SMART Journal of Business Management Studies

This paper examined the factors of financial profitability for listed Indian public-sector banks, by computing financial leverage (FL) and return on assets (ROA) and the relationship between return on equity (ROE), financial leverage (FL), and return on assets (ROA) in the Indian banking sector. The study employed fixed effects and random-effects models. The study also used panel data regression and adopted Hausman test-correlated random effects to check both panel procedures, which is a common method for detecting a panel effect. When ROE was used as a dependent variable, both FL and ROA were found to be significant for public sector banks. FL had increased profitability in the overall PSB statistics but raised profitability in all the PSB banks in India.