Assessing Bank Success Factors in Bangladesh Through the DuPont Model

Using a random effects panel regression model, this study looks at how bank-specific and macroeconomic factors affect the financial performance of commercial banks, as measured by return on equity (ROE). The results, which are based on 105 observations from 21 banks, show that capital adequacy, management efficiency, and liquidity quality all have a positive and statistically significant effect on ROE. Management efficiency is the most important factor, which shows how crucial useful management is for making banks more profitable. But the quality of assets and earnings doesnt have significant impacts on ROE. The unemployment rate has an enormous detrimental impact on how well banks do, which means that bad job market conditions hurt their profits. Conversely, GDP growth and stock market performance exert no influence. The Breusch–Pagan test confirms the use of a panel model, and the Hausman test confirms that the random effects specification is appropriate. The model explains about 41% of the changes in ROE, which has substantial impacts on banking sector performance for both policy and managerial decisions. The research adds to the body of knowledge about banking and finance by giving real-world examples from a developing economy and giving useful information to bank managers, investors, and policymakers. Strengthening managerial effectiveness and optimizing capital structures can enhance profitability and resilience, particularly amid economic fluctuations and competitive market conditions.