Does Commercial Banks Presence Enhance Profitability in Ghana?

2018 ◽  
Vol 19 (6) ◽  
pp. 1449-1461
Author(s):  
Kwame Mireku ◽  
Emmanuel Akomeah Sakyi ◽  
Joseph Akadeagre Agana
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Cost Management ◽  
Capital Adequacy ◽  
Bank Branches ◽  
Positive Effects ◽  
Management Quality ◽  
Specific Factors ◽  
Using Data ◽  
Macroeconomic Environment

The last few decades have witnessed an increasing drive for bank presence across Ghana due to commercial banks appetite for increased deposit mobilization. Although bank presence is crucial in savings mobilization for economic growth and development, its relationship with the financial performance of the banks is unknown within the context of a developing economy. The current study therefore investigates the implications of banks presence on the financial performance of the commercial banks in Ghana, using data from 2007 to 2013. Panel regression is used for the estimation. Our findings show that increasing banks presence does not necessarily translate into profitability of the commercial banks. A plausible deduction from the results indicate that growth in bank presence (bank branches) cannot improve alternate distribution channels of banks operations due to the strong competition in the financial sector, cost of operations and low savings culture in Ghana. The results also reveal that market concentration, cost management, capital adequacy and activity mix contribute positively to the financial performance of commercial banks in Ghana but not credit risk and management quality. We also document that the macroeconomic environment has positive effects on the financial performance of commercial banks. Following the above, we recommend that commercial banks should pay critical attention to bank specific factors such as cost management and capital adequacy ratios. Moreover, managers of the economy should strive to create a conducive and stable environment to increase their penetration in Ghana.

scholarly journals Effect of Credit Risk Management on Financial Performance Of Nepalese Commercial Banks

2022 ◽  
Vol 10 (1) ◽  
pp. 19-30
Author(s):  
Dr. Guna Raj Chhetri
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Significant Relationship ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Negative Effects ◽  
Management Quality ◽  
Capital Adequacy Ratio

The main purpose of this study is to investigate the effect of credit risk on the financial performance of commercial banks in Nepal. The panel data of seventeen commercial banks with 85 observations for the period of 2015 to 2020 have been analyzed. The regression model revealed that non – performing loan (NPLR) has negative and statistically significant impact on financial performance (ROA).Capital adequacy ratio (CAR) and bank size (BS) have negative and statistically no significant impact on financial performance (ROA). Credit to deposit (CDR) has positive but no significant relationship with the financial performance (ROA) and the study concluded that the management quality ratio (MQR) has positive and significant relationship with the financial performance (ROA) of the commercial banks in Nepal. The study recommends that, it is fundamental for Nepalese commercial banks to practice scientific credit risk management, improve their efficacy in credit analysis and loan management to secure as much as possible their assets, and minimize the high incidence of non-performing loans and their negative effects on financial performance.

scholarly journals The effect of credit risk management and bank-specific factors on the financial performance of the South Asian commercial banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Asima Siddique ◽  
Muhammad Asif Khan ◽  
Zeeshan Khan
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
South Asian ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Content Type ◽  
Specific Factors ◽  
Bank Specific Factors

PurposeAmong all of the world's continents, Asia is the most important continent and contributes 60% of world growth but facing the serving issue of high nonperforming loans (NPLs). Therefore, the current study aims to capture the effect of credit risk management and bank-specific factors on South Asian commercial banks' financial performance (FP). The credit risk measures used in this study were NPLs and capital adequacy ratio (CAR), while cost-efficiency ratio (CER), average lending rate (ALR) and liquidity ratio (LR) were used as bank-specific factors. On the other hand, return on equity (ROE) and return on the asset (ROA) were taken as a measure of FP.Design/methodology/approachSecondary data were collected from 19 commercial banks (10 commercial banks from Pakistan and 9 commercial banks from India) in the country for a period of 10 years from 2009 to 2018. The generalized method of moment (GMM) is used for the coefficient estimation to overcome the effects of some endogenous variables.FindingsThe results indicated that NPLs, CER and LR have significantly negatively related to FP (ROA and ROE), while CAR and ALR have significantly positively related to the FP of the Asian commercial banks.Practical implicationsThe current study result recommends that policymakers of Asian countries should create a strong financial environment by implementing that monetary policy that stimulates interest rates in this way that automatically helps to lower down the high ratio of NPLs (tied monitoring system). Liquidity position should be well maintained so that even in a high competition environment, the commercial is able to survive in that environment.Originality/valueThe present paper contributes to the prevailing literature that this is a comparison study between developed and developing countries of Asia that is a unique comparison because the study targets only one region and then on the basis of income, the results of this study are compared. Moreover, the contribution of the study is to include some accounting-based measures and market-based measures of the FP of commercial banks at a time.

scholarly journals Modeling the Effect of Bank Specific Factors on Financial Performance of Commercial Banks in Nigeria: Panel Data Regression Approach

2021 ◽  
Vol 28 (1) ◽  
pp. 40-47
Author(s):  
Y. Yakubu ◽  
S.M. Egopija
Keyword(s):  
Panel Data ◽  
Financial Performance ◽  
Commercial Banks ◽  
Management Quality ◽  
Panel Data Regression ◽  
Data Regression ◽  
Regression Approach ◽  
Specific Factors ◽  
Key Indicators ◽  
Bank Specific Factors

Periodic checking and evaluation of financial performance of the banking sector is a way of sustaining the development of a nation’s economy. The key indicators of the banks’ financial performance are their return on assets (ROA) and return on equity (ROE). A bank’s financial performance is affected by some specific factors like capital adequacy ratio (CAR), credit risk (CRISK), management quality, liquidity ratio (LIQ.RAT.) and bank size. This work first compares average financial performance of some sampled commercial banks in Nigeria (UBA, GTB, ZENITH, FIRST, and ACCESS banks) based on the key indicators and the bank specific factors. It then models the effect of these factors on the overall financial performance of the sampled banks using panel data regression approach. The results showed that the GTB had the highest average ROA, ROE and CAR throughout the period under review while Zenith bank was the best in terms of credit risk, management quality and liquidity ratio. The fitted ROA model accounted for 83% of the total variability in the data and revealed that CAR, CRISK, and LIQ.RAT were significant at both 1% and 5% levels while the ROE model accounted for 69% and revealed that CRISK and LIQ.RAT were significant. Keywords: Financial Performance, Commercial Banks, Evaluation, Panel Data, Economy

Financial Performance Analysis of Nepalese Financial Institutions in the Framework of CAMEL

2020 ◽  
Vol 9 (1) ◽  
pp. 56-74
Author(s):  
Kedar Raj Gautam
Keyword(s):  
Financial Performance ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Positive Relationship ◽  
Negative Relationship ◽  
Capital Adequacy ◽  
Significant Positive Relationship ◽  
Management Efficiency ◽  
Significant Negative Relationship ◽  
Development Banks

Analysis of financial performance to detect financial health of finance companies, development banks and commercial banks as a whole is a less explored research in Nepalese context. This paper, therefore, attempts to examine the financial performance and factors influencing financial performance of Nepalese financial depositary institutions in the framework of CAMEL. This study is based on descriptive cum casual research design. This study is based on secondary data which was extracted from various publications published by Nepal Rastra Bank such as banking and financial statistics, financial stability report and bank supervision report. All commercial banks, development banks, and finance companies are taken as population of the study. The study deals with financial performance analysis of entire population covering five years from 2014/15 to 2018/19. The variables such as capital adequacy, assets quality, management efficiency, earnings and liquidity are used to analyze financial performance. Descriptive as well as pooled regression analysis was used to assess the relationship among the variables. Descriptive analysis shows that financial institutions in each category meet NRB standard regarding capital adequacy. On the basis of capital adequacy and earnings, finance companies stand at first, on the basis of assets quality, development banks stand at first and on the basis of management efficiency, commercial banks stand at first. Finance companies store high liquidity as compared to other class financial institutions. The regression analysis shows that return on assets, ROA has significant positive relationship with capital adequacy and ROE but ROA has significant negative relationship with assets quality. However, return on equity, ROE has significant positive relationship with assets quality and ROA but ROE has significant negative relationship with capital adequacy. Capital adequacy and assets quality play major role to maximize ROA and ROE of financial institutions.

scholarly journals Loan efficiency in the Visegrad countries

2015 ◽  
Vol 65 (s1) ◽  
pp. 161-181 ◽  
Author(s):  
Kristína Kočišová
Keyword(s):  
Data Envelopment Analysis ◽  
Financial Markets ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Data Envelopment ◽  
Average Efficiency ◽  
The Past ◽  
Lending Decisions ◽  
Using Data ◽  
Visegrád Countries

Financial markets in the Visegrad countries have undergone several changes in lending business over the past decade. This study evaluates the efficiency of the largest commercial banks by focusing on their lending decisions using Data Envelopment Analysis. First, we define the concept of efficiency, then we analyse loan efficiency between 2007 and 2013. The results indicate that average efficiency declined. When we studied the loan efficiency in each country separately, we found that Hungarian banks had the lowest efficiency while the highest efficiency was achieved mainly by Czech banks. The results of the study also suggest that efficiency is positively related to profitability and capital adequacy, and negatively related to the share of non-performing loans, which confirms the bad management hypothesis.

scholarly journals Does Credit Risk Management affect the Financial Performance of Commercial Banks in Kosovo?

2018 ◽  
Vol 7 (2) ◽  
pp. 49-57
Author(s):  
Rrustem Asllanaj
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Multiple Regression ◽  
Commercial Banks ◽  
Multiple Regression Model ◽  
Capital Adequacy ◽  
Regression Equations ◽  
Credit Risk Management ◽  
The Impact

This study analyses the impact of credit risk management on financial performance of commercial banks in Kosovo, and comparing the relationship between the determinants of credit risk management and financial performance by using CAMEL indicators. Panel data of 85 observations from 2008 to 2012 of ten commercial banks was analysed using multiple regression model. Findings through multiple regression analysis are presented in forms of tables and regression equations. The study also elaborates whether capital adequacy, asset quality, management efficiency, earnings and liquidity have strong or weak relationship with financial performance of commercial banks. The study concludes that CAMEL model can be used as a system of assessment and rating of credit risk management by commercial banks in Kosovo.

scholarly journals The commercial banks’ credit risk efficiency: Empirical evidence from Kosovo

2021 ◽  
Vol 8 (2) ◽  
pp. 240-254
Author(s):  
Arbana Sahiti ◽  
Arben Sahiti
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Data Envelopment Analysis Model ◽  
Negative Consequences ◽  
Analysis Model ◽  
Tobit Regression ◽  
Credit Risk Management ◽  
Positive Effects

Commercial banks' credit risk management is a function that focuses on events that may affect the achievement of objectives. Improper management will result in negative consequences or results. Therefore, banks usually pay more attention to events with a higher probability and impact of a direct loss of revenue and capital than events that may result in positive effects. This research adopts secondary data and seeks to analyze credit risk management of commercial banks in Kosovo through a developed DEA (Data Envelopment Analysis) model. The study covers seven commercial banks in Kosovo for the period 2008-2016 and uses Tobit regression to determine credit risk efficiency. The estimation results show a statistically significant positive relationship between bank efficiency, capital adequacy, and loans.  Moreover, the study found that banks' efficiency factors, including profitability, deposits, costs, banks size, GDP growth, and inflation, are not statistically significant.

scholarly journals Determinants of Financial Performance of Nepalese Commercial Banks: Evidence from Panel Data Approach

2020 ◽  
Vol 32 (2) ◽  
pp. 45-59
Author(s):  
Purna Man Shrestha
Keyword(s):  
Panel Data ◽  
Financial Performance ◽  
Commercial Banks ◽  
Fixed Effect Model ◽  
Fixed Effect ◽  
Lagrangian Multiplier ◽  
Effect Model ◽  
Specific Factors ◽  
The Impact ◽  
Bank Specific Factors

The impact of bank specific factors on the financial performance of Nepalese commercial banks is analyzed in this paper. The financial performance is measured by using return on assets (ROA). Similarly, managerial efficiency (ME), liquidity (LIQ), credit risk (CR), assets quality (AQ) and operational efficiency (OE) is used as proxy of bank specific factors. This study used panel data of 17 commercial banks for the period of 2010/11 to 2017/18. Breusch and Pagan Lagrangian multiplier test showed that Pooled Regression model is not appropriate and Hausman test concluded that Fixed Effect model is appropriate rather than Random Effect model. Using the Fixed Effect model; this study concludes that bank specific factors have significant impact on financial performance of Nepalese commercial banks. Finally, this study reveals that ME, AQ and OE have significant positive impact, and CR has negative impact on the financial performance of Nepalese commercial banks.  

scholarly journals Financial performance after the Spanish banking reforms: A comparative study of 19 commercial banks

2014 ◽  
Vol 4 (2) ◽  
pp. 70-82 ◽  
Author(s):  
Pison F. Irene ◽  
Cibrán F. Pilar ◽  
Lious Agbor Tabot Ntoung
Keyword(s):  
Financial Crisis ◽  
Financial Performance ◽  
Commercial Banks ◽  
Positive Impact ◽  
Capital Adequacy ◽  
Research Database ◽  
Banking Reforms ◽  
The 2008 Financial Crisis ◽  
Asset Quality ◽  
The Impact

A diagnostic review of the Spanish financial system during the 2008 financial crisis reveals the emergency need for banking reform in the sector. In an attempt to evaluate the impact of the Spanish reform, the present study examines the bank´s performance before/after the reform was adopted, using data of 19 Spanish commercial banks extracted from the Global Vantage research database (Standard and Poor’s) over the period 2006 to 2013. This study uses multivariable regression method to investigate the impact of the CAMELS rating system: capital adequacy, asset quality, management quality, liquidity and sensitivity to market risks on the bank´s performance such as earnings efficiency. The time-line of the study is essential because it helps us to determine the financial performance of Spanish commercial banks before the banking reforms during the financial crisis and an important set in terms of mergers and acquisition in the banking industry. The empirical results have found strong and positive evidence that Capital Adequacy, Management Capacity, Liquidity and Sensitivity to Market Risk are useful predictors of banks performance (earnings efficiency), thus, any reform pilot toward this banking indicators will eventually have a positive impact on banking performance. Base on the present study, the Spanish reform was so vital for better banking performance. Therefore, this study serves not only to academics but also to policy makers.

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