Operating Performance Of Banks Research Articles

Corporate Governance and Operational Performance of Banks in the MENA Region

This article aims to study the impact of corporate governance on the performance of banks operating in the MENA region over the period 2009-2020. The results, obtained using the maximum likelihood method and the system generalized method of moments (system-GMM), show that the size of the board of directors, CEO-chairman role duality, ownership concentration and the presence of remuneration and nomination committees have a significant impact on the performance of banks in MENA countries. In addition, the empirical results revealed that bank size, credit risk, capitalization ratio, economic growth and the quality of the institutional environment are indeed explanatory factors of bank performance. Our findings provide useful information to regulatory authorities to improve the governance mechanisms of banks in the MENA region.

Acquirer’s Operational Performance and Stability of Islamic Banks: Mediation Role of Market Structure

Merger and acquisition is known as a market expansions strategy. This paper examines several factors associated with M&A namely bank size, intermediary role, modes of financing, bank-specific variables, and macro-economic variables on the operational performance and stability along with the mediation role of market structure for Islamic banks. This paper employs empirical research methods, namely POLS, panel data techniques and SEM to analyse a set of unbalanced panel samples of 10 Islamic banks during 2004Q1 to 2020Q4 from six countries, namely Qatar, Kuwait, Saudi Arabia, United Arab Emirates, Bahrain, and Pakistan. Stata package 14.2 is used to estimate M&A results (5 years pre and 5 years post). The results indicate that M&A improve Post-M&A performance of Islamic banks while stability does not improve. Interestingly, there is no mediation effects of market structure on the relationship between M&A, operational performance, and stability. Policymakers should take into consideration those factors taking M&A decisions considering the role of market structure.

Research on Computer Intelligent Evaluation Model of the Impact of Green Credit on the Operating Performance Using Principal Component Analysis

Under the background of "carbon peaking and carbon neutrality goals", green credit has become an important financial strategy to support green development, and commercial banks play a core role as the main force of implementing green credit policy. Based on the data of 10 commercial banks with relatively early and complete disclosure of green credit scale from 2016 to 2020, this paper establishes the operating performance evaluation system of commercial banks by using the principal component analysis(PCA)method, and establishes a fixed-effect model to empirically analyze the impact of green credit scale on the operating performance of commercial banks. The results show that there is a significant positive correlation between the scale of green credit and the operating performance of commercial banks. The implementation of green credit policy will improve the operating performance of commercial banks, and the promoting role of state-owned commercial banks is more prominent than that of small and medium-sized joint-stock commercial banks.

Effect of advertising spending on operating and market performance of banks: empirical evidence from Bangladesh

PurposeThe purpose of the paper is to empirically explore the economic effect of advertising spending on the performance of banks on a sample consisting of all banks listed on the Dhaka Stock Exchange over the period spanning from 2011 to 2019.Design/methodology/approachA dynamic panel data autoregressive approach of two-step system generalized method of moments (2-SGMM) estimation technique has been adopted in this study to analyze the contemporary and carryover effect of advertising on the financial performance of banks.FindingsThe findings indicate that advertising expenditure boosts banks' accounting returns but not their market value. Furthermore, advertising has a negative carryover effect on the financial performance of banks and is statistically significant for operating profit and return on equity. This finding demonstrates that the economic benefits of advertising expenditure lapse entirely within the current period and ought to be treated as an expense since it does not bring any future return for the banks in Bangladesh. In addition, this paper also offers no critical contrast between the impact of advertising spending on the performance of both conventional and Islamic banks operating in Bangladesh.Originality/valueTo the best of the authors' knowledge, no study so far has looked into the effect of advertising on the profitability and the market value of the banks operating in Bangladesh, and this is the first study that explores this relationship.

A Comparative Study on Operational and Financial Performance of International Finance Investment and Commerce Bank Ltd and Agrani Bank Ltd in Bangladesh

Financial and operational managements are considered to be important ways to measure profitability and liquidity of a bank. There is a close relationship between financial performance and operational performance of banks. The study aimed to determine the financial and operational management of International Finance Investment and Commerce Bank Ltd. and Agrani Bank Ltd. The study was prepared on the basis of secondary data collected from published annual reports of the banks, journals and books and so on. The technique of ratio analysis was used in order to find out liquidity and profitability of banks with a view to measuring operational and financial performance of banks covering a five (5) year periods. During analysis of the collected data, a fluctuating result was found out as International Finance Investment and Commerce Bank Ltd. is a Private bank and Agrani Bank Ltd. is a public bank. The management policy to some extent different in case of both of the banks. The study pointed out many limitations considering private and public sectors banks and assess which of the banks is in advantageous position. Lastly, the study outlined some modest possible suggestions for the betterment of financial and operational performance of banks so that the banks can contribute to the nations considerably.

Employee Turnover and Operational Performance of Commercial Banks in Rwanda

Employee turnover was the movement through which an organization hired and missed its employees. This might be voluntary, involuntary, internal transfer, and retirement turnover. The objective of this study was to analyse the employee turnover and operational performance of commercial banks in Rwanda, a case of KCB Bank Rwanda located in Nyarugenge District, Rwanda. The specific objectives were to analyse the effect of employee compensation on operational performance, to determine the impact of employee overscheduling on operational performance, and to find out the impact of employee favouritism on the operational performance of KCB Bank Rwanda. This quantitative research used the descriptive research survey design with questionnaire as research instrument where 80 questionnaires were distributed to 80 employees by using both physical and digital approaches forms due to situations of COVID-19. The data collection took six months and consisted of 15 Microsoft forms, 40 physical forms, and 25 emails responses. The data analysis was done by using Statistical Package for Social Science (SPSS) version 20 through which the census method was applied, and the descriptive method was used to make the conclusion and has been applied to determine the reliability and validity at 0.8%. This research contributed to the management of employee turnover to improve operational performance of commercial banks in Rwanda. It indicated that KCB Bank Rwanda recognized a considerable rate of employee turnover at a percentage of 46.5% since its creation in 2008 year to December 2020 where the low number of recruited employees compared to the number of employees who exited. This was caused by factors including poor employee compensation, employee overscheduling and employee favouritism. The study discovered that the research objectives were major causes of employee turnover that affected the operational performance of KCB Bank Rwanda at a percentage of 13.8%. Data analysis showed that compensation affected the bank’s operations at a percentage of 73.8% (see table 4.9.), overscheduling at 50.1% (see table 4.7), and favouritism at 56.3% (see table 4.8). The study discovered that the most concern of KCB Bank Rwanda was not the relevance of number of employees who left but the quality of those employee and the targets they had set during the set and submission of the annual balanced scorecard, which affects the operational performance review. The research recommended that the management should review the compensation policy to match the operational performance, reduce favouritism by approaching marginal employees, and reduce overscheduling by re-examining the job descriptions and visiting employee’s office to discover added and non-corresponding duties that attracted the employee turnover in the KCB Bank Rwanda.

"Green into Gold": The Sustainable Development of Commercial Banks from the Perspective of the Equator Principles

The Equator Principle is the goal of promoting the harmonious development of my country's economy and society. It promotes the green transformation and upgrading of the industrial structure by strictly controlling the flow of commercial bank funds, so as to achieve the goal of environmental protection and the coordinated development of the national economy. This paper uses factor analysis to reduce the dimensions of 10 financial indicators and non-financial indicators that measure the operating performance and development potential of joint-stock commercial banks, and then compares the comprehensive operating performance, liquidity, and safety of Industrial Bank and comparable banks. And the level of profitability, analyze the difference in comprehensive operating performance of joint-stock commercial banks joining the Equator Principles compared with commercial banks that have not joined the Equator Principles. The results of the study found that joining the Equator Principles of joint-stock commercial banks can improve comprehensive operating performance in the short term. In the long run, the development trend of Industrial Bank will be similar to that of comparable banks in the same category. Joining the Equator Principles of Industrial Bank can improve its liquidity and profitability, but it will not in the long run. Conducive to the improvement of the asset quality of joint-stock commercial banks. In this regard, the government, enterprises and financial institutions should work together to help commercial banks achieve an effective balance between operating performance and social responsibility, so as to achieve the goals of "carbon peak" and "carbon neutral".

The Influence of Digital Finance Development on the Operating Performance of China's Commercial Banks

Taking China's listed commercial Banks as the object of study, using their financial datas from 2014 to 2018, selecting net loan deals and third-party payment transaction scale growth as independent variables, which measure digital level of financial development. profitability and growth rate of non-performing loans to assets as dependent variables, which measure commercial banks operating performance characterization. by establishing the panel data model. To empirically test the impact of digital finance development on the operating performance of China's commercial banks. The empirical results show that the development of digital finance can not only improve the profit margin of commercial banks' assets, but also help reduce their non-performing loan ratio to improve the performance of commercial banks.

Impact of BASEL 3 norms on performance of commercial banks – A study of select Indian banks

The concept of capital Adequacy in commercial banks in India received focus only after the implementation of Basel norms framed for capital structure across the countries. Given the autonomy to central banks to operate within the framework, the Reserve Bank of India (RBI) has followed a caution approach right from beginning. Even at the time of implementation of Basel 2 norms, the RBI had implemented and monitored the norms more stringently that resulted in having much lesser impact of financial crises 2008 in the financial system of India in general and banking sector in particular. Basel 3 norms were framed keeping in view certain gaps of the Basel 2 norms. The Basel 3 norms are more stringent and stress on creating additional buffers to meet the financial crisis. It also requires banks to maintain additional layer of common equity, capital conservation buffer, countercyclical capital buffer, leverage ratio, minimum liquidity ratio etc. These measures will impact the operational performance of banks. Therefore, this paper is an attempt to analyse the impact of Basel 3 norms on operational performance of banks in India.

A Study on Merger and Operating Performance of Commercial Banks of Nepal

<p>This study aims to find the impact of mergers on operating performance of sample merged banks. To attain the research objective, this study has taken 8 independent variables; operating profit margin, net profit margin, return on assets, return on equity, debt equity ratio, return on loan loss provision, return on staff expenses and return on operating expenses. Three cases have been taken for the study as a sample to examine whether merger has led to a profitable situation or not. Research mainly focuses on quarterly secondary data which is analyzed using paired sample t-test, correlation analysis, VIF test and regression analysis. From the analysis it is deduced that merger has no significant role in case of Nepal Bangladesh Bank and NIC Asia Bank in terms of various operational ratios, since many operational ratios have been found weaker in post-merger period than pre-merger period. But merger plays a significant role in case of Machhapuchchhre Bank where almost all operational ratios have improved in post-merger. While analyzing the situation of overall commercial banking sectors, with the help of sampled data, it is observed that largely the merger isn’t able to produce positive results for the merged entities. The study shows the reason for negative result of merger as the poor financial position of the target banks. Further the merger will somewhat act as a solution for the current problems of Nepalese BFIs. Merger will be a wise option to bring BFIs in strong and growing position and to meet the requirement of current paid up capital as per the latest NRB directive. But it also must be considered that merger in itself is not the ultimate solution to strengthen the financial position of BFIs. A lot of factors must be taken into account before finding the right partner to merge with and executing the merger.</p><p>Journal of Business and Social Sciences Research, Vol. 2, No. 1 & 2, pp. 85-107</p>

Effect of Internet Banking on Operational Performance of Commercial Banks in Nakuru County, Kenya

The purpose of this paper was to investigate the effect of internet banking on operational performance of commercial banks in Nakuru County, Kenya. The study was guided by the research objective: to investigate the effect of internet banking on operational performance of commercial banks in Nakuru County. The study employed the following theories namely: Bank-Focused Theory and The Technology Acceptance Model (TAM). This study adopted a cross-sectional research design. A cross-sectional research design is a research approach in which the researchers investigate the state of affairs in a population at a certain point in time. Very often, the elements in the sample survey are selected at random to make inference about the population as a whole [21]. The study population comprised of 56 employees of the commercial banks. Since the banks are few, the study adopted a census survey. Data was collected using structured questionnaires. A pilot study was conducted in Uasin Gishu County to determine validity of the research instruments where Cronbach’s alpha coefficient (0.7) was employed. Data was analyzed using correlation and regression analysis. The study established that internet banking has a positive significant effect on operational performance of the commercial banks. The study recommends that managements of commercial banks should invest in internet banking as it positively influences operational performance. The study suggests that further studies should be conducted to establish the effect of internet banking on operational performance in other sectors other than banking as the study focused only on commercial banks in order to establish whether internet banking does affect their operational performance.

Determinants of Capital Adequacy Ratio of Deposit Money Banks in Nigeria

Capital Adequacy Ratio (CAR) is an important measure of “safety and soundness” for banks and depository institutions because it serves as a buffer or cushion for absorbing losses. It is one of the major benchmarks for financial institutions the world over, especially with the introduction and adoption of the various Basel Accords. This study is an attempt to analyze the bank-specific determinants of CAR in the Nigerian Deposit Money Banks (DMBs) using balanced panel data collected from financial statements of 12 selected quoted banks for the ten-year period 2005-2014. The index for profitability which is ROA was found to be the most important determinant of CAR, having recorded the highest coefficient in the multiple regression result. The study found out that Capital Adequacy Ratio of Nigerian deposit money banks is well above the regulatory minimum set by CBN as well as the requirements of Basel Accord. Also, Nigerian banks’ risk portfolio is quite high and ROA is quite low. Depositors’ interests are well protected as the asset base of DMBs is well above the total deposits. The study concludes that CAR is largely determined by banks risk-portfolio, deposit level, profitability and asset quality and that CAR of Nigerian banks is well above the regulatory minimum. The study recommends that Nigerian deposit money banks should adopt a more pragmatic risk-management mechanism and a risk-based capital maintenance approach backed by a robust data management system. The study recommends improvement in operational performance of banks, strict compliance with various capital regulations, frequent stress tests for banks and more detailed disclosure practice to include details of changes in Tier I and Tier II capital, risk-weighted assets and trend analysis of changes in Capital Adequacy Ratio.

Effect of Automated Teller Machines Usage on Operational Performance of Commercial Banks in Nakuru County, Kenya

The aim of this paper was to determine the effect of Automated Teller Machines usage on operational performance of commercial banks in Nakuru County, Kenya. The study was guided by the research objective: to establish the effect of automated teller machines (ATMs) usage on operational performance of commercial banks in Nakuru County, Kenya.The study employed the following theories namely: Diffusion of Innovation and The Theory of Reasoned Action. The study adopted a correlational-cross-sectional research design. The study population comprised 56 employees of the 28 commercial banks. There are 31 commercial banks branches in Nakuru County, Kenya with Kenya Commercial Bank, Co-operative Bank and Equity bank having 3, 2 and 3 branches respectively which makes a total of 31 commercial banks out of which the researcher, through a simple random sampling, chose 28. Data was collected using structured questionnaires. A pilot study was conducted in Eldoret Town, Uashin Gishu County to determine validity of the research instruments where Cronbach’s alpha coefficient was employed. For the purpose of determining the effect of ATMs usage on operational performance, correlation and regression analysis were carried out. The study established that ATM usage has a positive significant relationship with operational performance. The study recommends that managements of commercial banks should highly invest in ATMs as it positively influences operational performance. The study suggests that further studies should be conducted to relate ATMs with other variables like quality and flexibility.

Impact of operating and balance sheet performance of Japanese international banks on bank safety levels and risk ratings

Using a simultaneous equation model initially developed by Shrieves and Dahl this article shows that Japanese banks in comparison to European banks, have focused on factors other than those that impact on bank safety levels. This has left Japanese banks in a vulnerable position with respect to levels of non-performing loans and indicates that less attention has been paid to prudent credit risk assessment and management practices. Recent events and actions initiated by the Japanese government suggests that Japanese banks are in crisis in terms of their dangerously large burden of non-performing loans. The broad objective of this study is to demonstrate that the attention of any healthy and safe banking system needs to be focused on operating and balance sheet fundamentals. Focus needs to be on maximization of earnings, determination of the appropriate level of financial risk, careful management of expenses and the optimisation of bank size in a deregulated, competitive environment where prudent lending cri...

The Financial and Operational Performances of Privatized Banks: The Philippine Experience

It is widely believed that a great deal of the privatization efforts of governments started in the United Kingdom during the Thatcher Administration. Records show that the first effort to privatize government enterprises started in the Federal Republic of Germany during the time of Prime Minister Adenaur. One of the most remarkable aspects of the privatization efforts of governments is how similar their objectives are to that of Thatcher's. Raising revenue is the primary goal. Apart from this, governments likewise consider the more important objective of improving the financial and operating performance of privatized firm by exposing it to market forces. Thus privatization is also expected to increase the firm's profitability; to increase its operating efficiency; to allow the firm to increase its investment spending; to increase its output; and to maintain employment levels in order to accomplish the just cited objectives, although governments expect employment levels to decline. The financial and operational performance of commercial banks that were privatized in the Philippines was studied. Four banks before privatization and only three banks after privatization, due to the merger of two banks, were considered. The event study flow of analysis was utilized, i.e., the financial and operational performance of the banks three years before privatization was compared with their performance three years after privatization. Major financial measures of profitability, operating efficiency, capital investment spending, output changes, employment changes, leverage charges and dividend payout were considered. Wilcoxon rank sum test and t-test for differences in means were utilized. When the major financial ratios were considered, the Wilcoxon rank sum test results showed that there was significant difference in the median performance before and after privatization in real sales. We applied the t-test for differences in average performance before and after privatization of the bank. Results showed significant differences in mean return on sales, return on assets, real sales and total employment. At this point, Philippine banks that were privatized can already claim substantial improvements in their operational and financial performance.

The Operating and Balance Sheet Performance of Japanese International Banks in Relation to Safety Levels: A Comparison with Western European Banks

Using a simultaneous equation model initially developed by Shrieves and Dahl (1992) this paper shows that Japanese banks have focused on factors other than those that impact on bank safety levels. This has left Japanese banks in a vulnerable position with respect to levels of non-performing loans and indicates that less attention has been paid to prudent credit risk assessment and management practices. Recent empirical work suggests that Japanese banks are in crisis in terms of their dangerous large burden of non-performing loans. The broad objective of this study is to demonstrate that the attention of any healthy and safe banking system needs to be focused on operating and balance sheet fundamentals. Focus needs to be on maximization of earnings, determination of the appropriate level of financial risk, careful management of expenses and the optimisation of bank size in a deregulated, competitive environment where prudent lending criteria are applied without compromise.

Operating performance of banks among Asian economies: An international and time series comparison

After controlling for loan quality, liquidity, capitalization, and output mix, per unit bank operating costs are found to vary significantly across Asian countries and over time. Further analysis reveals that the country rankings of per unit labor and physical capital costs are highly correlated, suggesting that there exist systematic differences in bank operating efficiency across Asian countries. However, this measure of operating efficiency is found to be unrelated to the degree of openness of the banking sector. Asian bank operating costs were found to decline from 1992 to 1997, indicating that banks were improving their operating performance over time. Since 1997, the run-up in operating costs coincided with the Asian financial crisis, suggesting that banks were incurring additional costs in dealing with their problem loans while output was declining simultaneously. Moreover, the labor cost share is found to decline significantly between 1997 and 1999, indicating that banks were able to cut their labor force after the financial crisis but were less flexible to reduce physical capital input. Furthermore, significant differences in labor cost share are detected across countries, suggesting that different countries have different bank production functions. The variations in labor cost share are significantly positively related to the country’s financial services wage rate, suggesting that banks using relatively more labor in a particular country is due to the labor force productivity, rather than labor being cheap.

Operating Performance of Banks Among Asian Economies: An International and Time Series Comparison

Operating Performance of Banks Among Asian Economies: An International and Time Series Comparison

Operating Performance of Banks among Asian Economies: An International and Time Series Comparison

Per unit bank operating costs are found to vary significantly across Asian countries and over time. The strong correlation between per unit labor cost and physical capital cost suggests that there exist systematic differences in bank operating efficiency across countries. The declining operating costs between 1992 and 1997 is consistent with improving operating performance. The run-up in operating costs since 1997 coincided with the Asian financial crisis, suggesting that banks incurred additional costs to deal with problem loans while outputs declined simultaneously. Labor cost share is also found to decline significantly between 1997 and 1999, perhaps because banks were able to cut labor force faster than physical capital. Significant differences in labor cost share across countries suggest cross-country differences in bank production functions. The positive relation between labor cost share and wage rate indicates that banks use more labor due to higher labor force productivity, rather than labor being cheap.

The Economic Performance of African-American-Owned Banks: The Role of Loan Loss Provisions

Economists’ interest in African-American banking institutions dates back to the early 1970’s when Andrew Brimmer cast a factual, yet ominous shroud over the efficacy of African-American banks as engines for growth in African-American community economic development. Brimmer (1971 p. 207) stated, ‘‘Black banks are helpless as a vehicle to produce change in minority communities as a result of serious weaknesses in management capability.’’ In addition, earlier studies noted that African-American banks in particular face higher loan losses than their nonminority peers, employ more conservative, assetportfolio management strategies, and operate with lower ratios of equity capital to assets (Brimmer, 1971; John T. Boorman and Myron L. Kwast, 1974; Timothy M. Bates and William D. Bradford, 1980; Kwast, 1981). All of these practices inevitably work to reduce bank profitability and limit growth capability. Recent research by Elyas Elyasiani and Seyed Mehdian (1992) and Iftekhar Hasan and William C. Hunter (1996) compare the operating performance of minority and nonminority banks to a set of ‘‘best practice’’ banks that produce financial products and services at the lowest cost using the most efficient mix of productive inputs. This paper builds upon this previous work on managerial inefficiency in minority banking institutions by identifying proximate causes of inefficiency. Due to the adverse socioeconomic conditions of urban areas where many minority-owned banks are located, these institutions are faced with risk and uncertainty unique to those par-