Impact of Bank Specific and Macroeconomic Variables on Performance of Nepalese Commercial Banks

Bishnu Prasad Bhattarai

The study examines the impact of bank specific variables and macroeconomic variables on the performance of commercial banks of Nepal over the period of 2011 to 2016. The dependent variable is bank performance which has been specified in terms of ROA while the independent variables are bank specific (default risk, cost per loan assets and capital adequacy ratio), and macroeconomic variables (annual growth of gross domestic product, exchange rate and inflation). To test the impact of importance of bank specific and macro-economic variables on bank performance regression models have been estimated. This study concludes that the commercial banks profitability in Nepal is mainly influenced by cost per loan assets. The macroeconomic variables are not significant and hence there is no evidence that external forces have impact over bank performance.