ISSN 2736-1721
Global Journal of Business Management ISSN 6731-4538 Vol. 3 (11), pp. 001-009, November, 2009. © International Scholars Journals
Full Length Research Paper
An empirical study on Banks profitability in the KSA: A co-integration approach
Omar Masood¹, Bora Aktan2* and Sahil Chaudhary3
1University of East London, Business School, Docklands Campus, London, United Kingdom.
2Yasar University Faculty of Economics and Administrative Sciences, Selcuk Yasar Campus, Bornova, Izmir, Turkey.
³S.R.K.N.E.C. RTM Nagpur University, Nagpur, India.
Accepted 9 June, 2009
Abstract
This study aims to give the analysis of the determinants of banks’ profitability in the Kingdom of Saudi Arabia (KSA) over the period 1999-2007. This paper investigates the co-integration and causal relationship between return of assets (ROA) and return of equity (ROE) of Saudi banks. The analysis employs Augmented Dickey Fuller (ADF) test, Johansen’s cointegration test, Granger causality test. Analyzing the cointegration and other tests on Saudi Arabian banking sector over the study period, the relationships between the two variables are examined. The empirical results have found strong evidence that the variables are co-integrated.
Key words: Banking, bank profitability, return on assets, return on equity, co-integration, KSA.