Liability Management Research Articles

The Impact of Asset & Liability Management on Profitability: Evidence from Selected Private Commercial Banks in Ethiopia

This research meticulously investigates the intricate interplay between Asset and Liability Management (ALM) practices and the profitability dynamics of selected private commercial banks in Ethiopia over the period spanning 2011 to 2023. Employing a comprehensive fixed effect balanced panel regression analysis across a time horizon of 13 years and encompassing data from ten meticulously chosen banks, this study sheds light on critical aspects of financial management in the banking sector. Utilizing a quantitative approach and an explanatory design rooted in secondary data extracted from audited financial statements, the study rigorously examines a spectrum of key variables. These variables include income diversification, liquidity, bank size, GDP, asset quality, capital adequacy, loan and advance, and operational efficiency, all meticulously analyzed using E-view 12 econometrics software. The research findings underscore the pivotal significance of certain factors in enhancing bank profitability. Notably, asset quality, liquidity ratio, GDP, loan and advance, and bank size emerge as positive influencers on bank profitability, exhibiting statistically significant impacts. Conversely, operational efficiency and income diversification were found to exert negative effects on profitability. Surprisingly, capital adequacy was established as statistically insignificant in this context. This study accentuates the critical importance of asset quality, operational efficiency, liquidity management, bank size, GDP, income diversification, and loans as fundamental drivers of banks' return on assets. By accentuating the strategic significance of these variables, bank managers are equipped to navigate the complex financial landscape, leveraging effective ALM strategies to optimize profitability and ensure sustained financial viability.

The Impact of Applying International Accounting Standards on the Tax Base: An Applied Study of a Sample Of Banks Listed on the Iraq Stock Exchange

Objectives: The study aimed to examine how international accounting standards affect the taxable base of Iraqi banks listed on the Iraq Stock Exchange. Methods: A stratified purposeful sample of 33 participants was selected, including top management from financial departments of the National Bank of Iraq, Commercial Bank of Iraq, and Bank of Baghdad, as well as accountants and auditors. Data was collected using a questionnaire and analyzed through SPSS software. Results: The findings indicated that accounting information provides essential financial and accounting data necessary for calculating income, expenditure, and profits for tax purposes. This data enables government agencies to estimate the tax base more accurately. Furthermore, financial transparency and reporting include disclosing changes in tax rates compared to the previous accounting period. Specific international accounting standards, including Standards 9, 12, 15, 16, 21, and 36, were found to significantly influence the taxable base of the banks. Conclusion: The study concluded that banks should develop deferred tax asset and liability management strategies to reduce deferred tax impacts on financial statements and improve performance. Additionally, banks should periodically review and adjust their accounting and tax practices to comply with local legislation and international accounting standards, particularly in the areas of financial instruments, income tax, revenue recognition, fixed assets, and exchange rate changes.

Director Liability Protection and the Quality of Independent Directors

We study whether legal liability protection helps companies to recruit and retain high-quality independent directors. We conduct difference-in-differences analyses exploiting the 1999 Ninth Circuit Court of Appeals Ruling on the Silicon Graphics case, which substantially raised the bar for filing securities class action (SCA) lawsuits as a shock. We document supporting evidence for the talent attraction hypothesis by showing improvements in newly recruited independent director quality following the ruling, but only for candidates who are previously not exposed to SCA litigation risk. The effects are stronger for firms facing greater litigation risk ex ante or smaller local supplies of director candidates. Results are more evident for experience-based quality dimensions. We also analyze a sample of voluntary independent director departures and find little support for the talent retention hypothesis, suggesting that more complex factors enter into a director’s continuation decision once a director is already exposed to SCA litigation risk. A policy implication is that liability protection can be useful in attracting more unexposed high-quality candidates to the pool of public boards but does little to attract high-quality candidates who are already in the pool of public firms. This paper was accepted by Gustavo Manso, finance. Funding: H. Zou acknowledges the financial support from a competitive General Research Fund (GRF) grant from the Research Grants Council of the Hong Kong Special Administrative Region, China [Project No. HKU 17513816]. S. Shen acknowledges the financial support from the National Natural Science Foundation of China [Grants 72202164 and 72332003]. The work was partially carried out while R. W. Masulis visited the University of Hong Kong as an FBE visiting researcher, and he thanks the Faculty of Business and Economics of the University of Hong Kong for its sponsorship. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2020.03743 .

A study of asset and liability management applied to Brazilian pension funds

Asset and Liability Management (ALM) is a critical framework for pension funds, ensuring they have sufficient assets to meet future liabilities (pension payments) while managing investment risks effectively. This paper utilizes Brazilian data to develop an ALM model specifically for pension funds in the country. The model employs an optimization strategy that minimizes expected contributions made by individuals throughout their working lives. This optimization adheres to cash flow limitations and regulatory restrictions. The objective function leverages a min–max robust optimization approach based on a three-scenario planning scheme inspired by Brazil’s Interbank Rate. We incorporate a machine learning approach based on CMARS to predict confidence intervals for the key stochastic model parameters, particularly those related to the real returns of Brazilian investment classes. The findings empower pension fund managers to formulate well-informed investment strategies. We highlight allocation strategies that can reduce contribution rates without jeopardizing fund solvency, even for managers with a more aggressive risk profile favoring higher stock market allocations. Additionally, the study is enriched by an empirical analysis using data from a Brazilian pension fund, demonstrating the model’s practical application. In short, this model offers valuable insights that can benefit a wide range of pension funds in the Brazilian market, and it could also be applied to similar situations globally.

Robust Goal Programming as a Novelty Asset Liability Management Modeling in Non-Financial Companies: A Systematic Literature Review

Robust Goal Programming as a Novelty Asset Liability Management Modeling in Non-Financial Companies: A Systematic Literature Review

The Impact of Asset-Liability Management on the Profitability of Listed Commercial Banks in Vietnam

This paper investigates the effect of asset-liability management on the profitability of listed commercial banks in Vietnam, analyzing annual data from 2013 to 2023. The study uses VIF tests, Heteroskedasticity tests, Model Specification tests, and the Generalized Least Squares (GLS) model with the Modified Wald test to examine the data. The results reveal a positive correlation between bank asset management and annual GDP growth with profitability. Conversely, liability management and the year-on-year growth rate of total assets negatively impact profitability. Specifically, factors such as loans and advances, investments in securities on the asset side, and deposits and borrowings from other credit institutions, along with customer deposits on the liability side, are significant. Lending activities, in particular, are identified as key drivers of financial performance in the Vietnamese banking sector. However, the minimal impact of investment securities on profitability raises questions, given their traditionally significant role in banking profitability strategies globally. The study also highlights the negative effects of certain liabilities on bank profitability, stressing the need for careful liability management for banks in Vietnam. While GDP growth is generally linked with economic prosperity and financial sector growth, its impact on bank profitability in Vietnam appears limited, suggesting that other factors might play a more significant role.

Risks and Financial Indicators in Managing Bank Liquidity in Islamic Banks: A Case Study of Asia Islamic Bank for Finance and Investment in Iraq

The aims of this study to demonstrate the importance of liquidity indicators and the role of liquidity management in addressing liquidity risk and achieving alignment between the bank's objectives of maximizing profitability, determining an optimal level of liquidity and providing security for depositors and shareholders by following specific strategies and working according to specific mechanisms to achieve harmonization and alignment between its objectives Foremost among them is the forecasting, planning and follow-up of the volume and timing of cash flows, early disclosure of possible deficits and surplus cash balance and planning for investing surplus. In addition to using the financial ratios of the legal reserve, the legal liquidity ratio and the cash balance ratio through which the liquidity risk can be addressed and the bank's objective of securing optimal cash liquidity, maximizing profitability and providing security to the parties dealing with it can be achieved. Liquidity management should also pay attention to creating compatibility, balance and harmonization in the management of assets and liabilities and the role of reserves in securing liquidity.

Current Liabilities and Financial Performance of Healthcare Firms in Nigeria

The study evaluated the relationship between current liabilities and financial performance of healthcare firms in Nigeria. The specific objectives of the study are to assess the effect of Trade Payables, Current Tax Liabilities and Short-Term Borrowings on Return on Assets of Healthcare firms in Nigeria. Ex post facto research design was adopted. Data were collected from annual reports and accounts of sampled firms within the industry to test the null hypotheses that selected current liabilities do not affect return on assets significantly. Correlational analysis was the tool of analysis using panel data set covering Fifty (50) observations from Five (5) firms in the Healthcare sector. The findings revealed that Trade Payables (TP) have weak but significant positive relationship with Return on Assets of Healthcare firms in Nigeria with a correlation coefficient of 0.524514 and a p-value of 0.0001. Current Tax Liabilities have weak but significant positive relationship with Return on Assets of Healthcare firms in Nigeria with a correlation coefficient of 0.539686 and a p-value of 0.0001. Short-Term Borrowings have weak but significant positive association with Return on Assets of Healthcare firms in Nigeria with a correlation coefficient of 0.538232 and a p-value of 0.0001. The implication of the findings is that current liabilities such as trade payables, current tax liabilities and short-term borrowings are significant positive determinants of financial performance of healthcare firms in Nigeria. The study therefore concluded that while the observed relationships were statistically significant, the weak correlations suggest that other factors not examined in this study may have stronger association with return on assets of healthcare firms. The study recommends that effective management of trade payables and current tax liabilities is essential for healthcare firms to successfully navigate the tedious regulatory requirements and enhance financial performance. Furthermore, strategic utilization of short-term borrowings would provide healthcare firms with the necessary financial flexibility to support growth initiatives and address short-term funding needs.

"Tax optimization" and its difference from "tax planning"

The article clarifies the content and relationship between the concepts of «tax optimization» and «tax planning». The criteria for distinguishing these concepts are determined. It is established that tax planning is a multi­stage process which includes both strategic forecasting and careful organization of tax liabilities at each level of business. The main goal of this process is to be able to shape the structure and form of the business in such a way that they are optimal from the taxation point of view. Tax planning primarily determines the choice of a business entity’s strategy. Tax planning is defined as an important element of a company’s strategic management aimed at long-term and comprehensive management of tax liabilities. Tax optimization is an important process aimed at adapting the taxpayer to the peculiarities of the current tax system in order to choose the most profitable and efficient taxation regime. This process is not limited to the passive application of tax rules, but involves the active management of tax liabilities within the limits of legally permissible techniques, means and methods. Tax optimization is not only the ability to choose the most favorable conditions from those offered by the legislator, but also the ability to predict and adapt to changes that may affect the tax burden in the future. Tax optimization as a legal tool for reducing the total tax burden is considered exclusively within the framework of legal actions of the taxpayer. A distinctive feature of tax optimization as compared to tax planning is its focus on achieving short- and medium-term goals of a business entity by directly using the opportunities provided by tax legislation. Tax planning, on the other hand, is an element of strategic management aimed at achieving the long-term strategic goals of a business entity. Tax optimization is aimed at developing the most favorable model for fulfilling tax obligations by a business entity without changing the economic substance of business transactions. This approach allows the taxpayer to flexibly adapt to changes in the tax environment, while maintaining the sustainability of financial results and reducing tax costs. Tax optimization is not just a tool for reducing the tax burden, but also an important element of tax planning.

Moderating Effect of Board Characteristics on the Association between Asset Liability Management and Financial Performance of Commercial Banks in Nigeria

Asset liability management and consistent improvement in financial performance are the responsibility of the Board of Directors of commercial banks, yet studies on the impact of asset liability management on the financial performance of commercial banks in Sub-Saharan Africa have excluded board characteristics variable from their statistical model. This study examines the moderating effect of board characteristics and asset liability management on the financial performance of commercial banks in Nigeria. Commercial banks. It was based on secondary data, obtained from annual reports of commercial banks in Nigeria, the study covered the period starting from 2012 to 2021 and it purposively selected eleven (11) commercial banks out of fourteen (14) commercial banks in Nigeria. The statistical analysis was done using LASSO (Least Absolute Shrinkage Selection Operator). The findings of the study revealed that the moderating effect of board characteristics and asset liability management had a statistically significant impact on the financial performance of commercial banks in Nigeria because the p-values (0.04;0.03,0.02,0.01, and 0.005) obtained using LASSO were less than the 5% statistical threshold used in this study. The study concluded that the board of directors of commercial banks in Nigeria should ensure that they appoint board members who have expertise and experience in the establishment of asset liability management since its interaction with board characteristics showed a statistically significant impact on the financial performance of the bank.

The Impact of the Sarbanes-Oxley Act on Takeover Protection Provisions

We investigate the effects of the Sarbanes-Oxley (SOX) Act on corporate governance metrics, such as the takeover protection provisions and the governance index (G-index). We look at provisions related to takeover protection such as severance agreements, indemnity contracts, golden parachutes, compensation schemes, director liability and indemnity. We examine the effects of SOX between the two periods, designating the 1998–2000 timeframe as the pre–SOX period and the 2002–2004 timeframe as the post–SOX period. Then, in order to determine whether these provisions were affected in any way after 2004, we compare the values from 2004 to the values from 2006. We discover that between the pre-SOX and post-SOX periods, the G-index mean score had increased, indicating a declining degree of total shareholder rights. When we examine the six protection provisions, we discover that two of them—compensation plans and golden parachutes—had deteriorated (i.e., the percentage of firms using these measures had increased) and four of them—indemnification contracts, severance agreements, director indemnity, and director liability—had improved. Put differently, following the passage of the Act, businesses began to select different takeover protection options. However, the SOX's long-term effects were restricted to two variables only. After 2004, the proportion of companies employing golden parachutes climbed (i.e., negatively), whilst the percentage of companies utilizing severance agreements decreased (i.e., positively). We conclude that, in general, the SOX Act had a favorable effect on the majority of the measures that we looked at, with the exception of two measures: golden parachutes and compensation schemes.

MECHANISM OF TAX CONSULTING IN THE MANAGEMENT OF THE TAX COMPONENT OF ENTERPRISE ECONOMIC SECURITY

The article considers the mechanism of tax consultancy as an important element of the management of the tax component of the economic security of an enterprise, which is particularly relevant in the context of constant changes in tax legislation and growing requirements for transparency of financial statements. Tax consultancy is a complex process of providing companies with qualified assistance in the field of tax planning, optimisation of tax liabilities and management of tax risks. It is substantiated that tax consulting not only helps to reduce the tax burden, but also ensures compliance of the company's tax policy with the requirements of current legislation, which, in turn, is a guarantee of long-term stability and financial sustainability of the company. The article examines the structural elements of the tax liability management mechanism, which include tax planning, ensuring conditions for timely and correct calculation of tax liabilities, as well as organisational and control components. Particular attention is paid to the analysis of the tax planning process as one of the key stages of tax consulting. It is determined that effective tax planning allows an enterprise to optimise the structure of income and expenses, thereby reducing the tax burden and ensuring the rational use of financial resources. This paper considers the methods of ensuring compliance with tax reporting requirements as an important factor in the process of tax consulting. The function of tax consultancy in the formulation and execution of strategies designed to mitigate tax risks and enhance the efficacy of enterprise financial management is established. The necessity of utilising contemporary information technologies in the domain of tax consulting is underscored, as this enables the enhancement of the precision and efficacy of managerial resolutions pertaining to taxation. It can be concluded that effective tax consulting plays a pivotal role in enhancing the economic resilience of an enterprise. It serves to fortify the enterprise against external and internal threats, including those posed by shifts in the tax environment and economic challenges.

An Analysis of Maturity Patterns and Interest Rate Risk in Public and Private Banks in India: an Asset Liability Management Approach

An Analysis of Maturity Patterns and Interest Rate Risk in Public and Private Banks in India: an Asset Liability Management Approach

Sovereign Asset and Liability Management (SALM) and Efficient Debt Management: A Comprehensive Review of Short-Run Dynamics, Long-Run Relationships, and Asymmetric Effects

Sovereign Asset and Liability Management (SALM) and Efficient Debt Management: A Comprehensive Review of Short-Run Dynamics, Long-Run Relationships, and Asymmetric Effects

Approaches to numerical analysis of optimal control with linear phase constraints on the example of the assets and liabilities management by a bank

This paper presents the research of approaches to numerically compute the solution to an optimal control problem with phase constraints. Such models are typical for economic modeling, but can also be found in a variety of applications. The formal description of planning the assets and liabilities by the management of a bank within internal goals and regulatory requirements may be formalized as an optimal control problem with constraints. Solving such models analytically is rarely possible, but numerical experiments give the idea of the properties of the solution and the prospective dynamics of the bank’s balance sheet. Two types of methods are available to solve this problem numerically: indirect and direct methods. We present both approaches in this paper and test them on the example where the analytical solution is found explicitly. The indirect method in the form of the maximum principle, is used for the version of the model with penalty functions and for the version of the problem with one phase constraint. The corresponding system of ordinary differential equations combined with specific equations for the dual variables are solved by the shooting method. The direct method is applied to the model formulated in the discrete time. It is shown that such version of the model has the global solution if we reformulate it as the optimal control problem with mixed constraints. This paper provides the results of computation using both the direct and indirect methods and the results of numerical experiments.

A Study on Asset and Liability Management at ICICI Bank

A Study on Asset and Liability Management at ICICI Bank

The Influence of Asset and Liability Management on Dividend Policy and Firm Value of Listed Banking Companies in the Indonesia Stock Exchange

This study aims to examine the effect of asset and liability management on dividend policy and Firm value of listed banking companies in the Indonesia Stock Exchange. This study used panel data from banking statistics reports and annual IDX statistics. This research used Structural Equation Model as the data analysis. The results of the study found that, asset management has a positive and significant effect on dividend policy and firm value. Meanwhile, liability management has a negative and insignificant effect on dividend policy. and company value.

A Study on Assets and Liability Management with Reference to ICICI

A Study on Assets and Liability Management with Reference to ICICI

A Study on Assets and Liability Management with Reference to Canara Bank

A Study on Assets and Liability Management with Reference to Canara Bank

A Study on Assets Liability Management with Reference to HDFC

A Study on Assets Liability Management with Reference to HDFC