scholarly journals The impact of discretionary loan loss provision of sharia financing on financial performance

2019 ◽  
Vol 14 (4) ◽  
pp. 34-41
Author(s):  
Z Zulfikar ◽  
Wahyuni Sri
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Structural Equation ◽  
Equation Modeling ◽  
Loan Loss ◽  
Return On Assets ◽  
Operating Income ◽  
Loan Loss Provision ◽  
Loan Loss Provisions ◽  
The Impact

This study aims to investigate the role of discretionary loan loss provision of sharia financing on the Islamic commercial banks’ financial performance in Indonesia. Partial Least Squares-Structural Equation modeling (PLS-SEM) is used to examine the relationship between loan loss provisions and financial performance in 13 Islamic commercial banks for 4.5 years. The analysis of the outer model shows that the probability of default and loss given default are determinants of loan loss provision, while financial performance is determined by return on assets, non-performing financing, net operating margin, and operating costs on operating income. The results of this study indicate that loan loss provisions have a direct effect on financial performance. Further investigation shows that the return on sharia financing contributes to increasing the impact of loan loss provisions on financial performance (indirect influence). The findings contribute to the literature by showing that discretionary loan loss provision can occur in sharia financing. The study is very important in terms of awareness of management behavior related to financial performance. The study has implications for management policies related to the prerequisites of potential clients.

scholarly journals Did Asset Securitization Affect the Banking Financial Performance?

2021 ◽  
Vol 6 (1) ◽  
pp. 6-10
Author(s):  
Gos Ishak ◽  
Farah Margaretha Leon ◽  
Bahtiar Usman
Keyword(s):  
Financial Performance ◽  
Panel Data Analysis ◽  
Future Research ◽  
Asset Securitization ◽  
Loan Loss ◽  
Return On Assets ◽  
Variable Effect ◽  
Loan Loss Provisions ◽  
Asset Backed Securities ◽  
The Impact

This study investigates the impact of asset securitization on banking financial performance. The authors examined the effect between the independent variables (Asset-backed securities (ABS), Loan Loss Provisions (LLP), and Size), and the dependent variable (Return on Assets (ROA), Size has a moderating variable effect on Return on Assets. The banks improved profitability (ROA) by selling their loans receivable portfolio to the capital market to get liquidity. Furthermore, the bank significantly changed the role of acting as intermediaries between borrowers and depositors for the last decade. The authors used a sample of 12 commercial banks from Southeast Asian Countries and the regression model used for panel data analysis from 1998 to 2018. The results show that Asset-backed securities have found a significant positive Return on Assets. However, some empirical evidence found that asset securitization increases Profitability decreases Loan Loss Provisions and reduces bank securitization’s default risk. For future research, it is recommended to explore several variables to get a better result bank’s financial performance, such as Return on Equity, Debt to Equity Ratio, and Net Interest Margin.

scholarly journals Impact of Credit Risk Management Systems on the Financial Performance of Commercial Banks in Uganda

2018 ◽  
Vol 66 (6) ◽  
pp. 1627-1635
Author(s):  
Isah Serwadda
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Commercial Banks ◽  
Risk Measures ◽  
Secondary Data ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Loan Loss Provisions ◽  
The Impact

The paper is set to analyse the impact of credit risk management on the financial performance of commercial banks in Uganda for a period of 2006–2015 using panel data for a sample of 20 commercial banks. The study employs return on assets as a dependent variable and non‑performing loans, growth in interest earnings and loan loss provisions to total loans as credit risk measures. Secondary data is sourced from the Bank scope database, African development bank and the central bank of Uganda. The study employs descriptive statistics, regressions and correlation analysis. Regression models are to estimate the magnitude of significance of credit risk management on the performance of commercial banks in Uganda. The study revealed that credit risk management impacts on the performance of Ugandan commercial banks. The results portrayed that banks’ performance was inversely influenced by non‑performing loans which may expose them to large magnitudes of illiquidity and financial crisis. Thus given such results, the researcher recommends that banks need to enhance their credit risk management techniques not only to earn more profits but also to maintain a qualitative asset portfolio and attention be given to non‑performing loans, loan loss provision to total loans and growth in interest earnings that were found to be significant. Banks need to design appropriate credit policies that must handle all necessary conditions before advancing credit to their customers and also develop strong credit administration committees and teams that must conduct appropriate and sound loan appraisal evaluations and which must also monitor the loans throughout the required processes right from extending a loan to a customer up to the completion of loan repayments so as to mitigate credit risks.

scholarly journals Loan Loss Provision and the Profitability of Commercial Banks: Evidence from Jordan

2016 ◽  
Vol 11 (12) ◽  
pp. 242 ◽  
Author(s):  
Mohammad Alhadab ◽  
Saba Alsahawneh
Keyword(s):  
Commercial Banks ◽  
Negative Impact ◽  
Stock Exchange ◽  
Negative Consequences ◽  
Loan Loss ◽  
Return On Assets ◽  
Return On Equity ◽  
Loan Loss Provision ◽  
Amman Stock Exchange ◽  
The Impact

<p>The purpose of this study is to examine the impact of loan loss provision on the profitability of Jordanian commercial banks. While the impact of loan loss provision on the profitability of banks has been examined by prior research, this study is the first to examine this relationship using Jordanian data. By examining a Jordanian sample of 13 banks that listed on Amman Stock Exchange (ASE) over the period 2004-2014, this study provides the first evidence that loan loss provision has a negative impact on the profitability of Jordanian commercial banks. This evidence suggests that Jordan banks adjust their loan loss provision due to several motives and, this in turn, leads to negative consequences for their profitability. Return on assets (ROA) and return on equity (ROE) are employed as a proxy of the profitability in this study. </p>

CREDIT RISK AND COMMERCIAL BANKS’ PERFORMANCE IN NIGERIA: A PANEL MODEL APPROACH

2012 ◽  
Vol 02 (02) ◽  
pp. 31-38 ◽  
Author(s):  
KOLAPO T. Funso ◽  
AYENI R. Kolade ◽  
OKE M. Ojo
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Commercial Banking ◽  
Loan Loss ◽  
Return On Assets ◽  
Cross Sectional ◽  
Loan Loss Provision ◽  
Panel Model ◽  
Percent Increase ◽  
Credit Analysis

The study carried out an empirical investigation into the quantitative effect of credit risk on the performance of commercial banks in Nigeria over the period of 11 years (2000-2010). Five commercial banking firms were selected on a cross sectional basis for eleven years. The traditional profit theory was employed to formulate profit, measured by Return on Asset (ROA), as a function of the ratio of Non-performing loan to loan & Advances (NPL/LA), ratio of Total loan & Advances to Total deposit (LA/TD) and the ratio of loan loss provision to classified loans (LLP/CL) as measures of credit risk. Panel model analysis was used to estimate the determinants of the profit function. The results showed that the effect of credit risk on bank performance measured by the Return on Assets of banks is cross-sectional invariant. That is the effect is similar across banks in Nigeria, though the degree to which individual banks are affected is not captured by the method of analysis employed in the study. A 100 percent increase in non-performing loan reduces profitability (ROA) by about 6.2 percent, a 100 percent increase in loan loss provision also reduces profitability by about 0.65percent while a 100 percent increase in total loan and advances increase profitability by about 9.6 percent. Based on our findings, it is recommended that banks in Nigeria should enhance their capacity in credit analysis and loan administration while the regulatory authority should pay more attention to banks’ compliance to relevant provisions of the Bank and other Financial Institutions Act (1999) and prudential guidelines.

scholarly journals The Embellishment of Bottom Line through Hyperbole of Accrued Earnings: A Case of Deliberate Earnings Management of a Non-bank Financial Institution Enlisted in Dhaka Stock Exchange and Chittagong Stock Exchange

2016 ◽  
Vol 2 (4) ◽  
pp. 42
Author(s):  
Md. Thasinul Abedin
Keyword(s):  
Financial Institutions ◽  
Positive Impact ◽  
Financial Institution ◽  
Stock Exchange ◽  
Loan Loss ◽  
Accounts Receivable ◽  
Loan Loss Provision ◽  
Loan Loss Provisions ◽  
Accrued Earnings ◽  
The Impact

The study has tried to find out the key parameters through which a non-bank financial institution can embellish its earnings. The study has found that loan loss provisions increases in line with the increase in loan and advances and interest suspense. Moreover, non-bank financial institutions always report other assets except accounts receivable figure which foreshadows an existence of deliberate inflation of earnings. The study has found a positive impact of total loan loss provisions and interest suspense on accrued income, a clear message that non-bank financial institutions always report more accrued earnings to safeguard their profit. Increase in accrued income in line with total loan loss provision and interest suspense is also validated by increase in accrued income with respect to other assets except accounts receivable figure even though the impact of other assets on accrued income is insignificant at 5% level, an accounting channel through which excess other assets except accounts receivable would be inflated for excess increase in accrued income. The study has deduced that other assets except accounts receivable is a reserve bank for discretionary inflation of earnings even though it is insignificant. The study has used time series monthly data of International Leasing and Financial Services Limited, a non-bank financial institution from 2009-2015 reported in the Statement of NBDC sent to Bangladesh Bank each month. Two-time series models have been used in this study. The first model has tried to find out the impact of loan and advances, interest suspense, and other assets except accounts receivable on total loan loss provision. In the first model, there is a significant impact of loan and advances, interest suspense, and other assets except accounts receivable on total loan loss provision. The second model has tried to discern the impact of total loan loss provision, interest suspense, and other assets on accrued income along with other independent variables namely-loan and advances, total fixed assets, and operating income. The study has found a significant positive impact of total loan loss provision and interest suspense on accrued income and insignificant impact of other assets except accounts receivable on accrued income. For both models, there is no long-run relationship among the variables.

scholarly journals Credit Management and Issues of Bad Debts: An Empirical Study of Listed Deposit Banks in Nigeria

2020 ◽  
pp. 32-49
Author(s):  
Peter E. Ayunku ◽  
Akwarandu Uzochukwu
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Random Effect ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Data Set ◽  
Credit Management ◽  
Loan Loss Provision ◽  
The Impact

This study examines the impact of credit management on firm performance amidst bad debts, among Nigerian deposit banks. Five hypotheses were formulated following the dependent variables of Return on Asset and Tobin Q. The independent variables employed for this study include: Loan Loss Provision, Loan to Deposit Ratio, Equity to Asset Ratio, and Loan Write off. This study is based on ex-post facto research design and employed a panel data set collected from fourteen (14) commercial banks over six years ranging from 2014 to 2019 financial year. We analyzed the data set using descriptive statistics, correlation and Ordinary Least Square Regression Technique. The random effect models established that non-performing loan, loan loss provision and equity to asset impact significantly on banks’ performance in both Return on Asset and Tobin-Q models. This suggests that the sampled banks need to establish efficient arrangements to deal with credit risk management. In all, credit risk management indicators considered in this research are important variables in explaining the profitability of Nigerian commercial banks. However, based on the outcome from the empirical analysis, the study carefully recommends that investors and shareholders in these banks should be aware of the possible use of provisions for losses on non-performing loans by managers for smoothening of profits. The shareholders specifically should be ready to meet optimal agency costs to reduce the manager's information asymmetry by hiring competent internal and external auditors.

scholarly journals Does environmental performance leverage the impact of environmental strategy on financial performance? A focus on third-party logistic providers

2022 ◽  
Vol 10 (1) ◽  
pp. 29-36 ◽  
Author(s):  
Quang-Huy Ngo
Keyword(s):  
Financial Performance ◽  
Environmental Performance ◽  
Structural Equation ◽  
Partial Least Square ◽  
Least Square ◽  
Mediating Effect ◽  
Third Party ◽  
Equation Modeling ◽  
Environmental Strategy ◽  
The Impact

Although prior studies draw upon natural resource-based views, environmental strategy permits competitive advantages, and as such, gains financial performance. However, empirical results are mixed. To shed light on this issue, this study proposes that environmental performance mediates the link between environmental strategy and financial performance. Data were collected from 175 third-party logistic providers currently operating in Vietnam to test the hypotheses. Partial least square structural equation modeling was borrowed to test the data. The results reveal environmental performance partially mediates the link between environmental strategy and financial performance. By considering the mediating effect, this study contributes to the literature by addressing the intervening mechanism of environmental performance on the inconclusive relationship between environmental strategy and financial performance. Besides, this study also extends prior studies by borrowing a concept of environmental strategy, which captures the extent of organizations pursuing this strategy, to explain how and why pursuing this strategy permits environmental and financial performance.

scholarly journals Complexity and the triple bottom line: an information-processing perspective

2017 ◽  
Vol 37 (9) ◽  
pp. 1142-1163 ◽  
Author(s):  
Frank Wiengarten ◽  
Muhammad Usman Ahmed ◽  
Annachiara Longoni ◽  
Mark Pagell ◽  
Brian Fynes
Keyword(s):  
Information Processing ◽  
Financial Performance ◽  
Structural Equation ◽  
Negative Impact ◽  
Triple Bottom Line ◽  
Structural Equations ◽  
Equation Modeling ◽  
Bottom Line ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to empirically investigate the impact of complexity on the triple bottom line by applying information-processing theory. Specifically, the paper assesses the impact of internal manufacturing complexity on environmental, social, and financial performance. Furthermore, the paper assesses the moderating role of connectivity and shared schema in reducing the potential negative impact of complexity on performance. Design/methodology/approach Multi-country survey data collected through the Global Manufacturing Research Group were utilized to test the hypotheses. The authors used structural equation modeling to test the measurement and initial structural model. Furthermore, to test the proposed moderating hypotheses, the authors applied the latent moderated structural equations approach. Findings The results indicate that while complexity has a negative impact on environmental and social performance, it does not significantly affect financial performance. Furthermore, this negative impact can be reduced, to some extent, through connectivity; however, shared schema does not significantly impact on the complexity-performance relationship. Originality/value This study presents a comprehensive analysis of the impact of complexity on sustainability. Furthermore, it provides managerial applications as it proposes specific tools to deal with the potential negative influences of complexity.

scholarly journals Partnership-Based Supply Chain Collaboration: Impact on Commitment, Innovation, and Firm Performance

2019 ◽  
Vol 11 (2) ◽  
pp. 449 ◽  
Author(s):  
Nina Shin ◽  
Sun Park ◽  
Sangwook Park
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Structural Equation ◽  
Resource Dependence ◽  
Resource Dependence Theory ◽  
Equation Modeling ◽  
Supply Network ◽  
Supply Chain Collaboration ◽  
The Impact ◽  
The Relationship

With increasing numbers of nodes and links in supply network relationships, understanding partnership management and the required level of collaboration is important for sustainable supply network alignment. This study explores the impact of partnership orientation on partnership commitment and firm performance using a model based on social capital theory and resource dependence theory. It aims to understand the appropriate partnership orientation for the desired level of commitment and firm performance, including innovation, operational, and financial performance. Using a survey of 423 respondents representing three different partnership structure types (supplier, buyer, and parallel-aligned firms’ perspectives), the relationship between partnership orientation and commitment in enhancing firm performance is investigated using structural equation modeling. Additional analysis identifies the moderating role of commitment and investment exchange on performance. The findings show that positive relationships between both investment and contractual-based partnership orientation positively contribute to partnership commitment, but the direct association between partnership commitment and firm performance type varies by partnership structure. Furthermore, (i) investment exchange level moderates the relationship between commitment and innovation and operational performance regardless of partnership structure type, (ii) negative investment exchange signals higher firm performance from the buyer firm’s perspective, and (iii) positive investment exchange is absolutely necessary for financial performance from the supplier firm’s perspective.

scholarly journals Mengukur Kinerja Pra Merger Tiga Bank Umum Syariah dan Pengaruhnya Terhadap Return on Asset

2021 ◽  
Vol 8 (1) ◽  
pp. 70-78
Author(s):  
Hanif Artafani Biasmara ◽  
Pande Made Rahayu Srijayanti
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Third Party ◽  
Return On Assets ◽  
Financial Reports ◽  
Operating Income ◽  
Performance Variables ◽  
Capital Adequacy Ratio

Abstrak  - Pada tahun 2020, telah ditetapkan pelaksanaan merger antara tiga Bank Umum Syariah yang merupakan anak perusahaan dari Bank Badan Usaha Milik Negara (BUMN). Dimana ketiga bank tersebut adalah PT Bank Syariah Mandiri, PT Bank BRIsyariah, Tbk, dan PT Bank BNI Syariah. Penelitian ini dilakukan untuk mengukur kinerja keuangan ketiga bank tersebut sebelum dilakukannya merger dan pengaruhnya terhadap Return on Asset (ROA). Dalam penelitian ini, kinerja keuangan akan diukur dengan variabel Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), Non Performing Financing (NPF), Biaya Operasional dan Pendapatan Operasional (BOPO), dan persentase pertumbuhan Dana Pihak Ketiga (DPK). Data yang digunakan dalam penelitian ini merupakan data sekunder yang diperoleh melalui laporan keuangan tahunan dari masing-masing bank dengan periode tahun 2015-2019. Dimana data diolah dan dianalisis dengan menggunakan Regresi Linear Data Panel melalui perangkat lunak Stata 16. Kinerja ketiga Bank Umum Syariah sebelum dimerger menunjukkan hasil yang baik. Selama lima tahun terakhir CAR dan NPF memiliki kinerja yang memuaskan. FDR dan BOPO berada sedikit melenceng dari batas minimum ataupun maksimum. Berikutnya, pertumbuhan DPK rata-rata sebesar 15, 89333%. Seluruh variabel kinerja bank tersebut setelah dilakukan pengolahan data, menunjukkan bahwa variabel CAR, FDR, NPF, BOPO, dan pertumbuhan DPK bersama-sama memiliki pengaruh signifikan terhadap ROA. Sedangkan secara parsial, CAR, NPF, dan pertumbuhan DPK tidak memiliki pengaruh signifikan terhadap ROA. Tetapi FDR dan BOPO memiliki pengaruh signifikan terhadap ROA. Dimana melalui penelitian ini diharapkan dapat menjadi pertimbangan bagi PT Bank Syariah Indonesia Tbk dalam upaya memperoleh kinerja yang baik dan pertumbuhan profitabilitas yang tinggiKata Kunci: CAR, FDR, NPF, BOPO, Pertumbuhan DPK, ROA, Bank Umum Syariah Abstract - In 2020, the implementation of a merger between three Islamic Commercial Banks which are subsidiaries of the State-Owned Enterprise (BUMN) Bank has been determined. Where the three banks are PT Bank Syariah Mandiri, PT Bank BRIsyariah, Tbk, and PT Bank BNI Syariah. This research was conducted to measure the financial performance of the three banks before the merger, and their effect on Return on Assets (ROA). In this study, financial performance will be measured by the variable Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR), Non-Performing Financing (NPF), Operational Costs and Operating Income (OEOI), and the percentage growth in Third Party Funds (TPF).The data used in this study is secondary data obtained through the annual financial reports of each bank for the period 2015-2019. Where the data is processed and analyzed using Linear Data Panel regression through Stata 16. The performance of the three Islamic Commercial Banks before the merger showed good results. Over the last five years, CAR and NPF have performed satisfactorily. FDR and BOPO have slightly deviated from the minimum or maximum limits. Next, the growth in deposits was an average of 15.89333%. All of these bank performance variables, after data processing, show that the variables CAR, FDR, NPF, OEOI, and TPF growth together have a significant effect on ROA. Meanwhile, partially, CAR, NPF, and TPF growth have not a significant effect on ROA. However, FDR and BOPO have a significant effect on ROA. Where through this research it is hoped that in the future it can be a consideration for PT Bank Syariah Indonesia, Tbk to obtain good performance and high profitability growth.Keywords: CAR, FDR, NPF, OEOI, TPF Growth, ROA, Islamic Commercial Banks

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