scholarly journals Impact of Financial Risks on the Profitability of Commercial Banks in India

2019 ◽  
Vol 7 (1) ◽  
pp. 25-35
Author(s):  
Chetan Shetty ◽  
Anitha S Yadav
Keyword(s):  
Commercial Banks ◽  
Financial Risk ◽  
Banking Sector ◽  
Random Effect ◽  
Random Effect Model ◽  
Banking System ◽  
Interest Rate Risk ◽  
Financial Risks ◽  
Cross Sectional ◽  
The Relationship

The Indian banking sector is exposed to various types of risks which arise from both the external and internal environments. Banks long-term sustainability and financial feasibility are vulnerable financial risk. Credit risk, operationalrisk, marketrisk, and liquidity risk stances a major challenge, despite growth in the banking system. This study examines the relationship between profitability and financial risks of 43 Indian commercial banks for the period of 11 years, (2008 to 2018). The quantitative research design was adopted in this study and the profitability measures that have been used in this study are the Return on Assets (ROA) and Return on Equity (ROE) while the financial risks are Interest Rate Risk (IRR) and Foreign Exchange Risk (FER). In this study, Time- Series Cross-Sectional secondary balanced panel data regression analysis of fixed effect and random effect model have been implemented. The findings of the study indicated that the relationship between ROE and IRR were found to be weakly significant, and on ROA the effect of IRR is significant for all the commercial banks. On both profitability measures, the FER was found to have an insignificant impact. The study concludes that there exists an inverse relationship between banks profitability and financial risk. Hence, the commercial banks in India together with the bank supervisors should make a trade-off between profitability and financial risk.

scholarly journals The Effect of Market Structure on Bank Performance in Central Java

2020 ◽  
Vol 16 (1) ◽  
pp. 112-129
Author(s):  
Imanuel Madea Sakti
Keyword(s):  
Market Structure ◽  
Commercial Banks ◽  
Random Effect ◽  
Random Effect Model ◽  
Bank Performance ◽  
Independent Variables ◽  
Central Java ◽  
Effect Model ◽  
The Relationship ◽  
Positive Effect

Abstract: The research on the Structure-Conduct-Performance (SCP) hypothesis in the banking industry has been done many times, including in Indonesia. However, it still focuses on commercial banks. This research aims to examine the relationship between market structure and bank performance by involving commercial banks and rural banks (Bank Perkreditan Rakyat/BPR) when they are in the same market in the regency/city level. It uses panel data from 565 banks in Central Java: 261 BPR and 304 Commercial Banks, divided into 34 regencies/cities during 2012-2016. Independent variables involve market concentration and market share which is also as moderating variable, and the dependent variable is bank performance. The hypotheses are examined by multiple linear regression with a random effect model. In general, the results support that the market structure has a significant positive effect on bank performance. Another result has found no collusive behavior among dominant banks. Keywords: Structure-Conduct-Performance, Commercial Bank, Rural Bank, Market Structure, Bank Performance Pengaruh Struktur Pasar terhadap Kinerja Bank di Jawa Tengah Abstrak: Penelitian mengenai hipotesis Structure-Conduct-Performance (SCP) pada industri perbankan telah banyak dilakukan, termasuk di Indonesia. Namun, penelitian tersebut hanya berfokus pada bank umum saja. Penelitian ini bertujuan untuk menguji hubungan antara struktur pasar dan kinerja bank dengan melibatkan bank umum dan Bank Perkreditan Rakyat (BPR) ketika berada di pasar yang sama di tingkat kabupaten/kota. Penelitian ini menggunakan data panel terdiri dari 565 bank di Jawa Tengah: 261 BPR dan 304 Bank umum, yang terbagi ke dalam 34 kabupaten/kota selama tahun 2012-2016. Variabel independen yaitu konsentrasi pasar dan pangsa pasar yang sekaligus sebagai variabel moderasi, dan variabel dependen adalah kinerja bank. Hipotesis diuji menggunakan regresi linier berganda dengan random effect model. Secara umum, hasil mendukung bahwa struktur pasar berpengaruh positif signifikan terhadap kinerja bank. Hasil lainnya menunjukkan tidak terdapat perilaku kolusif di antara bank-bank besar. Kata kunci: . Structure-Conduct-Performance, Bank Umum, BPR, Struktur Pasar, Kinerja Bank.

scholarly journals Securitization as a method of managing the liquidity of a commercial bank

2020 ◽  
pp. 33-40
Author(s):  
Aleksandr Andreevich Sidorov
Keyword(s):  
Commercial Bank ◽  
Russian Federation ◽  
Commercial Banks ◽  
Financial Risk ◽  
Banking Sector ◽  
Banking System ◽  
Business Environment ◽  
Scientific Methods ◽  
Banking Activity ◽  
The Russian Federation

The financial system of the Russian Federation is currently facing deterioration of the conditions of external business environment. The spread of the coronavirus infection COVID-19 turned 2020 into the most difficult year for development of banking system of the Russian Federation. This article is dedicated to the research analysis of practical role of securitization as a mechanism and method used in management of the internal liquidity of a commercial bank. The relevance of this study is substantiated by the need to improve the mechanisms of financial risk management, which emerge in activity of credit institutions that experience a shortfall of internal liquidity of the assets. Methodological framework is comprised of the general scientific methods of cognition of economic phenomena, which allowed viewing the relevant tools of managing the liquidity of commercial banks and indicating most topical issues and barriers. The research is based on the combination of normative and positive analysis, principles of uniformity of historical and logical, as well as analytical approach towards studying the economic phenomena that reflect the contradictory nature of social processes. The article examines the relevant problems of formation of the internal liquidity of banking sector of the Russian Federation; as well as theoretical aspects of the concept of “liquidity” of a commercial bank. Description Is given to the mechanism of managing the liquidity of a commercial bank. The author considers the fundamentals and characteristic of securitization as a method of managing liquidity of a bank, and lists the advantages of using securitization in ensuring internal liquidity of banking activity. The benefits of securitization as a method of managing the liquidity of commercial banks in the Russian Federation are analyzed.

scholarly journals The Determinants of Banks’ Liquidity in Vietnam

2017 ◽  
Vol 33 (2) ◽  
Author(s):  
Tam Le
Keyword(s):  
Opportunity Cost ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Random Effect ◽  
Random Effect Model ◽  
Banking System ◽  
Open Market ◽  
Trade Off ◽  
Interest Rate Policy

This paper is aimed to identify the key determinants of commercial banks’ liquidity in Vietnam, testing the hypotheses of trade-off between bank liquidity and profitability. The random effect model (REM) is applied with data of 140 observations from 20 Vietnamese commercial banks in period 2008 to 2014. The key findings are: First, there is no trade-off between liquidity and profitability, as banks have better profitability will pay more attention to keeping liquidity in safe level. Second, interest rate policy has good and positive impact on bank liquidity, implying the importance of discount window and open market operation in providing liquidity to commercial banks. Third, however, opportunity cost of keeping liquid assets has negative impact on banks’ liquidity, which means that liquidity buffer should reflect the opportunity cost of keeping liquid assets instead of loans. Fourth, bank size is negatively related with banks’ liquidity, which means that smaller banks are more concerned about the liquidity problems than big banks. This is the signal for Vietnamese policy makers to start avoiding the “too big to fail” problem when restructuring the banking system and the plan for increasing the bank size to regional and international levels. Lastly, GDP growth has negative impact on banks’ liquidity. The better is the economic investment opportunities, the less the chance for banks to keep more liquidity. Customers will request more debts, while the demand of ithdrawing cash from banks will be lower. Therefore, managing bank liquidity in Vietnam needs to pay attention to these characteristics. Key words: bank liquidity, determinants, liquid assets, opportunity cost, profitability.

scholarly journals The Moderating Role of Capital Adequacy in the Effect of Liquidity on the Profitability of Islamic Banking

2020 ◽  
Vol 3 (2) ◽  
pp. 115-125
Author(s):  
Rury Diwira Registanaranti Yastika ◽  
Maria Rio Rita ◽  
Imanuel Madea Sakti
Keyword(s):  
Commercial Banks ◽  
Random Effect ◽  
Random Effect Model ◽  
Efficiency Factor ◽  
Capital Adequacy ◽  
Return On Assets ◽  
Bank Profitability ◽  
Effect Model ◽  
The Relationship

This study aims to examine the effect of liquidity on profitability with capital adequacy as a moderating variable in Islamic commercial banks in Indonesia. The research sample was 14 Islamic commercial banks during the 2016 - 2018 observation period. The dependent variable is profitability measured using Return On Assets (ROA), the independent variable is liquidity measured using the Financing to Deposit Ratio (FDR), the moderating variable is measured using the Capital Aquendency Ratio (CAR), and several control variables. Non Performing Financing (NPF), Operational Efficiency (BOPO), and Bank Size (SIZE). Hypothesis testing uses multiple linear regression with a random effect model. The results showed that bank liquidity was not proven to increase bank profitability and capital adequacy was not proven to moderate the relationship between the two. The results indicated that the efficiency factor and problematic financing The results indicate that the efficiency factor and non-performing financing are the main factors in influencing bank profitability.

scholarly journals Recapitalization Effectiveness and Performance of Banks in Malaysia

2016 ◽  
Vol 8 (4) ◽  
pp. 6-12
Author(s):  
Etri Ernovianti ◽  
Nor Hayati Binti Ahmad ◽  
Ahmad Rizal Mazlan
Keyword(s):  
Banking Sector ◽  
Random Effect ◽  
Random Effect Model ◽  
Banking System ◽  
Least Square ◽  
Annual Reports ◽  
Bank Failures ◽  
Term Survival ◽  
Capital Injection ◽  
And Performance

Recapitalization through capital injection is one of the strategies for banks to strengthen their banking system from the possibility of bank failures. Banks cannot deny that capital is one of the most important components to run their business. In spite of that, few studies have been conducted to assess the effectiveness of such strategy on Asian banks. This paper investigates the effectiveness of capital injection in the Malaysian banking sector which was adversely hit by the financial crisis. Panel data from 1997 to 2014 was used. The financial data is obtained from annual reports published in Bank Scope and The World Bank database. The data were processed using Panel Least Square and Random effect model. The empirical analysis reveals that, GDP, CAR, previous year capital injection and loan write-off (LWO) explain 89.6 percent of the variance in capital injection effectiveness. CAR and LWO/TA are significant at 5 percent confidence level. The evidence from the results shows that recapitalization is vital for long term survival of the banking sector. The study recommends that in order to improve the profitability of banking sector, the banks should write off bad loans and ensure they have adequate capital either through capital injection, or growth to withstand financial risks.

Tone, readability and financial risk: the case of GCC banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mostafa Kamal Hassan ◽  
Bassam Abu-Abbas ◽  
Hany Kamel
Keyword(s):  
Audit Committee ◽  
Financial Risk ◽  
Banking Sector ◽  
Random Effect ◽  
Annual Reports ◽  
Financial Risks ◽  
Reverse Causality ◽  
Content Type ◽  
Negative Tone ◽  
The Impact

PurposeThe authors investigate the impact of disclosure tones and financial risk on the readability of annual reports in the banking sector. The authors also examine the moderating effect of banks' financial risk on the tone–readability relationship.Design/methodology/approachThis study relies on the agency theory and the social psychology theory to formulate its testable hypotheses and explain the empirical findings. It uses a sample of 390 bank-year observations from banks listed in the Gulf Cooperation Council (GCC) Stock Exchanges during the period 2014–2019. It also employs random effect regressions to analyze the data and to examine the reverse causality/endogeneity in order to obtain robust findings.FindingsThis study’s results demonstrate that easy (difficult) to read annual reports is significantly associated with positive (negative) tone. Bank managers characterized as “too positive/optimistic” and banks with higher financial risks publish less readable annual reports. The results also show that the interaction between negative tone and a bank's financial risk is inversely associated with reading difficulty, indicating that managers prepare easy text to clarify causes of their banks’ high risks, yet they communicate this easy text with a negative tone that reflects their feelings/emotions towards the financial risks of their banks.Practical implicationsThis study’s findings call for the use of a plain English text that bears a neutral tone and urge financial analysts to go beyond the financial aspects of annual reports. They also stimulate policymakers to draft policies, which ensure the presence of audit committee members who possess a broad expertise to uncover the linguistic issues embedded in the annual reports.Originality/valueTo the best of the authors' knowledge, this is the first study dedicated to exploring the tone–readability association in the GCC's banking sector.

scholarly journals Research on Financial Risk Early Warning of Listed Companies Based on Stochastic Effect Mode

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Liduo Zhang ◽  
Lina Zhang ◽  
Mohammed Basheri ◽  
Hafnida Hasan
Keyword(s):  
Early Warning ◽  
Financial Risk ◽  
Market Competition ◽  
Random Effect ◽  
Random Effect Model ◽  
Listed Companies ◽  
Financial Risks ◽  
Early Warning Model ◽  
Effect Model ◽  
Warning Model

Abstract In the current era, the market competition is becoming increasingly fierce, complicated and unpredictable. Based on the interaction of various factors, the probability of financial risks of listed companies is significantly improved. Because of its unique characteristics, the listed companies’ operating status affects the overall operation of China’s market economy and occupies a fundamental position in the national economic system. If listed companies have financial risks, it will cause great trauma to our economy. Based on the financial risk evaluation theory of listed companies, this paper analyzes the financial indicators of listed companies through random effect model, and puts forward the risk analysis and prediction index system of listed companies from theoretical and empirical angles, thus constructing a financial risk early warning model based on linear random effect model, and studying the financial risk early warning of listed companies with practical cases. The research results show that the financial risk early warning model of random effect model is feasible and effective, which can help listed companies to carry out financial risk early warning management and improve financial management level.

scholarly journals Does the target market affect bank performance? Evidence from the geographic diversification of city commercial banks in China

2021 ◽  
Vol 15 (1) ◽  
Author(s):  
Xiaonan Li ◽  
Chang Song
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Capital Adequacy ◽  
Bank Performance ◽  
Chinese Government ◽  
Target Market ◽  
Geographic Diversification ◽  
Cross Sectional ◽  
The Impact ◽  
Geographical Diversification

AbstractAfter the opening up of the banking sector to domestic and foreign capitals which is approved by the Chinese government, the China Banking Regulatory Commission (CBRC) has permitted city commercial banks to diversify geographically. Since this deregulation in 2006, city commercial banks began to geographically diversify to occupy the market and acquire more financial resources. To examine the causal relationship between geographical diversification and bank performance, we construct an exogenous geographical diversification instrument using the gravity-deregulation model and a policy shock. We find that bank geographical diversification negatively affects bank performance. Moreover, we conduct some mechanism tests in the Chinese context. We find that the target market with several large- and medium-sized banks and a high level of local protectionism in the target market decreases the performance of city commercial banks. Finally, cross-sectional analyses show that the impact of geographical diversification on banks’ performance is more notable among city commercial banks that are younger, and have a lower capital adequacy ratio and a higher non-performing loan ratio.

Is internal and external mechanism of governance enriching the performance of the banking sector of Pakistan?

2017 ◽  
Vol 17 (4) ◽  
pp. 629-642 ◽  
Author(s):  
Sundas Sohail ◽  
Farhat Rasul ◽  
Ummara Fatima
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Good Governance ◽  
Random Effect ◽  
Random Effect Model ◽  
General Meeting ◽  
Governance Structure ◽  
Board Structure ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to explore how governance mechanisms (internal and external) enhance the performance of the return on asset (ROA), return on equity (ROE), earning per share (EPS) and dividend payout ratios (DP) of the banks of Pakistan. The study incorporates not only the internal factors of governance (board size, out-ratio, annual general meeting, managerial ownership, institutional ownership, block holder stock ownership and financial transparency) but also the external factors (legal infrastructure and protection of minority shareholders, and the market for corporate control). Design/methodology/approach The sample size of the study consists of 30 banks (public, private and specialized) listed at the Pakistan Stock Exchange (PSE) for the period 2008-2014. The panel data techniques (fixed or random effect model) have been used for the empirical analysis after verification by Hausman (1978) test. Findings The results revealed that not only do the internal mechanisms of governance enhance the performance of the banking sector of Pakistan but external governance also plays a substantial role in enriching the performance. The findings conclude that for a good governance structure, both internal and external mechanisms are equally important, to accelerate the performance of the banking sector. Research limitations/implications Internal and external mechanisms of corporate governance can also be checked by adding some more variables (ownership i.e. foreign, female and family as internal and auditor as external), but they are not added in this work due to data unavailability. Practical implications The study contributes to the literature and could be useful for the policy makers who need to force banks to mandate codes of governance through which they can create an efficient board structure and augment the performance. The investments from different forms of ownership can be accelerated if they follow the codes properly. Social implications The study facilitates the bankers in incorporating sound codes of corporate governance to enhance the performance of the banks. Originality/value This work is unique as no one has explored the impact of external mechanism of governance on the performance of the banking sector of Pakistan.

scholarly journals Non-prescription dispensing of antibiotic agents among community drug retail outlets in Sub-Saharan African countries: a systematic review and meta-analysis

2021 ◽  
Vol 10 (1) ◽  
Author(s):  
Sewunet Admasu Belachew ◽  
Lisa Hall ◽  
Linda A. Selvey
Keyword(s):  
Meta Analysis ◽  
Random Effect ◽  
Random Effect Model ◽  
Acute Diarrhoea ◽  
Upper Respiratory Tract ◽  
Cross Sectional ◽  
Retail Outlets ◽  
Sub Saharan ◽  
Tract Infections ◽  
Ssa Countries

Abstract Background The development of antimicrobial resistance, which is partially attributable to the overuse and/or misuse of antibiotics in health care, is one of the greatest global public health challenges. In Sub-Saharan African (SSA) countries, non-prescribed dispensing of antibiotics in community drug retail outlets (CDROs) has been flagged as one of the contributing factors for the widespread misuse of antibiotics in the community. Objective The current review aimed to estimate the proportion of non-prescription antibiotics requests or consultations that resulted in provision of antibiotics without a valid prescription among CDROs in SSA region, and describe the type of antibiotics dispensed. Methods A literature search was conducted using PubMed, CINAHL, Scopus and Google Scholar. We also searched reference lists of relevant articles. Random effect model meta-analysis was employed to determine the pooled proportion of over the counter sale of antibiotics. Subgroup and meta-regression was undertaken to explore the potential cause of heterogeneity in effect size across studies. Results Of 671 total citations retrieved, 23 met the inclusion criteria (seven cross-sectional questionnaire-based surveys and 16 cross-sectional client-based studies). The overall pooled proportion of non-prescription antibiotics requests or consultations that resulted in supply of antibiotics without prescription was 69% (95% CI 58–80). Upper respiratory tract infections and/or acute diarrhoea were the most frequently presented case scenarios, and amoxicillin and co-trimoxazole were the most frequently dispensed antibiotics to treat those symptoms. Conclusions Non-prescribed dispensing of antibiotics was found to be a common practice among CDROs in several SSA countries. Ease of access to and overuse of antibiotics can potentially accelerate the emergence of resistance to antibiotics available in the region. Our review highlights the need for a stringent enforcement of existing policies and/or enacting new regulatory frameworks that would regulate antibiotic supply, and training and educational support for pharmacy personnel (e.g. pharmacists, pharmacy assistants) regarding judicious use of antibiotics and the importance of antimicrobial stewardship.

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