Abstract:This paper investigates the effect of bank-specific, government, and macroeconomic indicators on bank profitability in the Kingdom of Saudi Arabia (KSA) over the period from 2009 to 2018.Two-panel data estimators have been utilized:Prais-Winsten and Driscoll-Kraay standard models. The empirical analysis reveals that bank-specific determinants were the key factors in explaining profitability in comparison to government and macroeconomic variables.The assets utilization ratio, credit risk ratio, bank liquidity risk ratio, and investment deposit ratio were found positively and significantly related to the bank’s profitability. In contrast, the bank size variable, and the earning assets ratio were found to have a negative impact on the profitability of bank-specific drivers. Similarly, inflation and the growth of gross domestic product were found in both models to have a negative and significant effect on profitability. On the other hand, government effectiveness was found to have a positive and significant influence on the first specification of both models. The study concluded that Saudi-owned banks should focus more on their asset utilization since it is the most important contributor to their profitability. At the same time, the government of Saudi Arabia must enhance the government effectiveness dimensions to be reflected positively on the Saudi financial system.