Risk and profitability in Algerian banks using macroeconomic and bank specific variables : a panel regression analysis

Abstract EN

This study investigates the relationship between risk management and financial performance in Algeria banks for the period 2010-2019.

the study conducted a panel regression analysis, to estimates the variation of the performance measures using OLS, fixed and random effects methods, after that, a Housman’s test was established to determine the appropriate model to estimate.

the results show that financial performance in Algerian banks measured using ROA and ROE, have a significant relationship with both bank specific variables and macroeconomic variables : interest rate risk (IRR), funding liquidity ratio (FL), provision to total loans ratio (PTL), GDP, inflation, real exchange rate (USD / DZD) and to real interest rate.

findings also indicate that Algerian banks need to improve loan quality and have sound credit risk management procedures.