FACTORS INFLUENCING THE PROFITABILITY OF NON-BANK FINANCIAL INSTITUTIONS IN BANGLADESH: A STATISTICAL ANALYSIS
This study examines the factors specific to firms that affect the profitability of Bangladesh's non-banking financial institutions (NBFIs). The regression is estimated using a model incorporating panel-corrected standard errors by looking at panel data from 22 NBFIs over ten years (2012–2021). The study investigates factors such as the organization's size, capital adequacy ratio, nonperforming loans, liquidity ratio, age, and leverage, focusing on assessing the return on assets (ROA) and equity (ROE). The results present numerous significant insights. First, company size has a significant positive impact on the profitability of NBFIs, indicating that larger institutions frequently outperform smaller ones. Their ability to obtain financing at more affordable rates and investors' perceptions of their dependability may account for this. Second, the study finds a beneficial and substantial association between profitability and the capital adequacy ratio, highlighting the need to maintain higher ratios to improve profitability. Third, the study also reveals that nonperforming loans negatively correlate with profitability, suggesting that NBFIs with reduced credit risk are more successful. Finally, it has been discovered that NBFI age has a detrimental effect on profitability, especially for older institutions that are still modest in size. Additionally, liquidity has a detrimental impact on profitability, showing that NBFIs make more investments to make money with their available money. However, there needs to be a discernible connection between profitability and leverage. Managers of NBFIs can benefit significantly from the practical implications of these results in knowing the particular elements that influence profitability. These insights can help managers decide about investment strategies, managing nonperforming loans, and capital sufficiency. The present study makes a scholarly contribution by providing panel data on the firm-specific determinants that impact the profitability of NBFIs in Bangladesh, thereby adding to the existing literature.
NBFIs, ROA, ROE, Firm-Specific Factors, Profitability, Bangladesh