Abstract:

The aim of this paper is to investigate the influence of total capital adequacy of Croatian banks on their performance measured with return on assets (ROA), return on equity (ROE) and net interest margin (NIM). The sample covered by the analysis comprises of all Croatian banks that were active in 2016 excluding housing savings banks. Besides total capital adequacy ratio, other independent variables included in the analysis are size of the bank measured on the basis of total assets and leverage. After employing regression analysis, the findings reveal that size of a bank positively and significantly affects its performance measured with ROA and ROE whereas leverage reduces profitability of a bank in terms of NIM. However, it is found that total capital adequacy ratio does not influence performance of Croatian banks.