Commercial Banks’ Profitability Determinants in Cambodia: Fixed Effect and Random Effect
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loginABSTRACT
This study employs fixed effect and random effect models to investigate the effect of commercial banks’ characteristics, macroeconomic indicators and financial structure on ROA of commercial banking in Cambodia. Fixed Effect model is selected as refer to the Hausman test. The result indicates that banks’ characteristic such as the ratio of non-performing loan to total loan, ratio of operating expense to total asset and ratio of equity to total asset play a crucial role in determine ROA of commercial banks. In contrast, none of macroeconomic indicators explain ROA, but one of financial structure ratio, CSX market capitalization to commercial banks’ total asset, is statistically significant in explaining commercial banks’ ROA.
Keywords: Commercial Banks, ROA, Fixed Effect model, Random Effect model.
* This research was supported by a grant from the CamEd Business School. Correspondence concerning this article should be address to Lecturer Siphat Lim, CamEd Business School, No. 64 Street 108, Phnom Penh, Cambodia. Contact: [email protected]
