Determinants Influencing Financial Performance of Financial Institutions in Azerbaijan

Abstract

The purpose of this thesis is to examine how financial indicators and macroeconomic variables have affected the performance of financial institutions in Azerbaijan, both during and after the pandemic period. The research aims to identify which factors had the most significant impact on financial institution performance and determine how these factors influenced the industry. The study employed a quantitative research methodology and an explanatory research design to examine the relationships between the independent variables: financial leverage, liquidity, capital adequacy, company size, capital structure, GDP growth rate, inflation, COVID and the dependent variable: return on assets (ROA) which is used to measure profitability. The research was conducted with the following objectives: first, to assess how the leverage impacts the financial performance of financial companies in Azerbaijan; second, to identify how the liquidity influences the financial performance of financial firms in Azerbaijan; third, to examine how capital adequacy affects the financial performance of companies financial companies in Azerbaijan; fourth, to examine how capital structure affects the financial performance of financial companies in Azerbaijan; fifth, to determine the impact of company size on the financial performance of financial firms in Azerbaijan; sixth, to assess the influence of company debt to equity on the financial performance of financial firms in Azerbaijan; seventh, to assess the influence of leverage on the financial performance of financial firms in Azerbaijan and seventh, to identify how the inflation rate influences the financial performance of financial firms in Azerbaijan; eighth, to assess the influence of COVID on the financial performance of financial firms in Azerbaijan and seventh, to identify how the inflation rate influences the financial performance of financial firms in Azerbaijan . In addition, the study utilized an analysis of secondary data covering the time span of 2019 to 2022 and as empirical evidence, the sample consists of 40 financial institutions, most of which were banks then credit agencies, investment, and insurance companies. The timeframe considered in the study consisted of two years characterized by the pandemic period, namely 2020 and 2021, as well as two years surrounding the pandemic, namely the pre-pandemic year of 2019 and the post-pandemic year of 2022.