scholarly journals The Impact of Capital Adequacy Ratio (CAR) on Islamic Banks’ Performance in Selected MENA Countries

2021 ◽  
pp. 116-133
Author(s):  
ADEL Z. A. ALNAJJAR ◽  
Anwar Hasan Abdullah Othman
Keyword(s):  
United Arab Emirates ◽  
Commercial Banks ◽  
Banking Sector ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Return On Assets ◽  
Return On Equity ◽  
Mena Countries ◽  
Capital Adequacy Ratio ◽  
The Impact

A strong capital adequacy ratio is crucial to a financial institution's success and helps it to survive any potential financial crisis. From Q1 2017 to Q4 2019, the influence of the Capital Adequacy Ratio (CAR) on the performance of Commercial Islamic Banks in MENA nations (Qatar, Oman, Bahrain, Kuwait, United Arab Emirates, Saudi Arabia, and Jordan) is examined. The performance measures utilized in this study are Return on Assets (ROA) and Return on Equity (ROE). The study's sample frame comprises all Islamic commercial banks in the designated MENA nations, with a sample size of 18 Islamic commercial banks. Panel data, fixed and random models, are applied in this study since there are multiple entities and time series. The findings of the study showed that the selected Islamic banks are committed to Capital Adequacy Ratio (CAR) which is defined under Basel III. This is considered the largest percentage regulated by the Basel Committee. The study also found that there is a statistically negative significant influence of CAR on both performance indicators ROE and ROA in the commercial Islamic banks in the selected MENA countries. The results of the study can be useful to a policymaker or decision-makers in the Islamic Banks industry. First, the research could be a reference to financial regulators such as central banks which may use the findings to provide regulation on optimal capital levels for local banks in terms of regulations, deregulations, and financial disruption. Next, the practice implications in the Islamic banking sector will provide them with insight as to how a bank’s capital influences its earnings. Hence, management can work towards attaining an optimal structure that maximizes their performance as well as identifying “best” and “worst” practices associated with capitalization levels.

scholarly journals PERBANDINGAN TINGKAT PROFITABILITAS DAN LIKUIDITAS DARI ASSET-LIABILITIES MANAGEMENT PADA BANK SYARIAH DAN BANK KONVENSIONAL

2016 ◽  
Vol 5 (1) ◽  
pp. 1
Author(s):  
Rindang Nuri Isnaini Nugrohowati
Keyword(s):  
Banking Sector ◽  
Banking System ◽  
Capital Adequacy ◽  
Islamic Banks ◽  
Return On Assets ◽  
Return On Equity ◽  
Liability Management ◽  
Capital Adequacy Ratio ◽  
Conventional Banks ◽  
Important Position

Abstract The banking sector has a very important position for the economic systemof a country. The banking system, which is part of the financial system willaffect the course of the economic system as a whole. If the banking system isweak then the system will also be weak economy. Banking is an intermediaryinstitution is the institution that channel funds from surplus funds (surplusunits) to the sectors that lack of funds (defi cit units). With the banking economic actors in need of funds can be met so that the economy can continue to run. In this study will specifi cally analyze the comparison of the level of profi tability of the asset-liability management in Islamic banks and conventional banks are seen from the return on assets and return on equity rises. It also will be studied comparative level of liquidity in Islamic banks and conventional banks are seen from the loan to deposit ratio and Capital Adequacy Ratio. By Hyphothesis is as follows : Ha1: there are differences in the level of profitability of the asset-liabilitymanagement in Islamic banks and conventional banks are seen from the return on assets and return on equity Ha2: there are differences in the level of liquidity in Islamic banks andconventional banks are seen from the loan to deposit ratio and Capital Adequacy Ratio Data analysis has been done obtained the following conclusions, based onmeans testing compare with test Independent-Samples t-test showed that the level of tability seen from ROA and ROE between Islamic Bank and Bank Konvensiona show any signifi cant difference. This is demonstrated by tests of signifi cance 0.02 0.05 for FDR, while for the signifi cance test CAR of 0.38> 0.05. Keyword: Profi tabilitas, Likuiditas, Asset Liabilities Management, Bank Syariah

scholarly journals IMPACT OF LIQUIDITY MANAGEMENT ON COMMERCIAL BANKS PROFITABILITY IN KOSOVO DURING THE PERIOD 2011-2019

2021 ◽  
Author(s):  
Yllka Ahmeti ◽  
◽  
Ardi Ahmeti ◽  
Albina Kalimashi ◽  
◽  
...  
Keyword(s):  
Commercial Banks ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Return On Assets ◽  
Liquidity Management ◽  
Return On Equity ◽  
Capital Adequacy Ratio ◽  
Data Regression ◽  
The Impact ◽  
The Relationship

Liquidity management and its impact on the profitability of commercial banks are two issues of particular importance in the further development of the business and at the same time two sources of concern for financial managers. For this reason, this study aims to determine the impact of changes in liquidity levels on the profitability of commercial banks in Kosovo. The study is based on secondary data for nine commercial banks in Kosovo over 9 years, respectively for the period from 2011 to 2019, taken from the audited annual statements of these financial institutions. The study measures the relationship between liquidity management and profitability and its impact on profitability. In order to process the data, regression analysis and correlation were used, while the findings determine whether there is a significant relationship between liquidity management and profitability in commercial banks in Kosovo. The current ratio, the quick ratio, the cash ratio and the capital adequacy ratio have been taken as liquidity indicators, while return on assets and return on equity are considered as profitability indicators.

scholarly journals The Impact of Corporate Governance on Profitability of Conventional Banks Operating in Pakistan

2020 ◽  
Vol 1 (4) ◽  
pp. 260-267
Author(s):  
Hafiz Muhammad Naveed ◽  
Shoaib Ali ◽  
Yao Hongxing ◽  
Saqib Altaf ◽  
Jan Muhammad Sohu
Keyword(s):  
Corporate Governance ◽  
Commercial Banks ◽  
Banking Sector ◽  
Board Independence ◽  
Return On Assets ◽  
Board Size ◽  
Return On Equity ◽  
Board Directors ◽  
Conventional Banks ◽  
The Impact

The key purpose of present research study to examine the association among corporate governance and profitability banks in developing counties. For such primary objective, annually based data collected from 2004 to 2016. The data taken from annual financial reports which issued by conventional banks.  We have used ADF (Augmented Dickey Fuller) test to examine the unit-root of variables. Moreover, the multiple linear regression utilized for hypothetical estimation. The results indicates that corporate governance and conventional banks profitability of Pakistan are bidirectional (positive-negative) associated to each other. In addition, the board size (Board Directors) is negatively associated with Return on assets and return on equity of banks. Similarly, the board independence (Insider-Outsider Board Directors) is positively influenced to return on assets and return on equity of conventional banks of Pakistan. The overall findings shows that board size and board independence are highly associated with return on equity than return on assets. Moreover, banking sector in developing countries the board size should contain on appropriate strength and acquire more professional and qualified staff. An optimal number of directors in a board size there is a need of commercial banks as to increase the profitability. To enhance the investors’ confidence with the bank there is also a need of the commercial banks to increases the board independency.

scholarly journals Analysis of the determinants of bank liquidity risk: The case of Islamic banks in the UAE

2021 ◽  
Vol 119 ◽  
pp. 01008
Author(s):  
Khadija Ichrak Addou ◽  
Afaf Bensghir
Keyword(s):  
Liquidity Risk ◽  
Multiple Linear Regression Model ◽  
Capital Adequacy ◽  
Annual Data ◽  
Islamic Banks ◽  
Mena Region ◽  
Return On Assets ◽  
Return On Equity ◽  
Risk Determinants ◽  
The Impact

This article aims to examine the principal parameters that impact the liquidity risk incurred by Islamic banks in the UAE. The study examines annual data from four Islamic banks in the UAE. The Data is extracted from their annual activity reports and financial results. A multiple linear regression model is used to assess the impact of six bank-specific variables (Return on Equity, return on assets, size of the bank, liquidity gaps, non-performing loans and capital adequacy ratio) on the liquidity risk of UAE Islamic banks. The designed model shows that ROA and NPL negatively impact the liquidity risk of the studied banks, while the other determinants, namely size, ROE, liquidity gaps and CAR contribute to the improvement of liquidity of UAE banks. Thus, our empirical results complement the existing studies related to the analysis of liquidity risk determinants incurred by Islamic banks operating in the MENA region, especially Emirati banks.

scholarly journals The Impact of Non-Performing Loans, Return on Assets, Return on Equity, and Loan to Deposit Ratios on Minimum Capital Adequacy Requirement Based on Commercial Banks for Business Activities (BUKU) I 2015-2020

2021 ◽  
Vol 6 (6) ◽  
pp. 42-46
Author(s):  
Rano Rahadian ◽  
Dudi Permana
Keyword(s):  
Panel Data ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Return On Assets ◽  
Financial Reports ◽  
Return On Equity ◽  
Minimum Capital ◽  
The Impact

The purpose of this research is to gain an understanding of The Impact of Non-Performing Loans, Return on Assets, Return on Equity, and Loan to Deposit Ratios on Minimum Capital Adequacy Requirement Based on Commercial Banks for Business Activities (BUKU) I 2015-2020. The data of this research is obtained from financial reports published by each bank in 2015 to 2020 period. This research uses panel data processed using EViews software version 9.0. The results show that NPL negatively and insignificantly affects CAR. ROA gives positive and insignificant impacts toward CAR, while ROE causes negative and insignificant effects on CAR. In addition, there is positive and significant impacts on CAR caused by LDR.

scholarly journals Impact of Credit Risk on the Profitability of Selected Commercial Banks Listed on the National Stock Exchange

2021 ◽  
Vol 1 (3) ◽  
pp. 1-15
Author(s):  
Sitaram Pandey ◽  
Amitava Samanta
Keyword(s):  
Credit Risk ◽  
Significant Relationship ◽  
Commercial Banks ◽  
Stock Exchange ◽  
Capital Adequacy ◽  
Series Data ◽  
Return On Assets ◽  
Return On Equity ◽  
Capital Adequacy Ratio ◽  
Indian Banks

This research is focusing on evaluation of the impact of credit risk on the profitability of selected commercial banks listed on National Stock Exchange. The financial ratios are taken as a proxy to evaluate credit risk and bank’s profitability. Profitability was measured through Return on Equity and Return on Assets whereas credit risk was measured by Pre-Provision Profit to Total Loans and Advances, Loan to Asset Ratio, Capital Adequacy Ratio, Credit to Deposit Ratio and Advances over Loan Funds. Based on the financial information of 2009 to 2017, the study concludes that Credit risk, as calculated from Pre-Provision Profit to Total Loans and Advances, Loan to Asset Ratio, Capital Adequacy Ratio, Credit to Deposit Ratio and Advances over Loan Funds have a non-significant relationship with profitability measured by Return on Assets whereas there is significant relationship exist only between Advances over Loan Funds and profitability measured by Return on Equity. The regression model of ROE shows the model is significant as compared to ROA model. The present study employed Auto Correlation and Durbin-Watson statistics, Unit root test & Multi-Collinearity tests to measure the robustness of time series data. Also the results of the regression analysis show that there exist a negative correlation between credit upon deposit ratio and return on equity. As per the current study, the Indian banks has to keep check on advances upon total funds ratio, as it was found most significant factor impacting the profitability of Indian banks.

scholarly journals The impact of credit risk management on the financial performance of United Arab Emirates commercial banks

2021 ◽  
Vol 10 (3) ◽  
pp. 303-319
Author(s):  
Jamil Salem Al Zaidanin ◽  
Omar Jamil Al Zaidanin
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
United Arab Emirates ◽  
Commercial Banks ◽  
Positive Impact ◽  
Capital Adequacy ◽  
Credit Risk Management ◽  
Capital Adequacy Ratio ◽  
Income Ratio ◽  
The Impact

The main purpose of this study is to measure up to what extent the independent factors defined by capital adequacy ratio, non-performing loans ratio, cost-income ratio, liquidity ratio, and loans-to-deposits ratio impact the financial performance of sixteen commercial banks operating in the United Arab Emirates using panel data for the period of 2013-2019. The secondary data was collected from banks and examined by applying standard descriptive statistics and the random effect model for hypothesis testing. It is concluded from the regression outcomes that non-performing loans ratio and cost-income ratio have a significant negative impact on commercial banks profitability in the United Arab Emirates, while capital adequacy ratio, liquidity ratio, and loans -to-deposits ratio all have a very weak positive relationship on the return on assets but they are not determinants of bank’s profitability due to the insignificant statistical impact on it. It is therefore suggested that to enhance financial performance and minimize the risk of non-performing loans in the future, banks must watch very carefully the loans’ performance and analyze thoroughly the clients’ credit history and ability to pay back their debts prior to any approval of loan applications. Furthermore, banks should continuously improve their assets utilization, liquidity, and techniques of managing operating costs, improve the impact of capital adequacy, and the use of deposits for lending activities from a weak positive impact to a significant positive impact on their profitability. The researchers recommend that future studies on credit risk management influence on banks’ financial performance should consider more independent variables and longer periods of study such as twenty or thirty years to have more accuracy and generalized results.  

scholarly journals Can Ratios Predict the Financial Performance in Banks: A Case of National Banks in United Arab Emirates (U.A.E)

2018 ◽  
Vol 8 (4) ◽  
pp. 227 ◽  
Author(s):  
Arindam Banerjee
Keyword(s):  
Financial Performance ◽  
United Arab Emirates ◽  
Asset Management ◽  
Commercial Banks ◽  
Banking Sector ◽  
Gap Analysis ◽  
Future Trend ◽  
Return On Assets ◽  
The Future ◽  
The Impact

A country’s banking sector plays a dominant and important role in its financial growth and economic progress. The prime objective of this research paper is aimed towards evaluating the performance of 12 selected banks in United Arab Emirates (UAE) through various financial ratios. The paper highlights the various financial parameters such as adequacy of risk based capital, credit growth, concentration of credit, non performing position of loans, liquidity gap analysis, liquidity ratios, return on assets, return on equity, net interest margin in analysing the financial performance of the selected banks. The analysis of ratio helps to develop an insight to the extent the various financial variable impact the profitability and the productivity of the selected National Commercial Banks in U.A.E. The purpose of this paper is to examine the future financial performance of selected U.A.E National commercial banks using three indicators; Internal–based performance measured by Return on Assets, Market-based performance measured by Tobin’s Q model (Price / Book value of Equity) and Economic–based performance measured by Economic Value add. The financial data has been adopted from the audited financial statements of the sampled banks for the period of 2014 till 2017. Statistical tools used in the study include multiple regression analysis that captures the impact of the individual size of the bank, the credit risk, efficiency in operations and the asset management on the financial performance followed by forecasting the Future Trend.

Does capital adequacy ratio influence risk-taking behaviour of conventional and Islamic banks differently? Empirical evidence from dual banking system of Malaysia

2020 ◽  
Vol 11 (9) ◽  
pp. 1989-2015
Author(s):  
Rafik Harkati ◽  
Syed Musa Alhabshi ◽  
Salina Kassim
Keyword(s):  
Empirical Evidence ◽  
Risk Taking ◽  
Commercial Banks ◽  
Banking Sector ◽  
Ordinary Least Squares ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Islamic Banks ◽  
Content Type ◽  
Capital Adequacy Ratio

Purpose The purpose of this study is to investigate the influence of capital adequacy ratio (CAR) prescribed in Basel III on the risk-taking behaviour of Islamic and conventional commercial banks in Malaysia. It also investigates the claim that the risk-taking behaviour of Islamic banks (IBs) and conventional banks (CBs) managers is identically influenced by CAR. Design/methodology/approach Secondary data for all CBs operating in the Malaysian banking sector are gathered from FitchConnect database for the 2011–2017 period. Both dynamic ordinary least squares and generalised method of moments techniques are used to estimate a panel data of 43 commercial banks, namely, 17 IBs and 26 CBs. Findings The findings of this study lend support to the favourable influence of CAR set in Basel III accord on risk-taking behaviour of both types of banks. CBs appeared to be remarkably better off in terms of capital buffers. Evidence is established on the identicality of the risk-taking behaviour of IBs and CBs managers under CAR influence. Practical implications Even though a high CAR is observed to hamper risk-taking of banks, the findings may serve as a signal to regulators to be mindful of the implications of holding a high CAR. Similarly, managers may capitalise on the findings in terms of strategising for efficient use of the considerable capital buffers. Shareholders are also concerned about managers’ use of the considerable capital buffers. Originality/value This study is among a few studies that endeavoured to provide empirical evidence on the claim that IBs mimic the conduct of CBs in light of the influence of CAR prescribed in Basel III on risk-taking behaviour, particularly banks operating within the same banking environment.

scholarly journals The Impact of Financial Ratios, Operational Efficiency and Non-Performing Loan Towards Commercial Bank Profitability

2016 ◽  
Vol 1 (1) ◽  
pp. 43-50
Author(s):  
Fiola Christaria ◽  
Ratnawati Kurnia
Keyword(s):  
Banking Sector ◽  
Operational Efficiency ◽  
Capital Adequacy ◽  
Public Confidence ◽  
Return On Assets ◽  
Bank Profitability ◽  
Operating Income ◽  
Capital Adequacy Ratio ◽  
Income Ratio ◽  
The Impact

Objective - The objective of this paper is to determine the impact of Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Operational Efficiency proxies by Operational Expense to Operating Income Ratio (BOPO)and Non-Performing Loan (NPL) towards bank profitability proxies by Return on Assets (ROA). Methodology/Technique - Purpose samplingis applied to gather samples of the banking sector that was listed on the Indonesia Stock Exchange for the period of 2012 - 2014. Multiple regression analysis was used to analyse data. Findings - The F test result shows that CAR, LDR, BOPO, and NPL simultaneously, have a significant impact towards ROA. This means that the model can be used to predict bank profitability. It is also deduced that Operational Efficiency proxies by Operational Expense to Operating Income Ratio has a significant impact towards banking profitability. Novelty - This paper suggests that banks perform lending selectively and banks maintain the level of non-performing loans to be low in order to manage the risks and to improve their profitability as a means of increasing public confidence level. Type of Paper Empirical Keywords: Capital Adequacy Ratio; Loan to Deposit Ratio; Non-performing Loan; Operating Expense to Operating Income; Return on Assets. JEL Classification: D81, G21.

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