scholarly journals DOES CAPITAL ADEQUACY INFLUENCE THE FINANCIAL PERFORMANCE OF LISTED BANKS IN NIGERIA?

2019 ◽  
Vol 4 (2) ◽  
pp. 69-80
Author(s):  
Arekhandia Alfred Ukinamemen ◽  
Hassan O. Ozekhome
Keyword(s):  
Financial Performance ◽  
Financial Institutions ◽  
Economies Of Scale ◽  
Fixed Effect Model ◽  
Bank Loans ◽  
Capital Adequacy ◽  
Productive Capacity ◽  
Economic Output ◽  
Systemic Crises ◽  
The Impact

Capital adequacy is important for the effective operation of any institution, particularly, its sustenance, viability and future growth. Banks as core financial institutions require sufficient capital base for its fund requirement and needs. Against this premise, banks and other financial institutions must keep balance between capital and available risk in its assets in order to reduce the likelihood of systemic crises, financial fragility and thus guarantee stability. This study empirically examines the impact of capital adequacy on the financial performance of banks in Nigeria. A sample of ten (10) listed banks on the basis of size and availability of data were examined over the period 2010 to 2017, using descriptive statistics, and multivariate panel data estimation technique, after conducting the Hausman, test of correlated random samples, wherein the fixed effect model was selected as the appropriate model. The empirical results revealed that banks’ capital adequacy ratio has a positive and significant impact on the financial performance of banks in Nigeria. Other variables found to be significant in the determination of the financial performance of banks in Nigeria are; bank size, bank loans and advances, debt ratio and growth rate of output. Against the backdrop of these findings, we recommend amongst others; sufficient capital base for banks, increased bank size through economies of scale measures, efficient deployment of bank resources, increased economic output (economic productive capacity) that will stimulate bank performance. These, will, in no doubt, reduce banks’ vulnerability to systemic crises and consequently enhance their stability for national growth through efficient financial intermediation.

scholarly journals Noninterest Income and Financial Performance at Jordanian Banks

2016 ◽  
Vol 8 (1) ◽  
pp. 166
Author(s):  
Alaaeddin Al-Tarawneh ◽  
Bashar K. Abu Khalaf ◽  
Ghazi Al Assaf
Keyword(s):  
Financial Performance ◽  
Equity Capital ◽  
Bank Loans ◽  
Capital Adequacy ◽  
Size Increase ◽  
Bank Performance ◽  
Interest Income ◽  
The Impact

This paper investigated the impact of noninterest income on the performance of 13 banks in Jordan during the period 2000-2015. The impact of size of bank, loans, capital adequacy and general expenses on banks performance found to have a significant impact on banks performance. In more details, general expenses decrease bank performance, while capital adequacy, loans and size increase it. In addition, non-interest income increases equity capital adequacy and this in turn affects the profitability positively.

scholarly journals Assessing the Impact of Corporate Governance Index on Financial Performance in the Romanian and Italian Banking Systems

2021 ◽  
Vol 13 (10) ◽  
pp. 5535
Author(s):  
Marco Benvenuto ◽  
Roxana Loredana Avram ◽  
Alexandru Avram ◽  
Carmine Viola
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Banking Sector ◽  
Research Question ◽  
Interactive Effect ◽  
Banking System ◽  
Capital Adequacy ◽  
Banking Systems ◽  
Governance Index ◽  
The Impact

Background: Our study aims to verify the impact of corporate governance index on financial performance, namely return on assets (ROA), general liquidity, capital adequacy and size of company expressed as total assets in the banking sector for both a developing and a developed country. In addition, we investigate the interactive effect of corporate governance on a homogenous and a heterogeneous banking system. These two banking systems were chosen in order to assess the impact of corporate governance on two distinct types of banking system: a homogenous one such as the Romanian one and a heterogeneous one such as the Italian one. The two systems are very distinct; the Romanian one is represented by only 34 banks, while the Italian one comprises more than 350 banks. Thus, our research question is how a modification in corporate governance legislation is influencing the two different banking systems. The research implication of our study is whether a modification in legislation, thus in the index of corporate governance, is feasible for two different banking sectors and what the best ways to increase the financial performance of banks are without compromising their resilience. Methods: Using survey data from the Italian and Romanian banking systems over the period 2007–2018, we find that the corporate governance has a significant, positive and long-lasting effect on profitability and capital adequacy in both countries. Results: Taking the size of the company into consideration, the impact of the Index of Corporate Governance (ICG) on a homogenous banking system is positive while the impact on a heterogeneous banking system is negative. Conclusions: Our study provides evidence of the impact of IGC on financial performance and sheds light on the importance of the size of the company. Therefore, one can state that the corporate governance principles applied do not encourage the growth of large banks in heterogeneous banking sectors, thereby suggesting new avenues of research associated with new perspectives.

Do disclosure and transparency affect bank’s financial performance?

2019 ◽  
Vol 19 (6) ◽  
pp. 1344-1361
Author(s):  
Isaiah Oino
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Performance ◽  
Financial Institutions ◽  
Content Type ◽  
Loan Portfolios ◽  
Cent Level ◽  
Transparency And Disclosure ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of transparency and disclosure on the financial performance of financial institutions. The emphasis is on assessing transparency and disclosure; auditing and compliance; risk management as indicators of corporate governance; and understanding how these parameters affect bank profitability, liquidity and the quality of loan portfolios. Design/methodology/approach A sample of 20 financial institutions was selected, with ten respondents from each, yielding a total sample size of 200. Principal component analysis (PCA), with inbuilt ability to check for composite reliability, was used to obtain composite indices for the corporate governance indicators as well as the indicators of financial performance, based on a set of questions framed for each institution. Findings The analysis demonstrates that greater disclosure and transparency, improved auditing and compliance and better risk management positively affect the financial performance of financial institutions. In terms of significance, the results show that as the level of disclosure and transparency in managerial affairs increases, the performance of financial institutions – as measured in terms of the quality of loan portfolios, liquidity and profitability – increases by 0.3046, with the effect being statistically significant at the 1 per cent level. Furthermore, as the level of auditing and the degree of compliance with banking regulations increases, the financial performance of banks improves by 0.3309. Research limitations/implications This paper did not consider time series because corporate governance does not change periodically. Practical implications This paper demonstrates the importance of disclosure and transparency in managerial affairs because the performance of financial institutions, as measured in terms of loan portfolios, liquidity and profitability, increases by 0.4 when transparency and disclosure improve, with this effect being statistically significant at the 1 per cent level. Originality/value The use of primary data in assessing the impact of corporate governance on financial performance, instead of secondary data, is the primary novelty of this study. Moreover, PCA is used to assess the weight of the various parameters.

scholarly journals Bank And Non-Bank Financial Institutions And The Development Of The Nigerian Economy

2015 ◽  
Vol 3 (7) ◽  
pp. 23-36
Author(s):  
Peter A Okere ◽  
Ndugbu Michael ◽  
J.N Ojiegbe ◽  
Barr. Lawrence Uzowuru
Keyword(s):  
Financial Institutions ◽  
Growth And Development ◽  
Banking Sector ◽  
Bank Loans ◽  
Least Square ◽  
Moral Hazards ◽  
Explanatory Variables ◽  
Consumer Loans ◽  
Term Basis ◽  
The Impact

The focus of this study was on the impact of bank and non-bank financial institutions on the growth and development of the Nigerian economy. In an attempt to achieve the objectives of the research, data for the period 1992 to 2012 were collected from the CBN publications. Hypotheses were also formulated. The data collected were analysed using the E-views econometric software under the ordinary least square (OLS) regression analysis. The study as confirmed by the result of the joint test revealed that the financial institutions play prominent role on the growth and development of the Nigerian economy. However, it was further revealed that individual contributions of the explanatory variables varied. For example, the Deposit Money Banks were revealed to have impacted very insignificantly to the growth and development of the Nigerian economy. This may not be unconnected with the unwholesome practices in the banking sector such as granting of loans/advances to “ghost” applicants, diversion of loans and advances granted, high incidence of moral hazards. In view of the above, it is recommended among others that government should come up with lending policies that will not only reduce diversions of bank loans/advances but will deter persons involved in such sharp practices. Such loans and advances which must be on long-term basis should be extended to needy investors in the real sector. Consumer loans and also loans and advances for commerce do not play prominent role in the growth and development of the economy and thus should be discouraged. The current and on-going reforms in the financial sector should be encouraged and maintained.

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 The Impact of Political Connections on the Performance and Solvency of Canadian Financial Institutions

2016 ◽  
Vol 8 (11) ◽  
pp. 1
Author(s):  
Saidatou Dicko
Keyword(s):  
Financial Performance ◽  
Financial Institutions ◽  
Composite Index ◽  
Negative Influence ◽  
Political Connections ◽  
Return On Assets ◽  
Return On Equity ◽  
The Impact

<p style="margin: 0cm 0cm 0pt; text-align: justify; line-height: 150%;">This article’s main goal is to analyze the impact of political connections on the financial performance of Canadian financial institutions. Data on Canadian financial institutions from the S&amp;P/TSX Composite Index over a five-year period was analyzed, and the results demonstrate that contrary to previous studies on companies in other industries, political connections had a negative influence on solvency, return on assets and return on equity for these Canadian financial institutions. Only the market-to-book ratio was positively and significantly influenced by political connections.</p>

scholarly journals The Threats of Unsystematic Risks in Jordanian Commercial Banking Sector

2017 ◽  
Vol 9 (9) ◽  
pp. 175
Author(s):  
Ghaith N. Al-Eitan ◽  
Ismail Y. Yamin
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Banking Sector ◽  
Fixed Effect Model ◽  
Commercial Banking ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Effect Model ◽  
The Impact ◽  
The Empirical Analysis

The objective of this study is to empirically examine the effect of unsystematic risks on the performance of commercial banks in Jordan, using panel data for the period of 10 years (2005-2015). The study uses earning per share and dividends as dependent variables to represent Banks’ performance. The empirical analysis based on the fixed effect model selected on the basis of Hausman test. The results indicate that the impact of Non-performing loans on commercial banks’ dividends is positive and significant while the impact of capital adequacy is negative and statistically significant on dividends. The results indicate that the credit risk, liquidity risk, non-performing loan and capital adequacy have significant effect on earnings per share and the effects are negative as expected. Based on the study it is recommended that the Jordanian commercial banks needs enhance the process of credit risk management to determine loan defaulter and impose the appropriate legal action against them.

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 Banking Financial Performance Before and During the Covid 19 Pandemic in Indonesia: Analysis of Comparison Between Islamic and Conventional Banking

2021 ◽  
Vol 9 (1) ◽  
pp. 976-986
Author(s):  
Mister Candera, Amrah Muslimin, Dina Permatasari
Keyword(s):  
Multivariate Analysis ◽  
Financial Performance ◽  
Financial Institutions ◽  
Performance Indicators ◽  
Risk Profile ◽  
Economic Conditions ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Financial Reports ◽  
The Impact

Banking is one of the financial institutions that is very influential on the economic conditions of a country. The level of banking liquidity is a reflection of the condition of the national economy. This study examines the differences in the financial performance of conventional banking and Islamic financial performance before and during the COVID-19 pandemic in Indonesia. The variables used to measure banking financial performance are risk profile, earnings, and capital. The data used are financial reports published by Otoritas Jasa Keuangan (OJK). The analysis used is the Multivariate Analysis of Variance (MANOVA). The results of the analysis found that there was no difference in the financial performance of Islamic banking on risk profile, earning, and capital indicators before and during the COVID-19 pandemic; there is no difference in the conventional financial performance of earning indicators before and during the Covid 19 pandemic; and there is no difference in the financial performance of conventional banking earning indicators during covid 19 and Islamic banking financial performance indicators of earning before covid 19. This analysis shows that the performance of Islamic finance is still able to deal with the impact of the COVID 19 pandemic in Indonesia.

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.  

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