Return on assets (ROA)

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Modelling the effects of capital adequacy, credit losses, and efficiency ratio on return on assets and return on equity of banks during COVID-19 pandemic

The study aims to determine the impact of the Capital Adequacy Ratio, Credit Losses Ratio, and Efficiency Ratio on the two significant profitability ratios, namely Return on Assets (ROA) and Return on Equity (ROE), during the pandemic. Panel Data Regression is used to model the effects of Capital Adequacy, Credit Losses, and Efficiency Ratio on Return on Assets and Return on Equity of Indian banks. A suitable model has been developed by analyzing the results of the Hausman test and the p-values. It has been found that the Capital Adequacy Ratio (CAR) with a coefficient value of –0.664, CET1 with a coefficient value of 1.83, and efficiency ratio with a coefficient value of 1.825 has significantly affected the return on assets as their p-values are less than 0.05. However, the accepted relationship between CAR and ROA, efficiency ratio, and ROA were inverse, but their coefficients were significant. The provision for credit losses (PCL) was not affecting the ROA significantly during the pandemic and hence was not considered while framing the model. Again, the dependent variable is the return on equity, except CAR. Other ratios, i.e., CET1, efficiency ratio, and PCL ratio have unacceptable correlations and are even non-significant as their p-values are less than 0.05.

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Analyzing How Credit Risk Influences the Performance of Commercial Banks in Bangladesh: A Quantile Regression Modeling

One of the main challenges faced by commercial banks in Bangladesh nowadays is credit risk, which has had a negative impact on the economic progress of the country. The purpose of the study is to scrutinize how, and to what level, the indicators of credit risk influence the profitability of commercial banks in Bangladesh. Using quantile regression analysis, this study examined a panel dataset for 22 sample commercial banks during the years 2008 to 2017. The results show that Loan Loss Provision to NPL ratio and Cost per Loan ratio were found to have a significant positive impact on Return on Assets (ROA), while Capital Adequacy ratio and Leverage ratio have a significant negative impact on the performance of banks. However, Non-Performing Loan ratio, Loan Loss Provision to Total Asset, Loan Loss Provision to Total Loan, Total Loan to Total Asset, and Log of Total Asset and Deposit, were found to have an insignificant impact on the profitability. The findings of the study assert that credit risk has a noteworthy negative impact on profitability. The study recommends that bank management should be more strategic in credit risk assessment, to curtail the exposure to credit risk and to boost profitability.

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- by Publishing India Group
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- 7
  Finance, Accounting, Quantile Regression, Credit Risk

NEXUS OF CORPORATE GOVERNANCE INDEX AND FINANCIAL PERFORMANCE - INVESTIGATING THE MEDIATING ROLE OF EARNINGS MANAGEMENT IN MANUFACTURING FIRMS OF PAKISTAN

In this research study the focus is upon evaluating the impact of corporate governance (CG) upon the performance of firms (FP) along with earnings’ management (EM), and whether the effect of CG on FP is mediated by EM. Our sample initially consisted of 72 manufacturing firms from different sectors listed at Pakistan Stock Exchange (PSE), but final sample consisted of 31 manufacturing firms for the sample period of 2009-2017, which counted nearly 50% of the total firms. The relevant secondary data was obtained from annual financial reports, PSE data portal and websites of the companies. Study results show that EM does mediate the relationship between CG and FP (ROA and Tobin’s Q). The significant effect of EM on the relationship between the CG and the FP means that managers use EM to improve financial position of their firms. Our results also imply that that managers use EM to improve financial statement and for securing certain vested interest. SECP should ensure the activities of internal as well as external auditor to be free from any pressure and rotate audit companies on yearly basis. SECP should make some rule that reduce willingness of companies to choose audit firm to protect right of the stakeholders. JEL Classification: M40, M41

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- by IAEME Publication
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- 8
  Firm Size, Firm Age, Return on assets (ROA), Return on equity (ROE)

Modelling the effects of capital adequacy, credit losses, and efficiency ratio on return on assets and return on equity of banks during COVID-19 pandemic

The study aims to determine the impact of Capital Adequacy Ratio, Credit Losses Ratio and Efficiency Ratio on the two significant profitability ratios, namely Return on Assets (ROA) and Return on Equity (ROE), during the pandemic. Panel Data Regression is used to model the effects of Capital Adequacy, Credit Losses and Efficiency Ratio on Return on Assets and Return on Equity of Indian banks. A suitable model has been developed by analyzing the results of the Hausman test and the p-values. It has been found that Capital Adequacy Ratio (CAR) with coefficient value of –0.664, CET1 with coefficient value of 1.83 and efficiency ratio with coefficient value of 1.825 have significantly affected the return on assets as their p-values are less than 0.05. However, the accepted relationship between CAR and ROA, efficiency ratio and ROA were inverse, but their coefficients were significant. The provision for credit losses (PCL) was not affecting the ROA significantly during the pandemic and he...

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Can Macroeconomic Fundamentals Predict the Performance of Commercial Banks?

The objective of this thesis is to evaluate the relative significance of macroeconomic fundamentals in predicting the performance of commercial banks in the United States. The performance of commercial banks is measured by the aggregate Return on Average Assets (ROA) of U.S. commercial banks from 1987-2007. I conduct an empirical investigation to explain the relation between macroeconomic fundamentals and commercial banks’ performance, and show how shocks to macroeconomic fundamentals affect forecast of commercial banks’ performance. The empirical analysis is performed using U.S. macroeconomic data and financial data from U.S. commercial banks. The results show that except for gross domestic product, all the macroeconomic fundamentals significantly predict the performance of commercial banks and can therefore be used by policy makers to measure the effect of macroeconomic policy shocks on the condition of the commercial banks.

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