Determinants of and Differences in U.S. and Foreign Commercial Bank Profitability

We study the factors driving the differences in profitability of

large commercial banks in the United States and in EU and

non-EU countries from 2004-2014. Most relevant bank-specific

and macroeconomic variables are reviewed and selected from

the literature. Pooled sample estimation and panel data tests

are conducted associating these factors with Return on Equity.

Our main findings are: macroeconomic factors have more

impact on U. S. banks’ profitability, while size and GDP growth

significantly impact foreign banks’ profitability. In comparing U.

S. and EU banks, we find significant differences in the

explanatory power of size, cash adequacy and real interest rate.

The significance and contribution of this study are from the

advancement of knowledge in the frontier of banking industry

performance research and from the innovative direct

comparison between U. S. and EU banks.

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