The Effective Factors on Profitability of Commercial Banks in Iran

Keeping the commercial banks in profitability situation is crucial for financial and economic soundness. For this purpose, the present research addresses to study the effective factors on the performance of commercial banks. In this research, the determinants of banksʹ profitability are examined based on two parameters of return on asset and return on equity. The specified model was estimated using of panel data regression technique for nine commercial banks in Iran during 2006- 2010. The research results show that the variables of bankʹs size, management efficiency and capital adequacy ratio have a positive effect on the performance of commercial banks while the variables of operating efficiency, gearing ratio and non-performing loans have a negative effect on the performance.