Investigating the Influence of Bank Characteristics and Macroeconomic Variables on the Profit Levels of China's Commercial Banks: A Comprehensive Panel Data

Abstract

This thesis investigates the factors influencing the profitability of Chinese commercial banks, focusing on bank specific factors and macroeconomic variables during the COVID-19 pandemic. The central question addresses how bank-specific factors like capital adequacy, asset quality, liquidity, and deposit ratios, alongside macroeconomic factors, affect profitability measures such as ROAA, ROAE, and NIM. Using fixed-effects models on data from 64 banks spanning 2012 to 2022, the study finds significant relationships between these variables and bank profitability. Notably, the COVID-19 pandemic significantly impacted profitability, and liquidity and deposit ratios showing strengthened positive effects during this period. These findings suggest that effective liquidity and risk management are crucial for maintaining bank profitability in crises. Chinese policymakers and banks must adapt to dynamic economic conditions and regulatory changes to enhance stability.