scholarly journals Credit Risk Assessments and Firm Value of Listed Commercial Banks in Kenya

2021 ◽  
pp. 68-82
Author(s):  
Mohamed Maalim Issackow ◽  
Felix Mwambia ◽  
Wilson Muema
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Firm Value ◽  
Equity Capital ◽  
Capital Adequacy ◽  
Risk Assessments ◽  
Asset Quality ◽  
The Impact ◽  
Positive Effect

Despite the various control measures put in place especially the CBK’s prudential laws to ensure that the performance of commercial banks in Kenya is ensured, most commercial banks have been collapsing in the recent past. It is in this light that the current study sought to ascertain the impact of bank liquidity, capital adequacy, asset quality and earnings on the firm value of listed Commercial banks in Kenya. Descriptive research design was employed on a population sample of eleven publicly listed retail banks. Secondary data was collected from CBK and other public financial reports over the 12-year period from 2009 to 2020. The collected data was analysed using1a multivariate panel regression1model to generate the relevant regression tests. The1study established that the capital adequacy has a marginal positive impact on the firm value while earning ability was found to have a statically insignificant positive effect on firm value among Kenyan commercial bank. The study findings indicated that liquidity was insignificantly and negatively correlated with firm value as asset quality had insignificant positive effect on firm value among Kenyan commercial bank. The study recommends that, managers of listed banks should embrace utilization of internally generated equity capital to ultimately promotes credit risk assessments as they maintain optimal levels of liquidity to maximize firm value and maintain high quality of assets as they sustained levels of earnings that boost output. This paper explained a credit risk rating concept that had not been examined in Kenya before.

scholarly journals Internal Determinants of Commercial Bank Profitability In Indonesia

2017 ◽  
Vol 8 (3) ◽  
pp. 219-223 ◽  
Author(s):  
Umi Widyastuti ◽  
Purwana E.S. Dedi ◽  
Sri Zulaihati
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Least Squares Method ◽  
Ordinary Least Squares ◽  
Capital Adequacy ◽  
Operating Efficiency ◽  
Bank Profitability ◽  
Operating Income ◽  
Net Interest Margin

Abstract Internal determinants of bank profitability can be defined as those factors that are influenced by the bank’s management decisions and policy objectives. This paper is aimed to examine the internal factors that impact on commercial banks profitability in Indonesia. The factors reviewed in the model namely capital adequacy, credit risk (non-performing loan), liquidity (loans to deposit ratio), net interest margin and operating efficiency (operating expenses to operating income ratio). Using purposive sampling method, the analysis used thirty three commercial banks, with 168 observations for the period 2010 to 2015. Based on the Chow-test, the common effect model was preferred. The model is estimated using Ordinary Least Squares method. The results revealed that two hypotheses were not be accepted. There are no significant effects of capital adequacy and credit risk on profitability, but the model explains that there are significant effects of all explanatory variables toward commercial bank profitability. However, other important internal determinants of bank profitability still have not included in the model of this paper.

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 Analysis of the Relationship between Credit Risk and Bank Performance of Some Commercial Banks in Ghana

2020 ◽  
Vol 8 (2) ◽  
pp. 34-51
Author(s):  
Joseph Acquah ◽  
Yusif Arthur ◽  
Damianus Kofi Owusu
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Quantitative Research ◽  
Banking Sector ◽  
Sampling Technique ◽  
Capital Adequacy ◽  
Research Approach ◽  
Independent Entity ◽  
The Relationship

This study analysed the relationship between credit risk and bank financial performance of selected commercial banks in Ghana for the period 2010 - 2014, using the banks respective financial statements. The study employed the quantitative research approach. The sample was Ghana Commercial Bank Limited, Zenith Bank Limited, UT Bank and Ecobank Plc. These four banks were selected using stratified random sampling technique. The data were primarily secondary and quantitative in nature. Both descriptive and inferential statistics were used to analyse the data. When the banks were compared, Ghana Commercial Bank Limited was found to be more liquid than Zenith Bank Limited. That of Zenith bank was also higher than UT bank and Ecobank Plc .However, profitability indicators showed that Zenith Bank Limited and Ecobank Plc utilised its assets better than Ghana Commercial Bank Limited and UT bank resulting in the two banks higher scores over the period. The findings show further that Ghana Commercial Bank Limited showed higher ratios for investment in the future while Zenith Bank Limited showed higher ratios of higher dividend immediately. However, Zenith Bank Limited capital adequacy level was far higher than the legal requirement of Banking sector while its counterparts fell slightly below it in terms of average. Based on the main findings and conclusions, it is recommended that Ghana Commercial Bank Limited should find a means of reducing its expenditure, introducing prudent assets management, should be cautious when assisting government in time of economic difficulty, and operate as an independent entity.

scholarly journals The Effects Of Ownership Structure And Listed Status On Bank Risk In China

2013 ◽  
Vol 29 (3) ◽  
pp. 695 ◽  
Author(s):  
Maoyong Cheng ◽  
Hong Zhao ◽  
Junrui Zhang
Keyword(s):  
Regression Analysis ◽  
Credit Risk ◽  
Ownership Structure ◽  
Commercial Banks ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Adequacy Ratio ◽  
Asset Quality ◽  
Relationship Of ◽  
The Relationship

This paper investigates the relationship of ownership structure, listed status and risk by using regression analysis based on the relevant data of Chinas commercial banks. Three main results emerge. First, compared to the state-owned banks, foreign-owned commercial banks exhibit better asset quality, lower credit risk and higher capital adequacy ratio; city commercial banks have lower credit risk and joint-stock commercial banks have lower credit risk and capital adequacy ratio. Second, listed status improves the asset quality and capital adequacy ratio. Finally, we also find that the listed status significantly moderates the relationship between ownership structure and risk. In conclusion, this study provides a theoretical reference for the reform of Chinas commercial banks.

scholarly journals Financial performance after the Spanish banking reforms: A comparative study of 19 commercial banks

2014 ◽  
Vol 4 (2) ◽  
pp. 70-82 ◽  
Author(s):  
Pison F. Irene ◽  
Cibrán F. Pilar ◽  
Lious Agbor Tabot Ntoung
Keyword(s):  
Financial Crisis ◽  
Financial Performance ◽  
Commercial Banks ◽  
Positive Impact ◽  
Capital Adequacy ◽  
Research Database ◽  
Banking Reforms ◽  
The 2008 Financial Crisis ◽  
Asset Quality ◽  
The Impact

A diagnostic review of the Spanish financial system during the 2008 financial crisis reveals the emergency need for banking reform in the sector. In an attempt to evaluate the impact of the Spanish reform, the present study examines the bank´s performance before/after the reform was adopted, using data of 19 Spanish commercial banks extracted from the Global Vantage research database (Standard and Poor’s) over the period 2006 to 2013. This study uses multivariable regression method to investigate the impact of the CAMELS rating system: capital adequacy, asset quality, management quality, liquidity and sensitivity to market risks on the bank´s performance such as earnings efficiency. The time-line of the study is essential because it helps us to determine the financial performance of Spanish commercial banks before the banking reforms during the financial crisis and an important set in terms of mergers and acquisition in the banking industry. The empirical results have found strong and positive evidence that Capital Adequacy, Management Capacity, Liquidity and Sensitivity to Market Risk are useful predictors of banks performance (earnings efficiency), thus, any reform pilot toward this banking indicators will eventually have a positive impact on banking performance. Base on the present study, the Spanish reform was so vital for better banking performance. Therefore, this study serves not only to academics but also to policy makers.

The Impact of Credit Risk on Performance: A Case of South African Commercial Banks

2020 ◽  
pp. 097215092096992
Author(s):  
Babatunde Lawrence ◽  
Mishelle Doorasamy ◽  
Prince Sarpong
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Gender Diversity ◽  
Capital Adequacy ◽  
Financial Reports ◽  
Return On Equity ◽  
Leverage Ratio ◽  
Small Banks ◽  
Board Gender Diversity ◽  
The Impact

The objective of the study was to comparatively assess the impact of credit risk on the performance of big and small banks in South Africa. Data from audited financial reports of 14 commercial banks were obtained and divided into two panel data sets and analysed using the R-Studio software version 3.5.1 to assess the impact of capital adequacy ratio (CAR), non-performing loan to gross loan (NPLGL), loan-to-deposit ratio (LTDR), leverage ratio (LR), board gender diversity (BGD), with bank size (total asset) and AGE as control variables, on performance, (return on asset [ROA] and return on equity [ROE]). The findings of the study revealed that non-performing loan (NPL), CAR, LR, LTDR and age of banks all have significant and greater impact on performance, as measured by ROA, of small banks when compared with big banks. Surprisingly, NPL was revealed to have a lesser impact on the ROE of small banks as compared to the ROE of big banks but showed no impact on the ROA of big banks during the period of 2008–2017.

scholarly journals The Impact of the Internal Audit in Reducing Credit Risk in Commercial Banks in Kosovo

2016 ◽  
Vol 12 (4) ◽  
pp. 268
Author(s):  
Shqipdona Hashani Siqani ◽  
Edona Sekiraca
Keyword(s):  
Credit Risk ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Internal Audit ◽  
Portfolio Diversification ◽  
Credit Risk Management ◽  
Loan Portfolio ◽  
Survey Results ◽  
The Republic ◽  
The Impact

Credit risk represents the vast majority of the risk in the context of estimating the capacity of the transfer of risk from commercial banks. Any commercial bank operating, in Kosovo, must have a system for managing credit risk. An important and essential process, such as the management of the credit risk, cannot be carried out without the aid of internal audit. From the survey results, it was concluded that the process of auditing the banks recommended the implementation of policies for managing credit risk of the respective commercial bank’s policy. This also include the policy of credit risk management of the Central Bank of the Republic of Kosovo, implementation of procedures, regulations and rules for credit exposure, loan portfolio diversification, training of staff of the credit risk involved in completing the loan files, etc.

scholarly journals Effects of Bank Specific Factors on Stock Returns of Listed Commercial Banks in Kenya

2021 ◽  
Vol 06 (08) ◽  
Author(s):  
Sheila Wamicwe ◽  
Keyword(s):  
Stock Returns ◽  
Stock Markets ◽  
Commercial Banks ◽  
The United States ◽  
Capital Adequacy ◽  
Market Portfolio ◽  
Specific Factors ◽  
Asset Quality ◽  
The Impact ◽  
Bank Specific Factors

The objective of this study was to establish the effects of bank specific factors on stock returns of listed commercial banks in Kenya, with four specific objectives; to determine the effect of capital adequacy on stock returns of listed commercial banks in Kenya, to determine the effect of asset quality on stock returns of listed commercial banks in Kenya, to determine the effect of earnings ability on stock returns of listed commercial banks in Kenya and to determine the effect of liquidity on stock returns of listed commercial banks in Kenya. The Kenyan banking sector instability within the stock market has been of great concern as depicted by continuous fluctuations in the stock prices of listed banks. Studies undertaken in other stock markets displayed mixed findings and much concentration has been on the United States, Turkey and Indonesian stock markets. Hence, a study providing a Kenyan perspective on the link between banks’ internal environment and stock returns of listed banks was crucial. The study was based on market portfolio theory, efficiency structure hypothesis and the buffer capital theory. The research targeted all the 11 listed commercial banks at the Nairobi Securities Exchange. Quarterly data was collected for the period 2010-2019. A pooled panel regression model was used in the estimation of the significance of the impact of the variables. Findings of the research established that capital adequacy and earnings had a significant effect on stock returns. The study recommends that commercial banks should improve their capital base and expand their asset quality through better loan management.

scholarly journals Impacts of Financial Inclusion on Non-Performing Loans of Commercial Banks: Evidence from China

2018 ◽  
Vol 10 (9) ◽  
pp. 3084 ◽  
Author(s):  
Feng-Wen Chen ◽  
Yuan Feng ◽  
Wei Wang
Keyword(s):  
Financial Crisis ◽  
Credit Risk ◽  
Commercial Banks ◽  
Local Governments ◽  
Banking Sector ◽  
Negative Impact ◽  
Financial Inclusion ◽  
Financial Industry ◽  
Asset Quality ◽  
The Impact

Non-performing loans of commercial banks have long hampered the development of the banking sector, and directly reflect the credit risk and asset quality. With the continuous development of the financial industry, the introduction of financial inclusion has greatly eased the shortage of funds, and narrowed the gap between poor and rich. However, whether the promotion of financial inclusion in the financial industry could affect the non-performing loans of commercial banks has not been verified. Therefore, this paper discusses the possible associations between financial inclusion and non-performing loans of commercial banks on the regional level, constructs a panel data model by selecting the data of 31 provinces (including 4 municipalities) in China from 2005 to 2016, and uses the fixed effect model for empirical test. The empirical results (from an overall national sample) reveal a negative impact of the financial inclusion on non-performing loans. Moreover, the development of the banking sector and the regional consumption could enhance the impact of financial inclusion, while government intervention and unemployment could reduce the impact of financial inclusion. From the analysis of the regional sample, when the development of financial inclusion reaches a high level, the lagged financial inclusion promote the non-performing loans of commercial banks; however, when the financial inclusion is underdeveloped, the development of commercial banks act as a disincentive to non-performing loans. Therefore, the local governments should pay more attention to the influences of financial inclusion on the financial industry, in order to maintain the stability of banking asset quality. In addition, the negative impact of financial inclusion on non-performing loans of commercial banks is significant in China central region, while its impacts in China eastern and western regions are not significant. This indicates that the development of the financial industry and economy can hamper the effects of financial inclusion. It is necessary to adjust the financial resource allocation according to the characteristics of different regions in China, so that the financial inclusion can effectively promote the regional financial industry upgrade, improve regional capital flow efficiency, and fundamentally reduce the non-performing loans of commercial banks. According to the sample analysis by time, there is a significant negative impact relationship between inclusive finance and commercial banks’ non-performing loans after the financial crisis, while the impacts before and during the financial crisis are not significant. This demonstrates that the impact of the global financial crisis on China’s regional economy has further enhanced the inefficiency of the inclusive financial system on credit risk, which in turn, helps commercial banks better maintain asset quality stability.

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