S z research article

MATERIALS AND METHODS 
 
Data Source: Regarding macroeconomic variables the data 
have been obtained from the central bank of Tanzania, 
Tanzania bureau of statistics, and World Bank’s database. For 
the empirical analysis six variables have been included in this 
research, out of them, ROA is dependent variable and other 
five variables (GDP, Inflation rate, Interest rate, Exchange rate, 
and government debts) are independent variables. 
Model Development: The majority of studies support the 
regression model to estimate the effect of different factors on 
the profitability (Singh Kumar Rajesh & Chaudary Sakshi. 
(2009); Fadzlan & Habibuhhal, 2009; Panayiotis, Sophocles & 
Matthaios, 2008; Deger & Adem, 2011; Andreas & Gabrielle, 
2011). Therefore the following model for Banks’ performance 
is provided in the following equation: 
 
ROA = β
0
+ β
1
GDP + β
2
INFR + β
3
INTR + β
4
EXCR + β
5
DEBTR 
+μ
t
Where; 
ROA = Return on Assets 
GDP = Gross Domestic Product 
INFR = Inflation rate 
INTR = interest rate 
EXCR = Exchange Rate 
DEBTR = Money Supply 
μ
t
= Random Error 
β
0
= The intercept of the equation
β
n
= The change coefficient for independent variables
t = Time
 
Measurement of Variables 
 
Dependent Variable – Performance Measure: The research 
by Rao & Lakew, (2012) captured from Guru et al., (1999) that 
it is a good practice to use ratios to measure the banks’ 
performance rather than using the values due to the fact that, 
ratios are not affected by inflationary pressure. In this context, 
our study use Return on Assets as the dependent variable. 
Return on Assets (ROA) explains on how the bank managers 
are effective in using assets efficiently to earn the return 
(Davydenko, 2011).