scholarly journals Agency Cost and Credit Risk Management: Empirical Evidence from Listed Commercial Banks in Nigeria

2020 ◽  
pp. 1-17
Author(s):  
Peter E. Ayunku ◽  
Akwarandu Uzochukwu
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Random Effect ◽  
Agency Cost ◽  
Data Set ◽  
Nonperforming Loans ◽  
Ex Post ◽  
Effect Regression ◽  
Ex Post Facto ◽  
New Policies

This study explores the relationship between agency cost and credit risk of quoted commercial banks in Nigeria. Five hypotheses were formulated following the dependent variable of credit risk which we proxy as non-performing loan. The independent variables employed for this study include agency cost, profitability, income diversification, corporate governance and firm leverage. This study is based on ex-post facto research design and made use of panel data set collected from twelve (12) quoted commercial banks within thirteen years of 2007 and 2019 financial year.  We analyzed the data set using a random effect regression analysis. The result showed that agency cost which is measured as managerial inefficiency is strongly and positively related to the non-performing loan of commercial banks in Nigeria during the period under investigation. However, in light of the obtained result, we recommend that bank managers in Nigeria should take a keen look at the activities that make up agency cost. Hence, they should consider new policies that will lower the size of its agency cost to reduce the level of nonperforming loans which will ultimately create room for greater profit.

scholarly journals Credit Management and Issues of Bad Debts: An Empirical Study of Listed Deposit Banks in Nigeria

2020 ◽  
pp. 32-49
Author(s):  
Peter E. Ayunku ◽  
Akwarandu Uzochukwu
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Random Effect ◽  
Credit Risk Management ◽  
Loan Loss ◽  
Data Set ◽  
Credit Management ◽  
Loan Loss Provision ◽  
The Impact

This study examines the impact of credit management on firm performance amidst bad debts, among Nigerian deposit banks. Five hypotheses were formulated following the dependent variables of Return on Asset and Tobin Q. The independent variables employed for this study include: Loan Loss Provision, Loan to Deposit Ratio, Equity to Asset Ratio, and Loan Write off. This study is based on ex-post facto research design and employed a panel data set collected from fourteen (14) commercial banks over six years ranging from 2014 to 2019 financial year. We analyzed the data set using descriptive statistics, correlation and Ordinary Least Square Regression Technique. The random effect models established that non-performing loan, loan loss provision and equity to asset impact significantly on banks’ performance in both Return on Asset and Tobin-Q models. This suggests that the sampled banks need to establish efficient arrangements to deal with credit risk management. In all, credit risk management indicators considered in this research are important variables in explaining the profitability of Nigerian commercial banks. However, based on the outcome from the empirical analysis, the study carefully recommends that investors and shareholders in these banks should be aware of the possible use of provisions for losses on non-performing loans by managers for smoothening of profits. The shareholders specifically should be ready to meet optimal agency costs to reduce the manager's information asymmetry by hiring competent internal and external auditors.

scholarly journals What Determines the Profitability of Vietnam Commercial Banks?

2018 ◽  
Vol 11 (2) ◽  
pp. 231 ◽  
Author(s):  
Duong Thuy Nguyen ◽  
Huyen Thanh Ta ◽  
Huong Thi Diem Nguyen
Keyword(s):  
Capital Structure ◽  
Commercial Banks ◽  
Banking Sector ◽  
Banking System ◽  
Liquidity Risk ◽  
State Ownership ◽  
Data Set ◽  
Bank Profitability ◽  
Macroeconomic Factors ◽  
New Policies

Kunt and Detragiache (1999) said that the profitability of the banking system was a good indication in signaling financial crisis. Therefore, studying determinants of bank profitability is necessary for better understanding of the current condition of the banking sector, and then, for launching new policies. The research explored determinants of Vietnamese commercial banks’ profitability. Using Regression Analysis for Panel Data set of 13 Vietnamese commercial banks over the period from 2006 to 2015, the study found that foreign ownership, cost to income and the level of credit risk, negatively influenced on the profitability of Vietnamese banks, whereas state ownership, size of assets, and macroeconomic factors (GDP and inflation) did not indicated statistically significant relations to the profitability and the relationships between capital structure, liquidity risk and the profitability were mixed.

DETERMINANTS OF CREDIT RISK: A COMPARATIVE ANALYSIS BETWEEN ISLAMIC AND CONVENTIONAL BANKS IN BANGLADESH

2020 ◽  
pp. 1-31
Author(s):  
Md. NURUL KABIR ◽  
MOHAMMAD DULAL MIAH ◽  
RUBAIYA NADIA HUDA
Keyword(s):  
Credit Risk ◽  
Emerging Economies ◽  
Commercial Banks ◽  
Poor Quality ◽  
Capital Adequacy ◽  
Policy Implications ◽  
Board Independence ◽  
Data Set ◽  
Capital Adequacy Ratio ◽  
Conventional Banks

The paper investigates the determinants of credit risk of Islamic and conventional banks in Bangladesh. In so doing, it collects data from 30 private commercial banks comprising of seven Islamic banks and 23 conventional banks for the period 2001–2018. Collected data are analyzed using GMM estimation technique. This method is perceived to be robust because it reduces the endogeneity problem that exists in the panel data set. Analysis of data shows that among the macro-economic variables, GDP growth decreases credit risk, whereas real interest rate and inflation increase credit risk. Bank-specific variables prove that both clusters of banks suffer from adverse selection and moral hazard problems. Results also indicate that competition has a risk-enhancing effect on banks, which supports the competition-fragility nexus. Further analysis shows that board size and board independence affect the credit risk of both clusters of banks. Findings of this study suggest some policy implications from macro, bank and governance perspectives. Specifically, banks should adopt ‘speed limit’ policy to reduce the poor quality loan. Also, competition in the banking industry should be regulated. Finally, central bank should maintain uniform capital adequacy ratio for both clusters of banks. Although this study is limited to private commercial banks in Bangladesh, the results can be generalized for other emerging economies.

scholarly journals Liquidity Risk and Bank Performance: An Empirical Test for Tunisian Banks

2017 ◽  
Vol 7 (1) ◽  
pp. 46 ◽  
Author(s):  
Abdelaziz Hakimi ◽  
Khemais Zaghdoudi
Keyword(s):  
Panel Data ◽  
Financial Crisis ◽  
Credit Risk ◽  
Empirical Test ◽  
Random Effect ◽  
Liquidity Risk ◽  
Bank Performance ◽  
International Financial Crisis ◽  
Effect Regression ◽  
The Relationship

An important part of banking literature was interested in the relationship between credit risk and bank performance. However, only few studies investigated the association between liquidity risk and bank performance. The aim of this paper is to study the effect of liquidity risk on the Tunisian bank performance. To this end, we used a sample of 10 Tunisian banks over the period 1990-2013. By applying panel data method, precisely random effect regression, results show that liquidity risk decreases significantly Tunisian bank performance. Also, findings indicate that international financial crisis and inflation act negatively and significantly on bank performance.

scholarly journals Risk Management and the Financial Performance of Banks in Nigeria

2020 ◽  
Vol 11 (5) ◽  
pp. 115
Author(s):  
Henry Inegbedion ◽  
Bello Deva Vincent ◽  
Eseosa Obadiaru
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Performance ◽  
Asset Management ◽  
Commercial Banks ◽  
Generalized Method Of Moments ◽  
Liquidity Risk ◽  
Capital Adequacy ◽  
Risk Capital ◽  
Ex Post

The study examined “risk management and financial performance of banks in Nigeria” with focus on commercial banks. The broad objective of the study was to ascertain the effect of risk asset management on the optimal financial performance of commercial banks in Nigeria. The study is a longitudinal survey, so the ex-post facto research design was applied. Research data were analysed using generalized method of moments (GMM) and vector Error Correction Model, after testing and adjusting the data for stationarity and Cointegration.The research findings were: Banks’ profitability is significantly influenced in the short run by liquidity risk and in the long-run by credit risk, capital adequacy risk, leverage risk and liquidity risk. Furthermore, profitability measured by ROaA was found to be positively related to liquidity risk but negatively related credit risk. Arising from the findings, there is the need for effective risk management, especially credit, capital adequacy, leverage and liquidity risks, to enhance the profitability of banks. By helping to enhance the going concern of banks, risk management will help to reduce retrenchment and unemployment and hence help to forestall the attendant social vices.

scholarly journals THE RELATIONSHIP BETWEEN THE INVESTMENT PORTFOLIO AND BANKING FINANCIAL PERFORMANCE IN NIGERIA

2020 ◽  
Vol 3 (1) ◽  
pp. 141-151
Author(s):  
Abdullahi Bala Ado ◽  
Amina Dahir Salman ◽  
Bala Ado Kofar Mata ◽  
Aminu Kado Kurfi
Keyword(s):  
Financial Performance ◽  
Portfolio Choice ◽  
Commercial Banks ◽  
Panel Data Analysis ◽  
Random Effect ◽  
Investment Portfolio ◽  
Treasury Bills ◽  
Insignificant Effect ◽  
Ex Post ◽  
The Relationship

The study aims to investigate the relationship between the investment portfolio and banking financial performance in Nigeria. The study took an ex post factor research design and firm was used as the unit of analysis. A population of the 15 commercial banks was taken but Skye Bank was screened out due to the unavailability of data and 14 banks were used as the sample for this study. Panel data analysis was used to analyze the data with E-views version 9 using the three models; without effect, random effect and fixed effect. The study reveals that investment in bond has a significant but negative effect on return on the asset while cash reserve had a positive but an insignificant effect on financial performance and treasury bills has a negative and an insignificant effect on financial performance. There is also a need for the management of investment companies to have a solid organization structure, as it will influence their investment portfolio choice, to avoid insignificant choices like treasury bills which do not impact on their financial performance. The research, therefore, recommends that the management of commercial banks should decrease their investment in bonds, cash reserve and treasury bills so as to avoid depleting the return on asset and consider investment in other portfolios like insurance, pension, forex and so on. Keywords: Investment Portfolio, Banks, Financial Performance, Treasury bill, Cash reserve

scholarly journals Implementation of Basel II and Profitability of Banks in Pakistan

2019 ◽  
Vol 1 (1) ◽  
pp. 24-34
Author(s):  
Muhammad Ramzan Sajid ◽  
◽  
Hassan Mujtaba Nawaz Saleem ◽  
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Regression Model ◽  
Commercial Banks ◽  
Random Effect ◽  
Liquidity Risk ◽  
Basel Ii ◽  
Annual Reports ◽  
Bank Profitability ◽  
The Impact

This study examines the impact of credit risk and liquidity risk on the profitability of the banks in Pakistan before and after the implementation of the Basel II policy in Pakistani Banks. For this purpose, five private commercial banks of Pakistan selected as the sample of our study. The balanced panel data of these banks for ten years (2006-2015) is used to analyze the model. The data is collected from the annual reports of the selected banks. The impact of pre and post-Basel-II policy implementation is also measured using four years (2006-2009) as pre-Basel-II and six years (2010-2015) as post-Basel-II to compare the impact of Basel-II implementation in the banks. The regression model estimation technique is used, which is selected based on the unit root test. The fixed effect and random effect models are used based on the Hausman test to estimate profitability determinants. The models are applied in three phases as the whole period, pre-Basel-II, and post-Basel-II implementation period. Further studies could be developed by adding more variables to the regression model to check their impact on bank profitability. The sample size can be increased to all commercial banks, and further, this study can also be discussed in Islamic banking and microfinance institutions. Further, the dependent variables could also be increased to enhance the results of bank profitability. The number of observations could be improved to describe the risk management more prudent than this. The study suggests that banks have to follow strategies that provide adequate diversification in credit risk and liquidity risk management to mitigate these risks and enhance the profitability. It is further recommended that adopting a sound risk management system and strong corporate governance will reduce the credit risk and liquidity risk and ultimately improve the profitability of banks in Pakistan.

scholarly journals Real Earnings Management and Dividend Payout among Non-financial Institutions in Nigeria

2020 ◽  
pp. 39-54
Author(s):  
Peter E. Ayunku ◽  
Ekokeme, Tamaroukro Timipere
Keyword(s):  
Earnings Management ◽  
Research Design ◽  
Financial Institutions ◽  
Secondary Data ◽  
Real Earnings Management ◽  
Data Set ◽  
Dividend Payout ◽  
Banking And Finance ◽  
Ex Post ◽  
Ex Post Facto

Aims: This study seeks to evaluate the consequences of real earnings management and dividend payout among non-financial institutions in Nigeria. Study Design: The study adopted Descriptive and ex-post facto research design. Place and Duration of Study: Department of Banking and Finance, Niger Delta University, Wilberforce Island, Bayelsa State, Nigeria. The study was carried out between October 2019 and January 2020. Methodology: To this end, we made use of Descriptive and ex-post research design, secondary data set, collected from thirty five quoted non-financial institutions for the period 2015 and 2018 financial period. The data were analyzed using Descriptive Statistics, Correlation Matrix. Results: Our findings align with the agency theory which suggests that despite the fact that corporate contracting is primarily designed to align incentives between principals and agents, agency concerns are still created as a result of incompleteness and rigidities in binding of contracts, which lead to manipulation of the reporting process consequently altering shareholders returns in form of dividend payout. Conclusion: Specifically, we find that real earnings management is been modulated through expenses. The variables of abnormal production and cash flow from operations show no significant effect on dividend payout with respect to the institutions and period under review.

scholarly journals The Impact of Credit Risk on the Financial Performance of Chinese Banks

2017 ◽  
Vol 2 (3) ◽  
pp. 14-17 ◽  
Author(s):  
Juliana Stanley Isanzu
Keyword(s):  
Credit Risk ◽  
Financial Performance ◽  
Commercial Banks ◽  
Secondary Data ◽  
Capital Adequacy ◽  
Nonperforming Loans ◽  
Panel Data Regression ◽  
Capital Adequacy Ratio ◽  
Chinese Banks ◽  
The Impact

The study aim was to empirically examine the impact of credit risk on the financial performance of Chinese banks. Secondary data was collected from five largest commercial banks in the country for the period of 7 years from 2008 to 2014. The study used nonperforming loans, capital adequacy ratio, impaired loan reserve, and loan impairment charges as measures of credit risk and for a measure of financial performance return on asset was used. Data analysis was done using a balanced panel data regression model, and the study findings reveal nonperforming loan and Capital adequacy have a significant impact of on financial performance of Chinese commercial banks; therefore, the need to control credit risk is crucial for bank financial performance.

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