*Assistant Professor, Department of Economics, Osmania University Women's College, Koti, Hyderabad, India
**Research Scholar, School of Economics, University of Hyderabad, Hyderabad, India
Online published on 4 October, 2013.
Using cointegrational analysis, this study investigates the long-run relationship between the return on equity (ROE) and return on asset (ROA) of Indian commercial banks over the period 1991–92 to 2011–12. The empirical results reveal that ROE and ROA are integrated of order I (1) and they are stationary at first order difference and there exists a long-run positive relationship between ROE and ROA in all groups except in the case of Indian private bank group which has a negative coefficient but not statistically significant. Furthermore the Granger causality analysis reveals that there exists a bidirectional causality except in private (new, old and all private) bank group and SBI and its associates group.
