The Influence of Capital Adequacy Ratio on the Financial Performance of Second-Tier Commercial Banks in Kenya (Published)
Performance of most mid-tier commercial banks in Kenya has been fluctuating over the past few years. Meanwhile, some of them continue to post impressive results as majority report losses and others merge in order to remain sustainable. This situation points to financial performance affecting the mid-tier commercial banks in Kenya. The government, through the Central Bank of Kenya, introduced prudential regulations aimed at bringing sanity in the banking industry. This move led to closure of Dubai Bank and Imperial Bank while Chase Bank went under statutory management awaiting new investors. From this, an investigation was done on how Central Bank regulations influenced financial performance of second-tier commercial banks in Kenya. Based on the study, this paper explores how capital adequacy ratio influences financial performance of commercial banks in Kenya. The study was purely quantitative research and, therefore, correlation research design and descriptive research designs were used. The study was conducted in 14 second tier commercial banks in Kenya. It collected financial data from 2013 to 2016, considering that the regulations came into effect in 2013 from CBK and commercial banks websites. The data was sourced from Central Bank of Kenya after getting permission and approval from National Commission for Science, Technology and Innovation (NACOSTI). Data collected was analysed using descriptive and inferential statistics. Multiple Regression Analysis was used to test the study research hypothesis. Findings were presented through tabulations and graphical illustrations. Computed correlation showed that capital adequacy ratio had significant strong positive relationship (p<0.05) with financial performance of mid-tier commercial banks. In conclusion, it was found that capital adequacy ratio is among the main predictors of mid-tier commercial banks’ financial performance. It was therefore recommended that CBK needs to regularly monitor commercial banks by ensuring that they publish their quarterly results to the public. The investment regulators in the country such as the Capital Markets Authority (CMA), Kenya Banker Association (KBA) and Central bank of Kenya can use these study findings to understand the bottom line impact of bank regulatory requirements and in understanding banks decision on to its customers.
Keywords: Capital Adequacy Ratio, Commercial Banks, Financial Performance, Influence, Kenya
Capital Structure Impact on Financial Performance of Sharia and Non-Sharia Complaint Companies of Pakistan Stock Exchange (Published)
For a firm to be profitable, it is necessary to create an optimal capital structure that contribute towards desired performance level. This study was conducted to explore the relationship between capital structure and financial performance of firms specifically with respect to shariah complaint and non shariah complaint companies. The analysis was conducted on panel data of 8 companies (3 shariah complaint and 5 non shariah complaint) listed under technology and communication sector of Pakistan Stock Exchange under the period 2009-2015. Financial Performance was the dependent variable measured by ROA and ROE while capital structure was independent variable measured by indicators, LTDR, STDR, SGR, NDTS and INSHOL. Multiple linear regression and correlation were used as statistical tools to run the model. On the basis key findings we concluded in Pakistan Shariah and non shariah companies have different pattrens of capital structure. We further concluded that capital structure effect the performance of firm in case of non-shariah but do not significantly affect performance of shariah complaint.
Keywords: Capital Structure, Financial Performance, Non- Sharia complaint, Pakistan, Return on Asset, Return on Equity, Sharia complaint, Technology and Communication
Effect of Credit Management on Performance of Commercial Banks in Rwanda (A Case Study of Equity Bank Rwanda Ltd) (Published)
Credit management is one of the most important activities in any company and cannot be overlooked by any economic enterprise engaged in credit irrespective of its business nature. Sound credit management is a prerequisite for a financial institution’s stability and continuing profitability, while deteriorating credit quality is the most frequent cause of poor financial performance and condition. As with any financial institution, the biggest risk in bank is lending money and not getting it back. The study sought to determine the effect of credit management on the financial performance of commercial banks in Rwanda. The study adopted a descriptive survey design. The target population of study consisted of 57 employees of Equity bank in credit department. Entire population was used as the sample giving a sample size of size of 57 employees. Purposive sampling technique was used in sampling where the entire population was included in the study. Primary data was collected using questionnaires which were administered to the respondents by the researcher. Descriptive and inferential statistics were used to analyze data. The study found that client appraisal, credit risk control and collection policy had effect on financial performance of Equity bank. The study established that there was strong relationship between financial performance of Equity bank and client appraisal, credit risk control and collection policy. The study established that client appraisal, credit risk control and collection policy significantly influence financial performance of Equity bank. Collection policy was found to have a higher effect on financial performance and that a stringent policy is more effective in debt recovery than a lenient policy. The study recommends that Equity bank should enhance their collection policy by adapting a more stringent policy to a lenient policy for effective debt recovery.
Keywords: Banks’, Client Appraisal, Credit Management, Debt Recovery, Financial Performance, Lending, Money, Risk Control
Factors Influencing the Acceptance of Enterprise Resource Planning System (ERP) and Financial Performance of Saudi Arabia Listed Companies: Multivariate Data Analysis Using Structural Equation Modeling (SEM) (Published)
Purpose – The purpose of this research is to examine the link between the acceptance of enterprise resource planning systems in Saudi Arabia, and the ways in which this can lead to long term acceptance of system. This research examines the issues of ERP acceptance, and the perceived benefits and ease of use, which a user has to deal with. Design/methodology/approach the research suggests the use of quantitative data, through the data analysis using multivariate data analysis. This approach uses structural equation modeling, which can lead to long-term change in the output of the data, and the link between the major hypotheses, which have been suggested. This ensures that the data collection can be undertaken. Findings – A number of findings from this research have been derived. It appears that the acceptance and use of ERP systems is central to the success of information systems today. However, the ease of use needs to be accentuated through training and support of users, which can be facilitated through top-level support for new systems. In order to reduce resistance, organizations need to take a proactive approach in implementing systems, and facilitate user participation, which can ensure that financial performance of systems can be improved.
Keywords: ERP, ERP Acceptance, ERP Perceived Ease of Use, ERP Perceived Usefulness, Financial Performance, PLS
Stimulants of Profitability of Non-Bank Financial Institutions: Evidence from Bangladesh (Published)
Financial institutions both Bank and Non-Bank play a significant role in the economy of a country. Like other developing countries Beside the Banking industry necessarily of Non-Bank financial institutions cannot overlook in Bangladesh. This study inspects the profitability of firms in the Non-Banking Financial Institutions (NBFIs) diligence of Bangladesh. Financial Enactment of a financial organization fundamentally depends on its some key financial factors. Specially operating efficiency is main inducing factor which is designed through operating income. Besides it capital Structure combination of equity and liability, term deposit, total asset considerably affect the profitability of any NBFI company. In addition operating expense also upsets the profitability though that is not statistically significant. Different Statistical procedures such as correlation matrix, multiple regressions have been used to determine the associations between variables. And before doing regression analysis normality distribution test has been accomplished by One-Sample Kolmogorov- Smirnov Test. This research is an effort to find out the statistically significant key stimulants variable and their level of impact over net profit.
Keywords: Capital Structure, Financial Performance, Non-Bank Financial Institutions (NBFI), Operating efficiencies, Profitability
The Relationship between the Financial Performance and Intellectual Capital in the Food and Beverage Enterprises (Published)
Increase in the gap between companies’ market value and their book value has resulted in numerous investigations into identifying the factors eliminated from the financial statements of companies. Intellectual capital value affects the value of companies but is not reflected in financial statements. This research investigated the relationship between financial performance of the companies in food and beverage industry listed in Tehran Stock Exchange and the components of intellectual capital. Accounting profit (loss) was used as a performance indicator. Pulic’s value added intellectual coefficient was used to measure the performance of intellectual capital. Kolmogrov-Smirnov and Mann-Whitney U tests were used to analyze the information about 127 firms-years of 23 active companies in the industry. The results indicated that the communication and human capital efficiency coefficients were higher in profitable companies compared to unprofitable companies. However, structural capital efficiency coefficient was higher in unprofitable companies.
Keywords: Financial Performance, Intellectual Capital, Value Added Coefficient
ANALYSIS OF BANKS FINANCIAL PERFORMANCE IN A LIBERALIZED BANKING ENVIRONMENT: A STUDY OF FIVE SELECTED BANKS IN NIGERIA. (Published)
The very essence of this research was to assess the financial performances of banks in a liberalized banking environment using an ordinary Least Square (OLS) method of regression analysis to analyze five selected banks in Nigeria. The time series properties of the variables were investigated by conducting a unit root test to determine the stationarity status of the data using annual series data spanning from 2001 – 2010. The analysis was further extended to cointegration and error correction modeling (ECM) technique in order to test for the stationarity status of the data by conducting a unit root test using the Dickey–Fuller (DF) and Augmented Dickey–Fuller (ADF) test. The objective of this research among others is to find out the effect of the nominal lending rate, the exchange rate and the credit volume on banks financial performances in terms of their profitability. The data sources were mainly from a ten year financial summary of the banks selected and CBN Statistical Bulletin, various years. From the empirical evidence made from the study so far, it was discovered that the nominal lending rate and the total credit had a positive impact on the profit of the five selected banks under review. Only exchange rate has a negative significance which is contrary to the other variables studied. The overall submission was that the variables employed are statistically significant as over 98 percent of them were explained at the long run. The researcher, therefore, recommends that to improve banks financial performance, the banks need a good regulatory environment that will enable them to expand their scope of business but strictly within the financial service industry and also good corporate governance that will allow for transparency and minimize fraud in the bank.
Keywords: Exchange Rate, Financial Performance, Interest Rate, Liberalization, Total credit
ANALYSIS OF BANKS FINANCIAL PERFORMANCE IN A LIBERALIZED BANKING ENVIRONMENT: A STUDY OF FIVE SELECTED BANKS IN NIGERIA. (Review Completed - Accepted)
The very essence of this research was to assess the financial performances of banks in a liberalized banking environment using an ordinary Least Square (OLS) method of regression analysis to analyze five selected banks in Nigeria. The time series properties of the variables were investigated by conducting a unit root test to determine the stationarity status of the data using annual series data spanning from 2001 – 2010. The analysis was further extended to cointegration and error correction modeling (ECM) technique in order to test for the stationarity status of the data by conducting a unit root test using the Dickey–Fuller (DF) and Augmented Dickey–Fuller (ADF) test. The objective of this research among others is to find out the effect of the nominal lending rate, the exchange rate and the credit volume on banks financial performances in terms of their profitability. The data sources were mainly from a ten year financial summary of the banks selected and CBN Statistical Bulletin, various years. From the empirical evidence made from the study so far, it was discovered that the nominal lending rate and the total credit had a positive impact on the profit of the five selected banks under review. Only exchange rate has a negative significance which is contrary to the other variables studied. The overall submission was that the variables employed are statistically significant as over 98 percent of them were explained at the long run. The researcher, therefore, recommends that to improve banks financial performance, the banks need a good regulatory environment that will enable them to expand their scope of business but strictly within the financial service industry and also good corporate governance that will allow for transparency and minimize fraud in the bank.
Keywords: Exchange Rate, Financial Performance, Interest Rate, Liberalization, Total credit