Authors: Speranca Reka, Chrysanthi Balomenou

Title: The impact of capitalization on bank performance: The case of Albania

Abstract

Bank capital is essential in preserving the safety and efficiency of the banking sector in general and serves as a buffer in case of economic turmoils. This paper aims to examine the influence of capital level on the performance of eight commercial banks in Albania. The study utilized quarterly secondary data sourced from the AAB, during the period 2012-2018. It also looks into other bank-specific characteristics of deposit to asset ratio, liquidity, and the size of the bank, that are hypothesized to affect bank performance, as measured by return on assets. The data analysis employed is the Panel Data Method, of the Ordinary Least Square regression method. The findings revealed that banks that have a high level of capital have a severe direct impact on the performance of Albanian banks, and all the other variables are significant as hypothesized.

Keywords: bank performance, capitalization, deposit ratio, liquidity, Albania.