The Impact of Liquidity Risk Management on the Financial Performance of Saudi Arabian Banks

This paper aims to analyze the impact of liquidity risk management on the financial performance of selected conventional banks in Saudi Arabia for the period of 2002-2019. Liquidity risk is measured with the loan to deposit ratio (LTD) and cash to deposit ratio (CTD). Financial performance is measured by the Return on Equity (ROE). Equity to total asset ratio (ETA) is used as the control variable. The study uses the panel data method (Pool, Fixed-effects and Random-effects) for testing the study hypothesis. The results show that liquidity risk has a significant negative impact on the financial performance measured by Saudi Arabian banks.

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The financial impacts of board mechanisms on performance: The case of listed Moroccan banks

International Journal of Financial, Accounting, and Management ◽

10.35912/ijfam.v3i2.536 ◽

2021 ◽

Vol 3 (2) ◽

pp. 93-113

Author(s):

Issam El Idrissi ◽

◽

Youssef Alami ◽

Keyword(s):

Corporate Governance ◽

Financial Performance ◽

Fixed Effects ◽

Audit Committee ◽

Negative Impact ◽

Governance Mechanisms ◽

Return On Equity ◽

Corporate Governance Mechanisms ◽

Governance Practices ◽

The Impact

Abstract Purpose: The present study examines the impact of corporate governance mechanisms on listed Moroccan banks' financial performance. Research methodology: This study investigates the relationship between listed banks' governance mechanisms and financial performance in the CSE for six years between 2014-2019. This study employs three performance measures, return on assets, return on equity, and Tobin's Q, to determine bank performance. This research uses the GMM EGLS approach to analyze data. In the first phase of this empirical research, we did use OLS, Fixed Effects, and Radom Effects regressions to show their inefficiency. Results: Our results portray that most board mechanisms have a negative impact on financial performance. In comparison, the audit committee and nomination & remuneration committee have a positive effect on financial performance. Limitations: Many qualitative and quantitative factors could influence financial performance and not only the used variables in this paper. Contribution: This research shows that the dynamic connection between corporate governance and financial performance is robust in the Moroccan banking context. Also, our study has important implications for establishing good corporate governance practices in emerging economies.

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DAMPAK MANAJEMEN RISIKO PADA KINERJA KEUANGAN BANK UMUM KONVENSIONAL DI INDONESIA

Jurnal Magister Akuntansi Trisakti ◽

10.25105/jmat.v8i1.8148 ◽

2021 ◽

Vol 8 (1) ◽

pp. 29

Author(s):

Kiki Afita Andriyani ◽

Farah Margaretha Leon

Keyword(s):

Risk Management ◽

Financial Performance ◽

Financial Stability ◽

Management Practices ◽

Liquidity Risk ◽

Operational Risk ◽

Interest Rate Risk ◽

Bank Management ◽

Conventional Banks ◽

The Impact

Abstract This study was conducted to examine the impact of risk management on the financial performance of conventional banks in Indonesia. Effective and efficient banking industry financial performance from time to time is highly expected to maintain banking financial stability itself and even the stability of a country. The increase in losses borne by banks as a result of inadequate risk management practices is a major concern of bank management and regulators. The data tested in this study is conventional bank data that listed on the Indonesia Stock Exchange during the 2015-2019 period. Data analysis using Multiple Linear Regression Model. The results show that there is a significant relationship between market risk management (NIM), operational risk management (BOPO) and liquidity risk management (LDR) with bank financial performance (ROA). Meanwhile, credit risk management (NPL) has no effect on bank financial performance (ROA). For this reason, it can be said that adequate risk management practices as demonstrated by the ratio of interest rate risk, liquidity risk and operational risk are the main driving factors for profitability for the banking sector in Indonesia. Therefore, bank management must mobilize resources to understand a sound risk management system which in turn will have an impact on improving the bank's financial performance.Keywords: Conventional Banks, Risk Management, Financial Performance.

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The The Impact of Liquidity, Credit, and Financial Leverage Risks on Financial Performance of Islamic Banks: A Case of Sudanese Banking Sector

Risk and Financial Management ◽

10.30560/rfm.v2n2p59 ◽

2020 ◽

Vol 2 (2) ◽

pp. p59

Author(s):

Ahmed Nourrein Ahmed Mennawi

Keyword(s):

Credit Risk ◽

Financial Performance ◽

Banking Sector ◽

Negative Impact ◽

Liquidity Risk ◽

Positive Influence ◽

Islamic Banks ◽

Financial Leverage ◽

Loan Financing ◽

The Impact

This study aims to investigate the impact of liquidity, credit, and financial leverage risks on the financial performance of Islam banks in Sudan during the period of 2008 - 2018. Panel dataset of 143 observations from (13) banks has been used in this study. Two models of ROA and NPM have been constructed using robust random effects estimates for testing the study hypotheses. The independent variables consist of liquidity and credit risks plus the financial Leverage ratio. Credit risk that measured by nonperformance of loan (financing) and provision of loan (financing) loss ratios; while the liquidity risk measured by cash to deposits ratio, liquid assets to total assets ratio and total loan (financing) to total deposits ratio. The financial performance of Islamic banks in Sudan measured by the ratios of return on assets and net profit margin. The results reveal that the credit risk and financial leverage have significant and negative impact on the financial performance of Islamic banks in Sudan, whereas the liquidity risk generally found to be insignificant. Despite that, the liquidity risk in term of liquid assets to total assets ratio provides a significant and positive influence on the financial performance of Sudanese banks. Finally, the importance of this study is that it touches the most significant types of risks that Sudanese Islamic banks face during their operational cycles.

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THE IMPACT OF RISK AND REPUTATION ON FINANCIAL PERFORMANCE IN ISLAMIC BANKING: EVIDANCE FROM INDONESIA

Amwaluna: Jurnal Ekonomi dan Keuangan Syariah ◽

10.29313/amwaluna.v5i2.7033 ◽

2021 ◽

Vol 5 (2) ◽

pp. 230-243

Author(s):

Falikhatun Falikhatun ◽

Mutiarafah Mutiarafah

Keyword(s):

Financial Performance ◽

Risk Mitigation ◽

Control Variable ◽

Liquidity Risk ◽

Profit Sharing ◽

Least Square ◽

Financing Risk ◽

Negative Effect ◽

The Impact ◽

Positive Effect

This study aims to examine the impact of risk and reputation on financial performance. More specifically, we use financing risk, liquidity risk, reputation with rewards, and growth in profit-sharing based financing as our variable of interests. We also assign bank size as a control variable. Our data is analyzed using Generalized Least Square (GLS) regression. Islamic Commercial Banks listed in Sharia Banking Statistics (Statistik Perbankan Syariah - SPS) published by OJK in 2015−2019 are selected as our sample. We find that (1) financing risk has a negative effect on financial performance; and (2) both reputation with rewards and bank size have a positive effect on financial performance. However, liquidity risk and growth in profit-sharing based financing do not affect financial performance. Several research implications are the importance of risk mitigation, the importance to maintain the reputation of the Islamic bank’s stakeholders, and creating innovative funding and financing products.

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Impact of COVID-19 on the Performance and Stability of Conventional and Islamic Banks in the GCC Region, Malaysia, and Pakistan

Islamic Banking and Finance Review ◽

10.32350/ibfr/2021/08/1076 ◽

2021 ◽

Vol 8 (1) ◽

pp. 25-37

Author(s):

Qazi Yasir Arafat ◽

Abdul Rashid ◽

Qazi Waseem Jan

Keyword(s):

Negative Impact ◽

Islamic Banks ◽

Return On Assets ◽

Return On Equity ◽

Quarterly Data ◽

Z Scores ◽

Conventional Banks ◽

The Stability ◽

The Impact ◽

Conventional And Islamic Banks

This study examines the impact of COVID-19 on the performance and stability of conventional and Islamic banks. The sample included all the 21 listed Islamic banks (IBs) and 44 listed conventional banks (CBs) from the GCC region, Malaysia, and Pakistan. Quarterly data of these banks covering the period January 2019 to June 2020 were obtained from their quarterly reports. Performance was measured by return on assets (ROA) and return on equity (ROE), while stability was measured by the Z-scores of these banks. Based on the previous literature, a better performance of IBs was expected because these banks are based on the participatory mode of financing instead of debt-based financing. However, the results of the current study showed a significant and negative impact of COVID-19 on the financial performance of both types of banks, suggesting that either type of banking was significantly affected during the pandemic. However, we did not find any significant evidence of the impact of COVID-19 on the stability of these banks.

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Family Ownership and Firm Performance: Romania Versus Germany

Timisoara Journal of Economics and Business ◽

10.1515/tjeb-2017-0011 ◽

2017 ◽

Vol 10 (2) ◽

pp. 169-186 ◽

Cited By ~ 2

Author(s):

Milena J. Schank ◽

Aurora Murgea ◽

Cosmin Enache

Keyword(s):

Firm Performance ◽

Financial Performance ◽

Fixed Effects ◽

Capital Intensity ◽

Time Frame ◽

Ordinary Least Squares ◽

Family Ownership ◽

Return On Assets ◽

Return On Equity ◽

The Impact

Abstract A consistent body of research is dedicated to the relationship between the ownership structure of a firm and its financial performance. Despite that, the hitherto researches fail to reach a consensus regarding this issue since both negative and positive relationships have been found out. This paper examines the impact of ownership’s type (more precise the impact of the family ownership) on the firm’s financial performance. The analysis includes a comparison between family and non-family firm performance using a sample of 1,161 Romanian companies and 1,342 German companies for a time frame that range between 2008 to 2015. Based on different types of static panel data regressions: Pooled Ordinary Least Squares (OLS), Fixed Effects (FE), Random Effects (RE) and a corrective model (PCSE), the main findings show very different results for the two considered countries. Financial performance, expressed as return on assets (ROA) and return on equity (ROE) seems to be insensitive to family ownership in Romanian companies and statistically positively correlated with it for German ones. A potential explanation for these outputs consists in the different development circumstances in the two countries in the period that forego the Second War. At the same time, other variables considered do not show significant differences in outcome between the two countries: size, age, capital intensity and leverage negatively influence the financial performance of companies.

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Applying the CAMEL model to assess performance of commercial banks: empirical evidence from Vietnam

Banks and Bank Systems ◽

10.21511/bbs.15(2).2020.16 ◽

2020 ◽

Vol 15 (2) ◽

pp. 177-186

Author(s):

Anh Huu Nguyen ◽

Hang Thu Nguyen ◽

Huong Thanh Pham

Keyword(s):

Financial Performance ◽

Commercial Banks ◽

Fixed Effects ◽

Ordinary Least Squares ◽

Capital Adequacy ◽

Fixed Effects Model ◽

Return On Equity ◽

Net Interest Margin ◽

Asset Quality ◽

The Impact

The paper aims to investigate the impact of CAMEL components on the financial performance of commercial banks in Vietnam. Three econometric models are built using four CAMEL’s crucial indicators as independent variables (capital adequacy, asset quality, management effectiveness, bank liquidity) and return on assets (ROA), return on equity (ROE), and net interest margin (NIM) as proxies for commercial banks’ financial performance – dependent variables. The research sample includes 31 Vietnamese commercial banks over the 6-year period, from 2013 to 2018. The results show a better fit of the fixed effects model (FEM) in terms of the research methodology compared to the ordinary least squares (OLS) and random effects model (REM). It was found that capital adequacy, asset quality, liquidity and management efficiency affect the performance of Vietnamese commercial banks. Acknowledgement This research is funded by National Economics University (NEU), Hanoi, Vietnam. The authors thank anonymous referees for their contributions and the NEU for funding this research.

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Pengaruh Credit Risk Management Pada Financial Performance Bank Konvensional Yang Terdaftar di BEI

Jurnal Ekonomi ◽

10.24912/je.v26i3.801 ◽

2021 ◽

Vol 26 (3) ◽

pp. 447

Author(s):

Ervina, Vivi N. Fatimah, H.S.Lestari

Keyword(s):

Risk Management ◽

Credit Risk ◽

Financial Performance ◽

Secondary Data ◽

Sampling Technique ◽

Capital Adequacy ◽

Credit Risk Management ◽

Capital Adequacy Ratio ◽

Conventional Banks ◽

The Impact

The purpose of this study is to analyze the impact of credit risk management on the financial performance of Indonesian conventional banks in 2016-2020. The sample in this study was 32 conventional banks from 160 observations using purposive sampling technique and secondary data. The dependent variable in this paper is measured by profitability using the return on assets proxy while credit risk management as an independent variable. From the research results, LDR and NPLR have no effect on financial performance. CAR has a positive influence on financial performance so that bank managers are expected to be able to maintain their capital adequacy ratio in accordance with the provisions set by Bank Indonesia to maintain their financial performance because a high capital adequacy ratio is considered safe and tends to meet its financial obligations, while CIR and LDR negative effect on financial performance. By increasing the ratio of costs to income indicates a low level of efficiency in banking operational costs, and low liquid assets will increase cash reserves to reduce liquidity risk. Investors can invest their funds in banks that have a high capital adequacy ratio, cost of income ratio and liquidity ratio to avoid financial risk.

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Liquidity risk and regulation in the Organization of the Islamic Cooperation (OIC) banking industry

Asian Academy of Management Journal of Accounting and Finance ◽

10.21315/aamajaf2021.17.2.2 ◽

2021 ◽

Vol 17 (2) ◽

pp. 29-62

Author(s):

Syajarul Imna Mohd Amin ◽

Aisyah Abdul-Rahman ◽

Nurhafiza Abdul Kader Malim

Keyword(s):

Risk Management ◽

Generalized Method Of Moments ◽

Banking System ◽

Liquidity Risk ◽

Banking Regulation ◽

Capital Requirements ◽

Islamic Banking ◽

Private Monitoring ◽

Conventional Banks ◽

The Impact

The recurring crises have evidenced poor liquidity risk management and ineffective regulation in banking. Consequently, banking regulations have undergone continuous reforms to bolster stability in the banking system. Nonetheless, theoretical and empirical evidence provide conflicting results that warrant comprehensive research, particularly for emerging Islamic banking. This study examines the role of banking regulation on the liquidity risk of 245 conventional banks and 68 Islamic banks from selected 14 Organization of the Islamic Cooperation (OIC) from 2000 to 2017 utilising the dynamic panel GMM (generalized method of moments) technique. We measure liquidity risk using the Net Stable Funding Ratio (NSFR) and the total financing-to-total deposits and short-term funding (LDEP). Meanwhile, the regulatory measures are asset restriction (AR), private monitoring (PM), supervisory power (SP) and capital requirements (CR). The findings suggest that regulation has a limited impact on bank liquidity risk. The CR supports the value creation of regulation through the reduction in banks’ liquidity risks, while PM and SP are agency costs of regulation that lead to higher liquidity risks. The impact of CR is lower on liquidity risk in Islamic banking than conventional ones, probably due to limited Islamic liquidity risk management facilities. Thus, regulators should strengthen Islamic liquidity risk instruments and markets to facilitate Islamic banking growth.

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Do disclosure and transparency affect bank’s financial performance?

Corporate Governance ◽

10.1108/cg-12-2018-0378 ◽

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.

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