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Publication date: 1 December 2008

Husain AL‐Omar and Abdullah AL‐Mutairi

This paper investigates the impact of bank‐specific determinants on bank’s profitability in the Kuwaiti banking sector for the period 1993‐2005. In order to achieve this purpose…

2067

Abstract

This paper investigates the impact of bank‐specific determinants on bank’s profitability in the Kuwaiti banking sector for the period 1993‐2005. In order to achieve this purpose, a pooled annual data for seven national commercial banks is used to estimate a five variables model by the seemingly unrelated regression technique. The results indicate that equity ratio, loan‐assets ratio, operating expenses ratio, and total assets explain about 67% of the variation in return on assets (ROA). However, the results indicate that loan‐assets ratio, and operating expenses ratio are statistically insignificant. Accordingly, the results stress the need for improving capital adequacy and reducing the ratio of non‐interest assets as a way to improve profitability. The positive impact of the size variable indicates scale efficiency meaning that there is a potential for higher profits as the size of these banks increases.

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Journal of Economic and Administrative Sciences, vol. 24 no. 2
Type: Research Article
ISSN: 2054-6238

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Article
Publication date: 1 December 2007

Husain AL‐Omar

This paper is an attempt to study the factors affecting the behaviour of domestic inflation in Kuwait for the period from 1972 to 2004. To achieve this goal the study used three…

1179

Abstract

This paper is an attempt to study the factors affecting the behaviour of domestic inflation in Kuwait for the period from 1972 to 2004. To achieve this goal the study used three variables believed to influence inflation in a small open economy, namley, foreign inflation, domestic money supply and domestic real GDP. The variables were subjected to a stationarity test which indicates that domestic inflation and money supply are first difference stationary, while foreign inflation and domestic income are stationary in their level. Accordingly, it may be argued that there is no evidence of a long run relationship between domestic inflation and its foreign counterpart. Based on these results the study tested the cointegration between domestic inflation and domestic money supply. The results indicate the exisence of long run relationship between inflation and the broad measure of money supply. The study then moved to examine the possibelity of short run relationships between domestic inflation and the rest of the variables using Granger causality test which indicates the lack of such relationships. Therefore, the study reveals that domestic inflation is influenced mainly by the development of domestic lequidity which overwhelmed the theoritcally expected effect of imported inflation. These results might be caused by two main factors; the first is the economic and political developments during the period of study, and the second is the difference in constructing each measure of inflation. These factors might be responsible for destorting the expected relationship between domestic and imported inflation.

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Journal of Economic and Administrative Sciences, vol. 23 no. 2
Type: Research Article
ISSN: 2054-6238

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