Do business strategies vary across firms in the banking industry? New perspectives from the bank size-profitability nexus

Abstract

This study examines the roles of interdependence and policy variations across firms in the causality between bank size and profitability in Nigeria, using second-generation estimators and the Dumitrescu�Hurlin panel Granger non-causality test. The findings support different business strategies and policy variances across banks. Causality is found non-existent in the cases of 11 banks. A unidirectional causality from size to profitability is established in two banks while evidence of a unidirectional causality is established from profitability to bank size in the other two banks. This study concludes that cross-sectional dependence and policy variations across firms matter in the bank size�profitability nexus.