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1 The Effect of Internal Capital Generation Power of Commercial Banks on Profitability- Evidence from Bangladesh Published Date: June 2022 Author Name: Md. Shahidul Islam, Professor, Department of Banking and Insurance, University of Dhaka, Dhaka-1000, Bangladesh Email: sizahid2000@du.ac.bd Rana-Al-Mosharrafa, Corresponding Author. Assistant Professor, Department of Business Administration, Prime University, Dhaka, Bangladesh Email: ranamosharrafa@gmail.com DOI Number: Abstract: Abstract The existence of Banks is vested with the conservation of adequate capital which is worked as cushion in case of liquidity crunch. The intention of this study was to investigate the co-movement of internal capital generation power and profitability in the banking industry in Bangladesh. We considered and analyzed the data of 57 commercial banks for a period of 2007 to 2018 by constructing a dynamic panel model using STATA statistical software. Bank profitability was proxied by return on assets (ROA), return on equity (ROE) and net interest margin (NIM). We considered Fixed Effect(FE) model and Random Effect(RE) model as the baseline estimation for our study. Bank profitability is significantly correlated with bank-specific variables like internal capital generation rate, implicit cost, regulatory capital buffer, and liquidity ratio. We observed less significant influence of industry competition on the profitability of banks. Macroeconomic variables like, inflation and real GDP growth rate have not that much influence on bank profitability. Keywords: Buffer capital, Internal Capital Generation Rate, Basel-III, Capital Conservation, Profitability. JEL Classification: G21, G28 |