May 13, 2024

Revised:
June 19, 2024

Accepted:
July 8, 2024

 

Tularkham Inthoulath*

Touny Viphommavongsa

Vilatda Phimphachane

Officer of Banking Institute, Bank of The Lao PDR
(*Corresponding Author)

Dr.Piya Wongpit

Associate Professor of Finance and Banking Department,

Faculty of Economics and Business Management, National University of Laos

 

 

Keywords:
Bank Profitability,
Commercial Bank, Lao PDR. 

ABSTRACT

The financial sector serves as a cornerstone in sculpting the economic terrain of nations. Effective performance within the banking sector can catalyze economic growth. This study delves into the determinants of bank profitability in the Lao PDR, scrutinizing both bank-specific attributes and macroeconomic variables. Drawing from unbalanced panel data spanning ten years (2012-2021) from 35 banks in Laos, the analysis employs a random effects approach to estimate the relationship. Findings indicate that certain macroeconomic factors such as the policy rate, alongside bank-specific variables including size and organizational structure (CEO), positively impact the profitability of Lao banks. Conversely, factors such as capital adequacy, credit risk, liquidity, operating expenses, and technological aspects significantly negatively influence bank profitability. This study represents one of the earliest investigations into the determinants of bank profitability in Laos, contributing valuable insights to both theoretical literature and practical industry applications. By shedding light on these critical factors, policymakers and stakeholders are empowered to enhance the performance of Lao commercial banks, thereby fostering economic growth and stability.

 

 

 

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