Impact of Divisional Loan Disbursement on Profitability of Bank: Evidence from Bangladesh

Abstract

Research Originality: Loan disbursing in economically and industrially developed divisions of Bangladesh has profound impact on a bank’s profitability remaining other factors in considerations.
Research Objectives: The purpose of this study is to look at how divisional wise loan disbursement affects the financial stability and profitability of Bangladesh's banking industry.
Research Methods: The analysis is based on panel data from 44 banks, totaling 520 observations over an eighteen-year period from 2005 - 2022. To conduct this study, different models like Ordinary Least Square (OLS), Pooled Ordinary Least Square (POLS), Second Stage Least Square (2SLS) and Generalized Method of Moments (GMM) are utilized.
Empirical Results: The study found that there is favorable association between profit after tax and total revenue in the entire model employed in the study. As opposed, PAT has an unfavorable association with Rangpur division’s loan disbursement and a total asset in the entire model used in the study. In addition, the connections between PAT and loan disbursed in other are mixed but insignificant in nature.
Implications: The empirical implications of this study are - lending economically and industrially developed or underdeveloped divisions of Bangladesh has too delicate relationship with a bank’s profit after tax.