What Determine Commericial Banks’ Profitability?

Although the determinants of profitability for commercial banks have been welldocumented, the comparison of the determinants of profitability between Chinese andAmerican commercial banks is still an empty. This paper empirically analyses thefactors that determine the profitability of Chinese and American commercial banks forthe period of2004–2011. I conclude that the asset quality is the common factor affectsthe profitability for both Chinese and American commercial banks. In addition, I findno evidence about the effect of revenue diversification, or the innovation onprofitability for both Chinese and American commercial banks. Differences betweenthe Chinese and American sample exist in some other factors. Loan proportion (assetportfolio) and market share (monopoly level) only determines the profitability forAmerican commercial banks, and management efficiency and capital adequacy levelhave strong effect on Chinese commercial banks. Overall, this study joins the seekingof the determinants of profitability for commercial banks by comparing differentresult between Chinese and American commercial banks to offer a morecomprehensive understanding on such an issue.