# Table 3. Determinants of the return on assets and the Z-score

The dependant variable in regressions 1-5 is _Return on assets_ , defined as pre-tax profits divided by assets. The dependent variable in regressions 6-10 is _Z-_ _ROA_  _CAR score_ defined as where _ROA_ is return on assets, _CAR_ represents capital assets ratio and _SROA_ stands for standard deviation of return on assets.

_SROA_ _Assets_ are natural logarithm of total assets in constant 2000 US dollars. _Liabilities over GDP_ are bank liabilities divided by GDP. _Big 0.1, Big 0.25, Big0.5_ and _Big 1_ are the dummy variables that equal 1 if the liabilities-to-GDP ratio exceeds 0.1, 0.25, 0.5 and 1 respectively and zero otherwise. _Equity_ is equity divided by assets. _Short term debt_ is customer and short term funding to total interest paying debt. _Investment bank, Non-banking credit institution_ and _Other bank_ are dummy variables that equal 1 for specific bank categories and zero otherwise. _Inflation_ is the annual change in consumer prices. _GDP growth_ is the inflation adjusted growth rate of GDP per capita of the country. _GDP per capita_ is GDP per capita in thousands of constant 2000 dollars. In _Z-score_ regressions variables are mean values over time. Regressions 1-5 include country and time fixed effects and clustering at bank level, and regressions 6-10 include a time fixed effect for the last year of the time series for a specific bank, and clustering at country level. Standard errors are given in parentheses. *, ** and *** denote significance at 10%, <u>5% and 1%.</u>

||(1)|(2)|(3)|(4)|(5)|(6)|(7)|(8)|(9)|(10)|
|---|---|---|---|---|---|---|---|---|---|---|
||ROA|ROA|ROA|ROA|ROA|Z|Z|Z|Z|Z|
|Assets|0.001***|0.001***|0.001***|0.001***|0.001***|-1.344***|-1.462***|-1.483***|-1.357***|-1.234**|
||(0.000)|(0.000)|(0.000)|(0.000)|(0.000)|(0.495)|(0.516)|(0.486)|(0.492)|(0.486)|
|Liabilities over GDP|-0.006***|||||2.282|||||
||(0.002)|||||(2.377)|||||
|Equity|0.100***|0.100***|0.100***|0.100***|0.100***|0.911|0.926|0.704|0.807|0.832|
||(0.018)|(0.018)|(0.018)|(0.018)|(0.018)|(9.232)|(9.454)|(9.474)|(9.242)|(9.052)|
||<br>-0.007*|<br>-0.007*|<br>-0.007*|<br>-0.007*|<br>-0.007|7.620|7.612|7.846*|7.712|7.327|
|Short term debt|(0.004)|(0.004)|(0.004)|(0.004)|(0.004)|(4.714)|(4.747)|(4.689)|(4.698)|(4.787)|
|Investment bank|<br>0.005|<br>0.005|<br>0.005|<br>0.005|<br>0.005|-6.602***|-6.366***|-6.396***|-6.600***|-6.776***|
||(0.004)|(0.004)|(0.004)|(0.005)|(0.004)|(2.046)|(2.062)|(2.043)|(2.046)|(2.066)|
|Non-banking credit<br>institution|-0.007**|-0.008**|-0.008**|-0.007**|-0.007**|3.383|3.631|3.624|3.381|3.142|
||(0.003)|(0.003)|(0.003)|(0.003)|(0.003)|(4.683)|(4.688)|(4.674)|(4.692)|(4.711)|
|Other bank|-0.002|-0.001|-0.001|-0.002|-0.002|8.442|8.612|8.717|8.485|8.267|
||(0.004)|(0.004)|(0.004)|(0.004)|(0.004)|(5.268)|(5.293)|(5.258)|(5.247)|(5.252)|
|Inflation|<br>0.220***|<br>0.219***|<br>0.220***|<br>0.221***|<br>0.220***|1.243|4.142|2.241|1.682|1.746|
||(0.046)|(0.046)|(0.046)|(0.046)|(0.046)|(37.061)|(37.636)|(36.681)|(37.100)|(37.250)|
|GDP growth|<br>0.186***|<br>0.187***|<br>0.186***|<br>0.186***|<br>0.187***|16.941|16.604|17.252|18.854|19.250|
||(0.047)|(0.047)|(0.047)|(0.047)|(0.047)|(40.734)|(40.785)|(40.743)|(40.369)|(39.754)|
|GDP per capita|<br>-0.001|<br>-0.001|<br>-0.001|<br>-0.001|<br>-0.001|0.112|0.129|0.118|0.108|0.107|
||(0.001)|(0.001)|(0.001)|(0.001)|(0.001)|(0.074)|(0.079)|(0.075)|(0.073)|(0.072)|

28