The Impact of Financial Solvancy on Bank Profitability

an Economitric Study on a group of Private Banks in Algeria during the Period (2010-2020)

Abstract

   This study aims to measure the impact of financial solvency on profitability in six private banks operating in Algeria, during the period (2010-2020). The dependent variable, profitability, was measured using the return on equity, return on assets, and return on deposits. The independent variable was represented by four financial solvency indicators: equity to total assets, equity to risky assets, equity to total deposits, and equity to total loans. To achieve the study objective, we relied on the cross-sectional time series methodology (panel models). aims to measure the impact of financial solvency on profitability in six private banks operating in Algeria, during the period (2010-2020). The dependent variable, profitability, was measured using the return on equity, return on assets, and return on deposits. The independent variable was represented by four financial solvency indicators: equity to total assets, equity to risky assets, equity to total deposits, and equity to total loans. To achieve the study objective, we relied on the cross-sectional time series methodology (panel models). The study found a significant effect between each of the financial solvency indicators and the return on equity, no significant effect between the financial solvency indicators and the return on assets, and a significant effect between the financial solvency indicators and the return on deposits.