The Impact of Exchange Rate Volatility on Bank Profitability: An Empirical Analysis of the Egyptian Banking Sector Before and After the Egyptian Currency Devaluation
Elfaham, K., Youssef, A., Zakey Eldin, K. (2024). The Impact of Exchange Rate Volatility on Bank Profitability: An Empirical Analysis of the Egyptian Banking Sector Before and After the Egyptian Currency Devaluation. EKB Journal Management System, 61(5), 465-496. doi: 10.21608/acj.2024.387244
Karim Elfaham; Amr Youssef; Kenzie Zakey Eldin. "The Impact of Exchange Rate Volatility on Bank Profitability: An Empirical Analysis of the Egyptian Banking Sector Before and After the Egyptian Currency Devaluation". EKB Journal Management System, 61, 5, 2024, 465-496. doi: 10.21608/acj.2024.387244
Elfaham, K., Youssef, A., Zakey Eldin, K. (2024). 'The Impact of Exchange Rate Volatility on Bank Profitability: An Empirical Analysis of the Egyptian Banking Sector Before and After the Egyptian Currency Devaluation', EKB Journal Management System, 61(5), pp. 465-496. doi: 10.21608/acj.2024.387244
Elfaham, K., Youssef, A., Zakey Eldin, K. The Impact of Exchange Rate Volatility on Bank Profitability: An Empirical Analysis of the Egyptian Banking Sector Before and After the Egyptian Currency Devaluation. EKB Journal Management System, 2024; 61(5): 465-496. doi: 10.21608/acj.2024.387244

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

مجلة جامعة الإسکندرية للعلوم الإدارية
Article 13, Volume 61, Issue 5, September 2024, Page 465-496  XML PDF (6.84 MB)
Document Type: المقالة الأصلية
DOI: 10.21608/acj.2024.387244
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Authors
Karim Elfaham1; Amr Youssef2; Kenzie Zakey Eldin3
1Lecturer of Accounting and Finance, College of Management and Technology, Arab Academy for Science, Technology and Maritime Transport
2Vice Dean for Educational Affairs, Graduate School of Business, Arab Academy for Science, Technology and Maritime Transport
3Teaching Assistant, College of Management and Technology, Arab Academy for Science, Technology and Maritime Transport
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.
Keywords
Bank Profitability; Currency Devaluation; Egyptian Banking; Exchange Rate Volatility
References
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