scholarly journals Political Connection and Credit Risk Management: Its Effect on Bank’s Performance

2019 ◽  
Vol 4 (3) ◽  
pp. 112-121
Author(s):  
Fahmi Setiadi ◽  
Y Anni Aryani
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Annual Report ◽  
Stock Exchange ◽  
Growth Period ◽  
Political Connection ◽  
Credit Risk Management ◽  
Credit Growth ◽  
Banking Institution

The present study examines the effect of political connection and credit risk management on Indonesian bank’s performance during the declining credit growth period. The present study involved 258 banks that registered in the Indonesian Stock Exchange from 2012 to 2017 as the sample of the study. Company political connection was measured using headcount index, credit risk management was measured by its credit risk value or NPL, and the company financial performance was measured based on Return on Asset. The data of the study were obtained from banks and Indonesian Stock Exchange annual report. The result of regression analysis showed that Indonesian bank’s political connection positively and significantly affected financial performance, and credit risk significantly affected bank’s financial performance. This result implied that banks in Indonesia needs political connection and improve their credit risk management in order to improve their financial performance during the declining credit growth period. The present study reveals a new fact that in order to maintain financial performance during the declining credit growth period, banking institution may utilize their political connection and improve their credit risk management. Keywords: Political Connection, Credit Risk Management, Bank Performance, Credit Growth

scholarly journals Credit Risk Management and Its Influence on the Financial Performance of Banks: A Study of Selected Banks in Nigeria

2018 ◽  
pp. 1-11
Author(s):  
Oyedele Oloruntoba ◽  
Adeyemi, Adewumi Zaid ◽  
Fasesin, Oladipo Oluwafolakemi
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Significant Influence ◽  
Stock Exchange ◽  
Secondary Data ◽  
Sampling Technique ◽  
Negative Influence ◽  
Credit Risk Management ◽  
Code Of Corporate Governance

This study examines the influence of credit risk management on the performance of Nigerian banks with particular reference to selected banks. Purposive sampling technique was used to select five Nigerian banks. Secondary data was used for this study. It was adopted from the audited financial statements of the listed banks in the Nigerian Stock Exchange (NSE), for the period of the year 2006 – 2017. This study also made use of Nigerian Stock Exchange Fact Book 2017 for the Nigerian banks and CBN bulletin 2017. The method of analysis used descriptive statistics and Linear Regressions. Result reveals that NLPR (β = 0.809), CARR (β = 11.246) and LTDR (β = 6.300) have significant influence on financial performance measured by ROA. Furthermore, the result also shows that CARR (β = 17.982) and LTDR (β = 3.227) have a significant influence on financial performance measured by ROE but NLPR (β = - 1.57) has a negative influence on ROE. The study concludes that credit risk management apparatus employed by the selected banks for the periods of study have a significant influence on their financial performance. The study, therefore, recommends that regulatory authorises should implement a new code of corporate governance that bank directors with non-performing loans (NPLs) are to either quit or be sacked and also banks' boards to remove any director with insider non-performing loans.

scholarly journals Credit Risk Management Evaluation and Bank Management Effectiveness: 1995 – 2015 Dimensionality

2020 ◽  
pp. 178-188
Author(s):  
John Nkeobuna Nnah Ugoani
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Banking System ◽  
Total Risk ◽  
Credit Risk Management ◽  
Management Effectiveness ◽  
Nonperforming Loans ◽  
Bank Management ◽  
The Board Of Directors ◽  
Banking Institution

Credit risk management is central to the success or failure of a banking institution because banks earn the greatest quantum of their interest income from interest on loans which represents a critical component of a bank’s profitability. Therefore, any carelessness with regard to credit risk management automatically results to creating huge nonperforming loans which often prepares the grounds for bank distress or failure. In the 1990s and specifically in 1995, 50 percent of 120 banks became technically distressed, as they were characterized by poor management and weak liquidity ratio. For example, in 1995, the ratio of nonperforming loans to total loans was about 33 percent compared to about 5 percent in 2015, and the average liquidity ratio of banks in 1995 was 0.49, against 58.18 in 2015. Also the loans, to deposit ratio in 1995 was 58.4 and 73.21 in 2015, while the number of banks with average liquidity ratio of less than 30 percent was 50 in 1995 against 1 in 2015. Distress persisted in the Nigerian banking system in the 1990s with dwindling profitability and the erosion of shareholders’ equity. In 1995, the adjusted shareholders funds was – N8791.1million against N3,240 billion in 2015, while the capital to total risk weighted asset ratio was about 67.18 percent in 1995 and only about 17.66 percent in 2015. In 1995, the ratio of nonperforming loans to shareholders’ funds was about 496 percent against about 13 percent in 2015. These major performance indicators showed that there was improved credit risk management and bank management effectiveness after 1995 until 2015. The expo-facto research design was employed for the study and the result showed strong positive relationship between credit risk evaluation management and bank management effectiveness. The study was not exhaustive, and further research could examine the relationship between regulatory efficiency and the performance of deposit money banks in Nigeria. The board of directors of banks should always take measures to avoid lending arrangements over and above the repayment capacity of borrowers to reduce the creation of nonperforming loans.

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 Analysis of Credit Risk, Intellectual Capital and Financial Performance of Listed Deposit Money Banks in Nigeria

2021 ◽  
Vol 06 (12) ◽  
Author(s):  
Rislanudeen Muhammad ◽  
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Intellectual Capital ◽  
Capital Adequacy ◽  
National Bureau ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Management Culture ◽  
Capital Adequacy Ratio

This paper examined the effects of credit risk, intellectual capital as well as credit risk moderated by intellectual capital on financial performance of fifteen listed deposit money banks in Nigeria (DMBs) from 2007 to 2016. Data were sourced from annual reports of banks and Nigerian National Bureau of Statistics and analysed using Generalised Method of Moments (GMM). The study finds that credit risk index by loan loss ratio negatively affects financial performance of the sampled banks; while capital employed efficiency, loan loss provision moderated by intellectual capital, capital adequacy ratio, income and diversification have positive relationship with banks’ financial performance. Thus, the study recommends that banks should strengthen their credit risk management culture to ensure prompt repayment of loans. The banks should operate within the required capital adequacy ratio to serve as buffer against loan loss provisions provided by the Central Bank of Nigeria. A strong credit risk management culture should be embedded within intellectual capital structure of banks, where all persons at all levels appreciate and understand the banks’ risk management policies as well as strategies and incorporate same into decision-making and business processes.

Sign in / Sign up

Export Citation Format

Share Document