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387244

The Impact of Exchange Rate Volatility on Bank Profitability: An Empirical Analysis of the Egyptian Banking Sector Before and After the Egyptian Currency Devaluation

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Last updated: 24 Dec 2024

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Abstract

This study investigated the impact of bank-specific and macroeconomic factors on the profitability of 11 listed banks in Egypt, focusing on the periods before and after the currency devaluation in late 2016. Utilizing a dynamic panel data model and the Generalized Method of Moments (GMM) approach, the research analyzed the persistence of profits and evaluated the determinants of bank profitability from 2012 to 2022. Key findings revealed that the capital adequacy ratio had an insignificant effect on return on assets (ROA) across both periods, aligning with previous literature. However, liquidity risk exhibited a positive significant relationship with ROA post-devaluation, indicating that higher liquidity could enhance profitability under certain economic conditions. Revenue diversification consistently showed a positive impact on ROA, while operational efficiency negatively affected profitability throughout the study period. Additionally, the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model was initially used to measure exchange rate volatility; however, due to a lack of evidence of volatility, the real exchange rate was instead used as an independent variable, which demonstrated a shift from an insignificant to a significantly negative relationship with ROA after devaluation, highlighting increased sensitivity of bank financial performance to exchange rate fluctuations.

DOI

10.21608/acj.2024.387244

Keywords

bank profitability, Currency Devaluation, Egyptian banking, Exchange rate volatility

Authors

First Name

Karim

Last Name

Elfaham

MiddleName

-

Affiliation

Lecturer of Accounting and Finance, College of Management and Technology, Arab Academy for Science, Technology and Maritime Transport

Email

karimfaham@aast.edu

City

-

Orcid

-

First Name

Amr

Last Name

Youssef

MiddleName

-

Affiliation

Vice Dean for Educational Affairs, Graduate School of Business, Arab Academy for Science, Technology and Maritime Transport

Email

amraziz@aast.edu

City

الاسكندرية

Orcid

-

First Name

Kenzie

Last Name

Zakey Eldin

MiddleName

-

Affiliation

Teaching Assistant, College of Management and Technology, Arab Academy for Science, Technology and Maritime Transport

Email

kenziezakey@gmail.com

City

الاسكندرية

Orcid

-

Volume

61

Article Issue

5

Related Issue

50296

Issue Date

2024-09-01

Receive Date

2024-09-11

Publish Date

2024-09-01

Page Start

465

Page End

496

Print ISSN

2682-4183

Online ISSN

2682-4191

Article File

ACJ_Volume 61_Issue 5_Pages 465-496.pdf

PDF . 7.2MB

Link

https://acjalexu.journals.ekb.eg/article_387244.html

Detail API

https://acjalexu.journals.ekb.eg/service?article_code=387244

Order

13

Type

المقالة الأصلية

Type Code

759

Publication Type

Journal

Publication Title

مجلة جامعة الإسکندرية للعلوم الإدارية

Publication Link

https://acjalexu.journals.ekb.eg/

MainTitle

The Impact of Exchange Rate Volatility on Bank Profitability: An Empirical Analysis of the Egyptian Banking Sector Before and After the Egyptian Currency Devaluation

Details

Type

Article

Created At

24 Dec 2024