This document analyzes the determinants of banks' capital ratios in Tunisia using data from 18 commercial banks from 2002 to 2008. The study finds that interest margin and risk have a strong positive impact on capital ratios, explaining the excess capital held by Tunisian banks beyond regulatory requirements. Deposit variability and intermediation rate also positively impact capital ratios, while equity cost and deposits ratio have negative effects. The main determinants of capital ratios are found to be similar between developing and developed countries.
11.the determinants of banks’ capital ratio in developing countriesAlexander Decker
This document analyzes the determinants of banks' capital ratios in Tunisia using data from 18 commercial banks from 2002 to 2008. It finds that interest margin and risk have a strong positive impact on capital ratios, explaining the excess capital held by Tunisian banks beyond regulatory requirements. Deposit variability and intermediation rate also positively impact capital ratios, while equity cost and deposits ratio have a negative effect. The main determinants of capital ratios are found to be the same in Tunisia as in other countries, challenging the view that factors only affect capital ratios differently in emerging versus developed markets.
7.[52 64]the determinants of banks’ capital ratio in developing countriesAlexander Decker
This document analyzes the determinants of banks' capital ratios in Tunisia based on data from 18 Tunisian banks from 2002 to 2008. It finds that interest margin, risk, deposit variability, and intermediation rate positively impact capital ratios, while equity cost and deposits ratio have a negative effect. The main determinants of capital ratios are the same in Tunisia as in other countries, though Tunisian banks are smaller and more concentrated than banks in developed nations.
Asset liability management and commercial banks profitability in ethiopiaAlexander Decker
The document examines the effect of asset liability management (ALM) on the profitability of commercial banks in Ethiopia. It uses a statistical cost accounting (SCA) model to analyze the relationship between banks' profitability, measured by return on assets (ROA), and their balance sheet items like loans, deposits and other assets/liabilities. The analysis finds that most assets positively impact profitability while liabilities generally have a negative effect. It also incorporates macroeconomic variables like GDP growth and inflation, finding GDP has a negative influence on bank profits. The study aims to help banks and policymakers better understand factors affecting bank performance in Ethiopia's developing financial system.
The relationship between net interest margin and return on assets of listed b...Alexander Decker
This study examined the relationship between net interest margin (NIM) and return on assets (ROA) of listed banks in Ghana from 2005-2011. It found a strong positive correlation between NIM and ROA, with NIM explaining 82.6% of the variation in ROA. Both NIM and ROA generally decreased over the period, though they increased between 2009-2010. The study also found a very strong positive relationship between net interest income and profit before tax, with net interest income explaining 99.8% of the variation in profit before tax. In conclusion, the ability of banks to generate net interest income was highly influential in determining their level of profitability.
Determinants of banks’ profitability in a developing economyAlexander Decker
This document investigates the factors that affect bank profitability in Tanzania. It uses a fixed effects regression model on panel data from 23 banks over the period of 2009 to 2013. The empirical results show that bank-specific factors, which are influenced by bank management decisions, significantly impact bank profitability in Tanzania. However, macroeconomic factors do not seem to significantly affect bank profitability. Therefore, bank profitability in Tanzania is mainly influenced by internal management decisions, while external macroeconomic conditions have an insignificant effect. The study aims to provide insight to policymakers and bank managers on how to improve long-term profitability.
Estimation of Net Interest Margin Determinants of the Deposit Banks in Turkey...inventionjournals
Banks, which are the irreplaceable intermediaries of the financial system, are financial institutions that significantly contributeto economic development. The basiccriterion that indicates the efficiency of the intermediation activities of banks is the net interest margins. These costs are assumed to be high for developing countries such as Turkey. The degree to which banks are willing to redeem the funds they collect as credit to the system is directly related to how low their intermediation costs will be. In this paper, it is aimed to estimate the net interest margin determinants of deposit banks in Turkey. Three different panel data models are used for this purpose. These are the Fixed and Random Static models and the GMM (Generalized Moment Models) Dynamic model
Impact analysis of interest rate on the net assets of multinational businesse...Alexander Decker
This document summarizes a research study that examined the impact of interest rates on the net assets of multinational businesses in Nigeria from 1995 to 2010. A regression model was used to analyze the relationship between net asset value index and interest rates based on financial data from 7 randomly sampled multinational companies. The regression analysis showed that increases in interest rates resulted in reductions in net assets. Therefore, interest rates provide important information for multinational companies about profitability and maintaining the right debt-equity mix to remain competitive.
Trend analysis of the effect of capital base requirement on profit generating...Alexander Decker
This document summarizes a research study examining the relationship between capital base requirements and the profitability and operational efficiency of commercial banks in Nigeria from 1992 to 2007. The study utilized secondary data on key performance indicators of banks such as total income, interest rates, total credits, and branch networks. Descriptive statistical techniques were used to analyze trends in these indicators in relation to changes in bank capital levels over the period. The results showed that capital base requirements in Nigeria were ineffective in reducing banking distress and that requirements often lagged average capital levels. The study concluded that increasing capital base requirements through regulatory power could stimulate greater profitability and efficiency in the Nigerian banking sector.
11.the determinants of banks’ capital ratio in developing countriesAlexander Decker
This document analyzes the determinants of banks' capital ratios in Tunisia using data from 18 commercial banks from 2002 to 2008. It finds that interest margin and risk have a strong positive impact on capital ratios, explaining the excess capital held by Tunisian banks beyond regulatory requirements. Deposit variability and intermediation rate also positively impact capital ratios, while equity cost and deposits ratio have a negative effect. The main determinants of capital ratios are found to be the same in Tunisia as in other countries, challenging the view that factors only affect capital ratios differently in emerging versus developed markets.
7.[52 64]the determinants of banks’ capital ratio in developing countriesAlexander Decker
This document analyzes the determinants of banks' capital ratios in Tunisia based on data from 18 Tunisian banks from 2002 to 2008. It finds that interest margin, risk, deposit variability, and intermediation rate positively impact capital ratios, while equity cost and deposits ratio have a negative effect. The main determinants of capital ratios are the same in Tunisia as in other countries, though Tunisian banks are smaller and more concentrated than banks in developed nations.
Asset liability management and commercial banks profitability in ethiopiaAlexander Decker
The document examines the effect of asset liability management (ALM) on the profitability of commercial banks in Ethiopia. It uses a statistical cost accounting (SCA) model to analyze the relationship between banks' profitability, measured by return on assets (ROA), and their balance sheet items like loans, deposits and other assets/liabilities. The analysis finds that most assets positively impact profitability while liabilities generally have a negative effect. It also incorporates macroeconomic variables like GDP growth and inflation, finding GDP has a negative influence on bank profits. The study aims to help banks and policymakers better understand factors affecting bank performance in Ethiopia's developing financial system.
The relationship between net interest margin and return on assets of listed b...Alexander Decker
This study examined the relationship between net interest margin (NIM) and return on assets (ROA) of listed banks in Ghana from 2005-2011. It found a strong positive correlation between NIM and ROA, with NIM explaining 82.6% of the variation in ROA. Both NIM and ROA generally decreased over the period, though they increased between 2009-2010. The study also found a very strong positive relationship between net interest income and profit before tax, with net interest income explaining 99.8% of the variation in profit before tax. In conclusion, the ability of banks to generate net interest income was highly influential in determining their level of profitability.
Determinants of banks’ profitability in a developing economyAlexander Decker
This document investigates the factors that affect bank profitability in Tanzania. It uses a fixed effects regression model on panel data from 23 banks over the period of 2009 to 2013. The empirical results show that bank-specific factors, which are influenced by bank management decisions, significantly impact bank profitability in Tanzania. However, macroeconomic factors do not seem to significantly affect bank profitability. Therefore, bank profitability in Tanzania is mainly influenced by internal management decisions, while external macroeconomic conditions have an insignificant effect. The study aims to provide insight to policymakers and bank managers on how to improve long-term profitability.
Estimation of Net Interest Margin Determinants of the Deposit Banks in Turkey...inventionjournals
Banks, which are the irreplaceable intermediaries of the financial system, are financial institutions that significantly contributeto economic development. The basiccriterion that indicates the efficiency of the intermediation activities of banks is the net interest margins. These costs are assumed to be high for developing countries such as Turkey. The degree to which banks are willing to redeem the funds they collect as credit to the system is directly related to how low their intermediation costs will be. In this paper, it is aimed to estimate the net interest margin determinants of deposit banks in Turkey. Three different panel data models are used for this purpose. These are the Fixed and Random Static models and the GMM (Generalized Moment Models) Dynamic model
Impact analysis of interest rate on the net assets of multinational businesse...Alexander Decker
This document summarizes a research study that examined the impact of interest rates on the net assets of multinational businesses in Nigeria from 1995 to 2010. A regression model was used to analyze the relationship between net asset value index and interest rates based on financial data from 7 randomly sampled multinational companies. The regression analysis showed that increases in interest rates resulted in reductions in net assets. Therefore, interest rates provide important information for multinational companies about profitability and maintaining the right debt-equity mix to remain competitive.
Trend analysis of the effect of capital base requirement on profit generating...Alexander Decker
This document summarizes a research study examining the relationship between capital base requirements and the profitability and operational efficiency of commercial banks in Nigeria from 1992 to 2007. The study utilized secondary data on key performance indicators of banks such as total income, interest rates, total credits, and branch networks. Descriptive statistical techniques were used to analyze trends in these indicators in relation to changes in bank capital levels over the period. The results showed that capital base requirements in Nigeria were ineffective in reducing banking distress and that requirements often lagged average capital levels. The study concluded that increasing capital base requirements through regulatory power could stimulate greater profitability and efficiency in the Nigerian banking sector.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The document discusses a panel on shadow banking and money market funds. It summarizes the remarks of several panelists:
- Graham Bishop expressed support for shadow banking but dislike of the term.
- Kay Swinburne argued shadow banking is an essential source of capital and not unregulated.
- Anastasia Nesvetailova described the origin and evolution of shadow banking and argued it is a complex financial phenomenon.
- David Carruthers supported transparency efforts but noted regulatory actions require consideration.
- Gareth Murphy argued shadow banking should be monitored to address data gaps and support financial stability.
The panels discussed terminology issues, data gaps, and regulatory approaches regarding shadow banking and money market funds.
This document provides an overview and analysis of international banking practices, growth, and prospects, with a focus on comparing State Bank of India (SBI) and ICICI Bank. It finds that while SBI has traditionally been larger and more trusted among customers, ICICI Bank has shown better operational efficiency in some areas like credit deployment and expenses management. The document also outlines trends in international banking historically, factors driving its growth, effects on financial stability and economic development, and reflections on its future amid ongoing globalization.
This document summarizes a research paper that investigates the role of non-bank financial institutions (OFIs), including credit unions, in economic growth. It analyzes data from 76 countries from 1981 to 2005. The paper finds that measures of OFI assets and credit are positively and significantly related to real GDP growth, even after controlling for bank credit. Measures of credit union loans and assets are also positively linked to economic growth. While bank credit is positively related to growth, the relationship is not statistically significant over the sample period. The findings suggest that OFIs play an important role in promoting economic growth.
An analysis of loan portfolio management on organization profitability case o...Alexander Decker
This document summarizes a research study that investigated the determinants of profitability among commercial banks in Kenya. Specifically, it examined the impact of loan portfolio management, interest expenses, and administrative costs on bank profitability.
The introduction provides background on the important role of banks in financing economic activity and intermediating funds. It also discusses previous research that has identified various internal and external factors that influence bank profitability, including capital ratios, loan loss provisions, interest rates, and expense control.
The document then reviews literature related to the factors being studied - loan portfolio and its relationship to bank liquidity and risk/profit tradeoffs, how interest rates impact bank revenues and yields, and the link between administrative costs and managerial
Informality and bank performance in nigeria a panel data analysisAlexander Decker
This document analyzes the impact of informality on the performance of banks in Nigeria. It begins with an abstract that summarizes the study's objectives and main findings. The introduction provides background on the important role of banks in an economy and issues with Nigeria's banking sector. It states that the study aims to empirically examine how the large informal sector in Nigeria impacts bank performance.
The document then reviews four main theories on informality (modernization, dependency, structuralism, and neoliberalism) and discusses the characteristics of Nigeria's large informal economy. It finds that informality negatively impacts bank profitability and returns on assets. The conclusion recommends that banks work to better capture economic activity in the informal sector and that government
Working paper 202_-_segmentation_and_efficiency_of_the_interbank_market_and_t...Dr Lendy Spires
This document discusses segmentation and efficiency of the interbank market and their implications for monetary policy conduct. It argues that an efficient interbank market is important for effective monetary policy transmission and liquidity management. However, segmentation in the interbank market due to information asymmetries and counterparty risks can reduce efficiency. The paper assesses the level of segmentation and efficiency in Kenya's interbank market and its implications using network analysis and event studies on high-frequency interbank transaction data from the Central Bank of Kenya. Preliminary findings indicate Kenya's interbank market is incomplete, segmented and inefficient, hindering short-term monetary policy effectiveness, though policy may still be effective in the long run.
Proposed topic of the res an emperical analysis on interest rate risk managem...tesfatsion tefera
Risk is defined as anything that can create hindrances in the way of achievement of certain objectives. It can be because of either internal factors or external factors, depending upon the type of risk that exists within a particular situation. Exposure to that risk can make a situation more critical. A better way to deal with such a situation; is to take certain proactive measures to identify any kind of risk that can result in undesirable outcomes. In simple terms, it can be said that managing a risk in advance is far better than waiting for its occurrence. Risk Management is a measure that is used for identifying, analyzing and then responding to a particular risk. It is a process that is continuous in nature and a helpful tool in decision making process. According to the Higher Education Funding Council for England (HEFCE), Risk Management is not just used for ensuring the reduction of the probability of bad happenings but it also covers the increase in likeliness of occurring good things. A model called “Prospect Theory” states that a person is more likely to take on the risk than to suffer a sure loss.
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
DETERMINANTS OF BANK-SPECIFIC AND MACROECONOMIC FACTORS THAT ARE AFFECTING T...Uni-assignment
DETERMINANTS OF BANK-SPECIFIC AND MACROECONOMIC FACTORS THAT ARE AFFECTING THE PROFITABILITY OF COMMERCIAL BANKS A STUDY ON THE BRIC FROM THE EMERGING MARKET
Assessing the effect of liquidity on profitability of commercial banks in kenyaAlexander Decker
This document discusses factors that affect the profitability of commercial banks in Kenya. It provides background on the banking sector in Kenya and reviews various theories on factors that influence bank profitability, including market power theory, efficiency structure theory, and the Modigliani-Miller theorem. The study aimed to determine the effect of internal factors like liquidity on the profitability of commercial banks in Kenya. It found that liquidity has a statistically significant and positive relationship with bank profitability.
the role of securitized lending and shadow banking in the 2008 financial cris...Debora Dyankova
The document discusses the role of securitized lending and shadow banking in the 2008 financial crisis. It argues that changes in regulations in the late 1990s connected traditional banking and investment banking, leading to growth of securitized lending and shadow banking. This resulted in a complex global system of interconnected financial institutions with large amounts of securitized assets being traded. The overreliance on securitized lending and lack of oversight of shadow banking contributed to the crisis, as seen when the bankruptcy of Lehman Brothers in 2008 triggered a global recession due to the domino effect across financial systems.
This document summarizes a study that investigated the determinants of commercial bank lending behavior in Nigeria. The study aimed to test how common factors like deposits, investments, interest rates, reserve requirements, and liquidity ratios affect bank lending. Regression analysis found the model to be significant, with deposits having the greatest impact on lending. The study suggests banks focus on deposit mobilization to enhance lending performance and develop strategic plans.
A comparative profitability and operating efficiency analysis ofAlexander Decker
This document summarizes a study that compares the profitability and operating efficiency of public and private banks in Bangladesh from 2006 to 2010. The study finds that contrary to expectations, state-owned banks are as efficient as private banks based on statistical analysis, though private banks have higher average values. This raises the question of whether banks should be privatized. The document provides background on Bangladesh's banking system and literature reviewing previous research on the relative performance of public and private banks that has produced mixed results.
This document discusses empirical research on the determinants of bank lending across countries. It proposes estimating equations to model domestic credit levels based on bank balance sheet and capital requirements approaches. The analysis will use data from 146 countries over 1990-2013 to examine how economic growth, banking system health, and external capital flows influence domestic credit after controlling for other factors. Key determinants expected to impact credit include deposits, interest rates, costs, capital levels, and macroeconomic conditions.
This document summarizes the Mongolian banking sector and economy. It discusses how the banking sector has grown rapidly along with the Mongolian economy in recent years. The top 3 banks control 70% of banking sector assets. The banking sector faces challenges in developing interbank markets, long-term funding sources, and risk management systems. The government is working to modernize regulations to strengthen prudential standards and develop capital markets.
This document discusses corporate governance, diversification, and risk management in commercial banks of Ethiopia. It examines the effect of corporate governance attributes and bank characteristics on liquidity risk in 14 commercial banks in Ethiopia over 6 years. The results showed that risk committee size, bank liquidity, capital adequacy ratio, loan concentration, income diversification, bank size, and loan growth were significant factors affecting liquidity risk, while board size, ownership type, risk committee meeting frequency and operational efficiency had no significant effect. The document recommends commercial banks improve loan portfolio diversification and rely more on non-traditional income to enhance effective risk management.
7.[52 64]the determinants of banks’ capital ratio in developing countriesAlexander Decker
This document analyzes the determinants of banks' capital ratios in Tunisia based on data from 18 Tunisian banks from 2002 to 2008. It finds that interest margin, risk, deposit variability, and intermediation rate positively impact capital ratios, while equity cost and deposits ratio have a negative effect. The main determinants of capital ratios are the same in Tunisia as in other countries, though Tunisian banks are smaller and more concentrated than banks in developed nations.
This paper examines how banking sector concentration impacts monetary policy transmission through the bank lending channel using bank-level panel data from 13 countries from 1999 to 2011. The main finding is that higher banking concentration weakens the effectiveness of monetary policy, though this effect decreases during crisis periods. The paper discusses how factors like banks' access to funds, profit margins, and bargaining power impact the relationship between concentration and monetary policy transmission. It has implications for how monetary policy should be implemented based on a country's concentration level.
Banks play several key roles in financial markets:
1) They perform maturity transformation by collecting short-term deposits and investing in long-term assets, allowing risk sharing but also exposing them to liquidity risk.
2) Banks help solve informational problems through delegated monitoring of borrowers.
3) In some countries, banks act as outside monitors of large corporations through equity ownership, solving agency problems where market mechanisms are weak.
4) While enabling risk sharing, banks' interlinkages can also spread financial shocks through contagion effects.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The document discusses a panel on shadow banking and money market funds. It summarizes the remarks of several panelists:
- Graham Bishop expressed support for shadow banking but dislike of the term.
- Kay Swinburne argued shadow banking is an essential source of capital and not unregulated.
- Anastasia Nesvetailova described the origin and evolution of shadow banking and argued it is a complex financial phenomenon.
- David Carruthers supported transparency efforts but noted regulatory actions require consideration.
- Gareth Murphy argued shadow banking should be monitored to address data gaps and support financial stability.
The panels discussed terminology issues, data gaps, and regulatory approaches regarding shadow banking and money market funds.
This document provides an overview and analysis of international banking practices, growth, and prospects, with a focus on comparing State Bank of India (SBI) and ICICI Bank. It finds that while SBI has traditionally been larger and more trusted among customers, ICICI Bank has shown better operational efficiency in some areas like credit deployment and expenses management. The document also outlines trends in international banking historically, factors driving its growth, effects on financial stability and economic development, and reflections on its future amid ongoing globalization.
This document summarizes a research paper that investigates the role of non-bank financial institutions (OFIs), including credit unions, in economic growth. It analyzes data from 76 countries from 1981 to 2005. The paper finds that measures of OFI assets and credit are positively and significantly related to real GDP growth, even after controlling for bank credit. Measures of credit union loans and assets are also positively linked to economic growth. While bank credit is positively related to growth, the relationship is not statistically significant over the sample period. The findings suggest that OFIs play an important role in promoting economic growth.
An analysis of loan portfolio management on organization profitability case o...Alexander Decker
This document summarizes a research study that investigated the determinants of profitability among commercial banks in Kenya. Specifically, it examined the impact of loan portfolio management, interest expenses, and administrative costs on bank profitability.
The introduction provides background on the important role of banks in financing economic activity and intermediating funds. It also discusses previous research that has identified various internal and external factors that influence bank profitability, including capital ratios, loan loss provisions, interest rates, and expense control.
The document then reviews literature related to the factors being studied - loan portfolio and its relationship to bank liquidity and risk/profit tradeoffs, how interest rates impact bank revenues and yields, and the link between administrative costs and managerial
Informality and bank performance in nigeria a panel data analysisAlexander Decker
This document analyzes the impact of informality on the performance of banks in Nigeria. It begins with an abstract that summarizes the study's objectives and main findings. The introduction provides background on the important role of banks in an economy and issues with Nigeria's banking sector. It states that the study aims to empirically examine how the large informal sector in Nigeria impacts bank performance.
The document then reviews four main theories on informality (modernization, dependency, structuralism, and neoliberalism) and discusses the characteristics of Nigeria's large informal economy. It finds that informality negatively impacts bank profitability and returns on assets. The conclusion recommends that banks work to better capture economic activity in the informal sector and that government
Working paper 202_-_segmentation_and_efficiency_of_the_interbank_market_and_t...Dr Lendy Spires
This document discusses segmentation and efficiency of the interbank market and their implications for monetary policy conduct. It argues that an efficient interbank market is important for effective monetary policy transmission and liquidity management. However, segmentation in the interbank market due to information asymmetries and counterparty risks can reduce efficiency. The paper assesses the level of segmentation and efficiency in Kenya's interbank market and its implications using network analysis and event studies on high-frequency interbank transaction data from the Central Bank of Kenya. Preliminary findings indicate Kenya's interbank market is incomplete, segmented and inefficient, hindering short-term monetary policy effectiveness, though policy may still be effective in the long run.
Proposed topic of the res an emperical analysis on interest rate risk managem...tesfatsion tefera
Risk is defined as anything that can create hindrances in the way of achievement of certain objectives. It can be because of either internal factors or external factors, depending upon the type of risk that exists within a particular situation. Exposure to that risk can make a situation more critical. A better way to deal with such a situation; is to take certain proactive measures to identify any kind of risk that can result in undesirable outcomes. In simple terms, it can be said that managing a risk in advance is far better than waiting for its occurrence. Risk Management is a measure that is used for identifying, analyzing and then responding to a particular risk. It is a process that is continuous in nature and a helpful tool in decision making process. According to the Higher Education Funding Council for England (HEFCE), Risk Management is not just used for ensuring the reduction of the probability of bad happenings but it also covers the increase in likeliness of occurring good things. A model called “Prospect Theory” states that a person is more likely to take on the risk than to suffer a sure loss.
This document summarizes a study that examined the determinants of commercial bank lending in Ethiopia between 2005-2011. The study tested whether bank size, credit risk, GDP, investment, deposit, interest rate, liquidity ratio, and cash reserve requirements influenced bank lending. It found that bank size, credit risk, GDP, and liquidity ratio had a significant relationship with lending, but deposit, investment, interest rate, and cash reserves did not. The study suggests banks focus on managing credit risk and liquidity to support lending.
DETERMINANTS OF BANK-SPECIFIC AND MACROECONOMIC FACTORS THAT ARE AFFECTING T...Uni-assignment
DETERMINANTS OF BANK-SPECIFIC AND MACROECONOMIC FACTORS THAT ARE AFFECTING THE PROFITABILITY OF COMMERCIAL BANKS A STUDY ON THE BRIC FROM THE EMERGING MARKET
Assessing the effect of liquidity on profitability of commercial banks in kenyaAlexander Decker
This document discusses factors that affect the profitability of commercial banks in Kenya. It provides background on the banking sector in Kenya and reviews various theories on factors that influence bank profitability, including market power theory, efficiency structure theory, and the Modigliani-Miller theorem. The study aimed to determine the effect of internal factors like liquidity on the profitability of commercial banks in Kenya. It found that liquidity has a statistically significant and positive relationship with bank profitability.
the role of securitized lending and shadow banking in the 2008 financial cris...Debora Dyankova
The document discusses the role of securitized lending and shadow banking in the 2008 financial crisis. It argues that changes in regulations in the late 1990s connected traditional banking and investment banking, leading to growth of securitized lending and shadow banking. This resulted in a complex global system of interconnected financial institutions with large amounts of securitized assets being traded. The overreliance on securitized lending and lack of oversight of shadow banking contributed to the crisis, as seen when the bankruptcy of Lehman Brothers in 2008 triggered a global recession due to the domino effect across financial systems.
This document summarizes a study that investigated the determinants of commercial bank lending behavior in Nigeria. The study aimed to test how common factors like deposits, investments, interest rates, reserve requirements, and liquidity ratios affect bank lending. Regression analysis found the model to be significant, with deposits having the greatest impact on lending. The study suggests banks focus on deposit mobilization to enhance lending performance and develop strategic plans.
A comparative profitability and operating efficiency analysis ofAlexander Decker
This document summarizes a study that compares the profitability and operating efficiency of public and private banks in Bangladesh from 2006 to 2010. The study finds that contrary to expectations, state-owned banks are as efficient as private banks based on statistical analysis, though private banks have higher average values. This raises the question of whether banks should be privatized. The document provides background on Bangladesh's banking system and literature reviewing previous research on the relative performance of public and private banks that has produced mixed results.
This document discusses empirical research on the determinants of bank lending across countries. It proposes estimating equations to model domestic credit levels based on bank balance sheet and capital requirements approaches. The analysis will use data from 146 countries over 1990-2013 to examine how economic growth, banking system health, and external capital flows influence domestic credit after controlling for other factors. Key determinants expected to impact credit include deposits, interest rates, costs, capital levels, and macroeconomic conditions.
This document summarizes the Mongolian banking sector and economy. It discusses how the banking sector has grown rapidly along with the Mongolian economy in recent years. The top 3 banks control 70% of banking sector assets. The banking sector faces challenges in developing interbank markets, long-term funding sources, and risk management systems. The government is working to modernize regulations to strengthen prudential standards and develop capital markets.
This document discusses corporate governance, diversification, and risk management in commercial banks of Ethiopia. It examines the effect of corporate governance attributes and bank characteristics on liquidity risk in 14 commercial banks in Ethiopia over 6 years. The results showed that risk committee size, bank liquidity, capital adequacy ratio, loan concentration, income diversification, bank size, and loan growth were significant factors affecting liquidity risk, while board size, ownership type, risk committee meeting frequency and operational efficiency had no significant effect. The document recommends commercial banks improve loan portfolio diversification and rely more on non-traditional income to enhance effective risk management.
7.[52 64]the determinants of banks’ capital ratio in developing countriesAlexander Decker
This document analyzes the determinants of banks' capital ratios in Tunisia based on data from 18 Tunisian banks from 2002 to 2008. It finds that interest margin, risk, deposit variability, and intermediation rate positively impact capital ratios, while equity cost and deposits ratio have a negative effect. The main determinants of capital ratios are the same in Tunisia as in other countries, though Tunisian banks are smaller and more concentrated than banks in developed nations.
This paper examines how banking sector concentration impacts monetary policy transmission through the bank lending channel using bank-level panel data from 13 countries from 1999 to 2011. The main finding is that higher banking concentration weakens the effectiveness of monetary policy, though this effect decreases during crisis periods. The paper discusses how factors like banks' access to funds, profit margins, and bargaining power impact the relationship between concentration and monetary policy transmission. It has implications for how monetary policy should be implemented based on a country's concentration level.
Banks play several key roles in financial markets:
1) They perform maturity transformation by collecting short-term deposits and investing in long-term assets, allowing risk sharing but also exposing them to liquidity risk.
2) Banks help solve informational problems through delegated monitoring of borrowers.
3) In some countries, banks act as outside monitors of large corporations through equity ownership, solving agency problems where market mechanisms are weak.
4) While enabling risk sharing, banks' interlinkages can also spread financial shocks through contagion effects.
Banks play several key roles in financial markets:
1) They perform maturity transformation by collecting short-term deposits and investing in long-term assets, allowing risk sharing but also exposing them to liquidity risk.
2) Banks help solve informational problems through delegated monitoring of borrowers.
3) In some countries, banks act as outside monitors of large corporations through equity ownership, solving agency problems where market mechanisms are weak.
4) While banks facilitate growth by providing long-term financing, their interlinkages can also spread financial shocks through contagion.
Fiduciary or paper money is issued by the Central Bank on the basis of
computation of estimated demand for cash. Monetary policy guides the Central
Bank’s supply of money in order to achieve the objectives of price stability (or low
inflation rate), full employment, and growth in aggregate income.
This document discusses a study examining the relationship between banking sector development and economic growth in Lebanon from 1992-2011. The study uses regression analysis to test whether greater banking sector development, as represented by factors like private credit levels and banking efficiency, leads to increased economic growth. Preliminary analysis includes a Granger causality test to determine the direction of the relationship between financial development and GDP growth. Key banking sector variables analyzed are private credit levels, interest rate spreads, banking assets, concentration levels, and deposit growth rates. The goal is to evaluate how Lebanon's banking-centered financial system impacts economic activity and development.
A mature, well functioning financial system and institutions is crit.pdfexpressionnoveltiesk
A mature, well functioning financial system and institutions is critical to maximum economic
growth. Discuss completely the role of financial markets, institutions, and instruments (sources
and uses of funds) in sustaining and augmenting economic growth. Include in your response a
discussion of direct finance and indirect finance, the money market and capital market, and the
problem depository institutions face in managing their assets (use of funds) and liabilities (source
of funds).
Solution
Financial System and Economic growth:
Financial systems, i.e. financial intermediaries and financial markets, are important for
economic growth. They can lead to a more efficient allocation of resources because they reduce
the costs of moving funds between borrowers and lenders, and help overcome an information
asymmetry between borrowers and lenders. If they do not function well the economy cannot
operate efficiently and economic growth will be negatively affected.
Some economists just do not believe that the finance-growth relationship is important. For
instance, Robert Lucas asserted in 1988 that economists badly over-stress the role of financial
factors in economic growth. Moreover, Joan Robertson declared in 1952 that \"where enterprise
leads, finance follows\". According to this view, economic development creates demands for
particular types of financial arrangements, and the financial system responds automatically to
these demands.
Other economists strongly believe in the importance of the financial system for economic
growth. They address the issue of what the optimal financial system should look like. Overall,
the notion seems to develop that the optimal financial system, in combination with a well-
developed legal system, should incorporate elements of both direct, market and indirect, bank-
based finance. A well-developed financial system should improve the efficiency of financing
decisions, favouring a better allocation of resources and thereby economic growth.
The Role of Financial Markets, Institutions, and Instruments sustaining economic growth:
The financial system comprises all financial markets, instruments and institutions. Today
I would like to address the issue of whether the design of the financial system matters for
economic growth.
The role of finance in economic growth will have policy implications and shape future
policy-oriented research. The impact of finance on economic growth will influence the priority
that policymakers and advisors attach to reforming financial sector policies. Furthermore,
convincing evidence that the financial system influences long-run economic growth will
advertise the urgent need for research on the political, legal, regulatory, and policy determinants
of financial development. In contrast, if a sufficiently abundant quantity of research indicates
that the operation of the financial sector merely responds to economic development, then this
will almost certainly mitigate the intensity of research on t.
This document summarizes China's financial system and issues with capital allocation to the private sector. It notes that China's banking system is state-dominated and focuses lending on state-owned enterprises rather than small-and-medium enterprises. While SMEs contribute significantly to China's economy, they face difficulties obtaining financing due to factors like a lack of collateral. The document compares China's financial system to measures in other countries and finds that capital markets are underdeveloped and a smaller proportion of credit goes to the private sector in China than elsewhere. It concludes China's financial institutions have struggled to efficiently allocate capital to private sector development and SMEs.
This document introduces an updated database on financial institutions and markets across countries over time. Some key findings:
1) Financial systems have deepened globally in recent decades, but progress has been uneven, concentrated in high-income countries. Markets have deepened more than banks.
2) Banking systems have become larger and more efficient in high-income countries, with declining stability leading up to the 2007 crisis.
3) Financial integration has increased via cross-border lending and bonds, though low/middle-income countries have seen more remittance flows than lending.
How The Growth In Bond Market Affect The Performance Of Banks In Briics?inventionjournals
When it comes to raising capital, corporates have two major sources of external funds: Equity and Debt. Corporate debt consists of broadly two types – bank borrowings and bonds. A bond is a formal contract between a borrower and a lender whereby the borrower promises to repay borrowed money with coupons at fixed intervals and at maturity in which the participants are provided with the issuance and trading of debt securities. The main objective of this study is to understand how the growth in bond market affects the performance of the Bank in BRIICS countries. The variables like Bank’s capital to asset ratio, Domestic credit to private sector, NPA, Portfolio investment and Bond market size has been analysed and Panel regression has been used to find the results. The results showed that all the variables analysed have a positive impact on the bond market growth and a leading effect on the banks
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Finance companies, central bank of nigeria and economic developmentAlexander Decker
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This document analyzes factors that determine the financial margins on loans granted by commercial and development banks in Mexico. It uses data on over 313,000 loans from 2007. The authors find empirical evidence of differences in the determinants of financial margins between bank types. Results suggest development banks do not pursue profitability as a primary objective like commercial banks. Development banks seem to offer lower rates to increase credit supply in Mexico.
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
Signature content of MTBiz is its Article of the Month (AoM), as depicted on Cover Page of each issue, with featured focus on different issues that fall into the wide definition of Market, Business, Organization and Leadership. The AoM also covers areas on Innovation, Central Banking, Monetary Policy, National Budget, Economic Depression or Growth and Capital Market. Scale of coverage of the AoM both, global and local subject to each issue.
MTBiz is a monthly Market Review produced and distributed by Group R&D, MTB since 2009.
This document analyzes Brazilian National Treasury primary auctions from the 2000s using a Modern Monetary Theory interpretation. It finds that:
1) The Brazilian government was always able to sell its treasury bonds and was not pressured into higher interest rates by bond markets or rating downgrades.
2) Downgrades by international rating agencies did not cause persistent pressure on auction rates or changes in bond sales volumes.
3) The Central Bank ensured liquidity for treasury bonds through repo operations, maintaining interest rate targets and guaranteeing demand for government bonds.
This document summarizes a theoretical model examining the effects of small regional banks on local economic growth. The model shows that small regional banks are more effective than large interregional banks at promoting economic growth in underdeveloped regions. This is because small regional banks have lower screening and monitoring costs of local borrowers compared to large banks. The model is then empirically tested using bank and regional economic data from Germany, finding that small regional banks play an important role in enhancing economic development in less developed German regions.
Financial development is one of the issues in recent decades in order to achieve economic growth and development, as improve performance, especially in terms of oversight has led the government to curb corruption and to set rules and regulations. In most developing countries, the public sector plays an important role in the market. The aim of this study is to compare the situation between Iran and Norway during the period 1970 -2014 in the financial markets and the public. The results of the comparative two oil economies suggest that variables, including oil revenues share of GDP in the economy and how to deal with this income, has been affected the state and public of sector financial indicators examined in the two countries. Norway's economy has failed to manage this income, to help improve their financial situation. Aldo comparing the financial status of the situation, Iran has been more stable during the period under review. Besides, the financial indicators in Norway are more dynamic than Iran.
The Relationship between Financial Structure and GDP.Stefano Valeri
This document analyzes the relationship between different financial structures and GDP levels across countries. It identifies three main types of financial systems: bank-based, market-based, and government-based. These systems are characterized by five factors: solvency, profitability, market efficiency, foreign presence, and core revenue/cost structure. The document uses factor analysis to develop indexes for these factors. It then performs cluster analysis to group countries into the three financial system types. Finally, it uses regression analysis to test if each system type is related to GDP levels, finding that only market-oriented systems are strongly related to economic development as measured by GDP.
Abnormalities of hormones and inflammatory cytokines in women affected with p...Alexander Decker
Women with polycystic ovary syndrome (PCOS) have elevated levels of hormones like luteinizing hormone and testosterone, as well as higher levels of insulin and insulin resistance compared to healthy women. They also have increased levels of inflammatory markers like C-reactive protein, interleukin-6, and leptin. This study found these abnormalities in the hormones and inflammatory cytokines of women with PCOS ages 23-40, indicating that hormone imbalances associated with insulin resistance and elevated inflammatory markers may worsen infertility in women with PCOS.
A usability evaluation framework for b2 c e commerce websitesAlexander Decker
This document presents a framework for evaluating the usability of B2C e-commerce websites. It involves user testing methods like usability testing and interviews to identify usability problems in areas like navigation, design, purchasing processes, and customer service. The framework specifies goals for the evaluation, determines which website aspects to evaluate, and identifies target users. It then describes collecting data through user testing and analyzing the results to identify usability problems and suggest improvements.
A universal model for managing the marketing executives in nigerian banksAlexander Decker
This document discusses a study that aimed to synthesize motivation theories into a universal model for managing marketing executives in Nigerian banks. The study was guided by Maslow and McGregor's theories. A sample of 303 marketing executives was used. The results showed that managers will be most effective at motivating marketing executives if they consider individual needs and create challenging but attainable goals. The emerged model suggests managers should provide job satisfaction by tailoring assignments to abilities and monitoring performance with feedback. This addresses confusion faced by Nigerian bank managers in determining effective motivation strategies.
A unique common fixed point theorems in generalized dAlexander Decker
This document presents definitions and properties related to generalized D*-metric spaces and establishes some common fixed point theorems for contractive type mappings in these spaces. It begins by introducing D*-metric spaces and generalized D*-metric spaces, defines concepts like convergence and Cauchy sequences. It presents lemmas showing the uniqueness of limits in these spaces and the equivalence of different definitions of convergence. The goal of the paper is then stated as obtaining a unique common fixed point theorem for generalized D*-metric spaces.
A trends of salmonella and antibiotic resistanceAlexander Decker
This document provides a review of trends in Salmonella and antibiotic resistance. It begins with an introduction to Salmonella as a facultative anaerobe that causes nontyphoidal salmonellosis. The emergence of antimicrobial-resistant Salmonella is then discussed. The document proceeds to cover the historical perspective and classification of Salmonella, definitions of antimicrobials and antibiotic resistance, and mechanisms of antibiotic resistance in Salmonella including modification or destruction of antimicrobial agents, efflux pumps, modification of antibiotic targets, and decreased membrane permeability. Specific resistance mechanisms are discussed for several classes of antimicrobials.
A transformational generative approach towards understanding al-istifhamAlexander Decker
This document discusses a transformational-generative approach to understanding Al-Istifham, which refers to interrogative sentences in Arabic. It begins with an introduction to the origin and development of Arabic grammar. The paper then explains the theoretical framework of transformational-generative grammar that is used. Basic linguistic concepts and terms related to Arabic grammar are defined. The document analyzes how interrogative sentences in Arabic can be derived and transformed via tools from transformational-generative grammar, categorizing Al-Istifham into linguistic and literary questions.
A time series analysis of the determinants of savings in namibiaAlexander Decker
This document summarizes a study on the determinants of savings in Namibia from 1991 to 2012. It reviews previous literature on savings determinants in developing countries. The study uses time series analysis including unit root tests, cointegration, and error correction models to analyze the relationship between savings and variables like income, inflation, population growth, deposit rates, and financial deepening in Namibia. The results found inflation and income have a positive impact on savings, while population growth negatively impacts savings. Deposit rates and financial deepening were found to have no significant impact. The study reinforces previous work and emphasizes the importance of improving income levels to achieve higher savings rates in Namibia.
A therapy for physical and mental fitness of school childrenAlexander Decker
This document summarizes a study on the importance of exercise in maintaining physical and mental fitness for school children. It discusses how physical and mental fitness are developed through participation in regular physical exercises and cannot be achieved solely through classroom learning. The document outlines different types and components of fitness and argues that developing fitness should be a key objective of education systems. It recommends that schools ensure pupils engage in graded physical activities and exercises to support their overall development.
A theory of efficiency for managing the marketing executives in nigerian banksAlexander Decker
This document summarizes a study examining efficiency in managing marketing executives in Nigerian banks. The study was examined through the lenses of Kaizen theory (continuous improvement) and efficiency theory. A survey of 303 marketing executives from Nigerian banks found that management plays a key role in identifying and implementing efficiency improvements. The document recommends adopting a "3H grand strategy" to improve the heads, hearts, and hands of management and marketing executives by enhancing their knowledge, attitudes, and tools.
This document discusses evaluating the link budget for effective 900MHz GSM communication. It describes the basic parameters needed for a high-level link budget calculation, including transmitter power, antenna gains, path loss, and propagation models. Common propagation models for 900MHz that are described include Okumura model for urban areas and Hata model for urban, suburban, and open areas. Rain attenuation is also incorporated using the updated ITU model to improve communication during rainfall.
A synthetic review of contraceptive supplies in punjabAlexander Decker
This document discusses contraceptive use in Punjab, Pakistan. It begins by providing background on the benefits of family planning and contraceptive use for maternal and child health. It then analyzes contraceptive commodity data from Punjab, finding that use is still low despite efforts to improve access. The document concludes by emphasizing the need for strategies to bridge gaps and meet the unmet need for effective and affordable contraceptive methods and supplies in Punjab in order to improve health outcomes.
A synthesis of taylor’s and fayol’s management approaches for managing market...Alexander Decker
1) The document discusses synthesizing Taylor's scientific management approach and Fayol's process management approach to identify an effective way to manage marketing executives in Nigerian banks.
2) It reviews Taylor's emphasis on efficiency and breaking tasks into small parts, and Fayol's focus on developing general management principles.
3) The study administered a survey to 303 marketing executives in Nigerian banks to test if combining elements of Taylor and Fayol's approaches would help manage their performance through clear roles, accountability, and motivation. Statistical analysis supported combining the two approaches.
A survey paper on sequence pattern mining with incrementalAlexander Decker
This document summarizes four algorithms for sequential pattern mining: GSP, ISM, FreeSpan, and PrefixSpan. GSP is an Apriori-based algorithm that incorporates time constraints. ISM extends SPADE to incrementally update patterns after database changes. FreeSpan uses frequent items to recursively project databases and grow subsequences. PrefixSpan also uses projection but claims to not require candidate generation. It recursively projects databases based on short prefix patterns. The document concludes by stating the goal was to find an efficient scheme for extracting sequential patterns from transactional datasets.
A survey on live virtual machine migrations and its techniquesAlexander Decker
This document summarizes several techniques for live virtual machine migration in cloud computing. It discusses works that have proposed affinity-aware migration models to improve resource utilization, energy efficient migration approaches using storage migration and live VM migration, and a dynamic consolidation technique using migration control to avoid unnecessary migrations. The document also summarizes works that have designed methods to minimize migration downtime and network traffic, proposed a resource reservation framework for efficient migration of multiple VMs, and addressed real-time issues in live migration. Finally, it provides a table summarizing the techniques, tools used, and potential future work or gaps identified for each discussed work.
A survey on data mining and analysis in hadoop and mongo dbAlexander Decker
This document discusses data mining of big data using Hadoop and MongoDB. It provides an overview of Hadoop and MongoDB and their uses in big data analysis. Specifically, it proposes using Hadoop for distributed processing and MongoDB for data storage and input. The document reviews several related works that discuss big data analysis using these tools, as well as their capabilities for scalable data storage and mining. It aims to improve computational time and fault tolerance for big data analysis by mining data stored in Hadoop using MongoDB and MapReduce.
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2. Media content convergence challenges include dealing with the heterogeneity of media types, services, networks, devices, and quality of service requirements as well as integrating technologies used by media providers and consumers.
3. Scalability and expandability challenges involve adapting to the increasing volume of media content and being able to support new media formats and outlets over time.
This document surveys trust architectures that leverage provenance in wireless sensor networks. It begins with background on provenance, which refers to the documented history or derivation of data. Provenance can be used to assess trust by providing metadata about how data was processed. The document then discusses challenges for using provenance to establish trust in wireless sensor networks, which have constraints on energy and computation. Finally, it provides background on trust, which is the subjective probability that a node will behave dependably. Trust architectures need to be lightweight to account for the constraints of wireless sensor networks.
This document discusses private equity investments in Kenya. It provides background on private equity and discusses trends in various regions. The objectives of the study discussed are to establish the extent of private equity adoption in Kenya, identify common forms of private equity utilized, and determine typical exit strategies. Private equity can involve venture capital, leveraged buyouts, or mezzanine financing. Exits allow recycling of capital into new opportunities. The document provides context on private equity globally and in developing markets like Africa to frame the goals of the study.
This document discusses a study that analyzes the financial health of the Indian logistics industry from 2005-2012 using Altman's Z-score model. The study finds that the average Z-score for selected logistics firms was in the healthy to very healthy range during the study period. The average Z-score increased from 2006 to 2010 when the Indian economy was hit by the global recession, indicating the overall performance of the Indian logistics industry was good. The document reviews previous literature on measuring financial performance and distress using ratios and Z-scores, and outlines the objectives and methodology used in the current study.
“Amidst Tempered Optimism” Main economic trends in May 2024 based on the results of the New Monthly Enterprises Survey, #NRES
On 12 June 2024 the Institute for Economic Research and Policy Consulting (IER) held an online event “Economic Trends from a Business Perspective (May 2024)”.
During the event, the results of the 25-th monthly survey of business executives “Ukrainian Business during the war”, which was conducted in May 2024, were presented.
The field stage of the 25-th wave lasted from May 20 to May 31, 2024. In May, 532 companies were surveyed.
The enterprise managers compared the work results in May 2024 with April, assessed the indicators at the time of the survey (May 2024), and gave forecasts for the next two, three, or six months, depending on the question. In certain issues (where indicated), the work results were compared with the pre-war period (before February 24, 2022).
✅ More survey results in the presentation.
✅ Video presentation: https://youtu.be/4ZvsSKd1MzE
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Poonawalla Fincorp Limited, under the leadership of Managing Director Abhay Bhutada, has achieved industry-leading Gross Non-Performing Assets (GNPA) below 1% and Net Non-Performing Assets (NNPA) below 0.5% as of May 31, 2024. This success is attributed to a strategic vision focusing on prudent credit policies, robust risk management, and digital transformation. Bhutada's leadership has driven the company to exceed its targets ahead of schedule, emphasizing rigorous credit assessment, advanced risk management, and enhanced collection efficiency. By prioritizing customer-centric solutions, leveraging digital innovation, and maintaining strong financial performance, Poonawalla Fincorp sets new benchmarks in the industry. With a continued focus on asset quality, digital enhancement, and exploring growth opportunities, the company is well-positioned for sustained success in the future.
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
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In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
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Madhya Pradesh, the "Heart of India," boasts a rich tapestry of culture and heritage, from ancient dynasties to modern developments. Explore its land records, historical landmarks, and vibrant traditions. From agricultural expanses to urban growth, Madhya Pradesh offers a unique blend of the ancient and modern.
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In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
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Contributors included:
Jo Blanden, Professor in Economics, University of Surrey
Clive Bolton, CEO, Life Insurance M&G Plc
Jim Boyd, CEO, Equity Release Council
Molly Broome, Economist, Resolution Foundation
Nida Broughton, Co-Director of Economic Policy, Behavioural Insights Team
Jonathan Cribb, Associate Director and Head of Retirement, Savings, and Ageing, Institute for Fiscal Studies
Joanna Elson CBE, Chief Executive Officer, Independent Age
Tom Evans, Managing Director of Retirement, Canada Life
Steve Groves, Chair, Key Retirement Group
Tish Hanifan, Founder and Joint Chair of the Society of Later life Advisers
Sue Lewis, ILC Trustee
Siobhan Lough, Senior Consultant, Hymans Robertson
Mick McAteer, Co-Director, The Financial Inclusion Centre
Stuart McDonald MBE, Head of Longevity and Democratic Insights, LCP
Anusha Mittal, Managing Director, Individual Life and Pensions, M&G Life
Shelley Morris, Senior Project Manager, Living Pension, Living Wage Foundation
Sarah O'Grady, Journalist
Will Sherlock, Head of External Relations, M&G Plc
Daniela Silcock, Head of Policy Research, Pensions Policy Institute
David Sinclair, Chief Executive, ILC
Jordi Skilbeck, Senior Policy Advisor, Pensions and Lifetime Savings Association
Rt Hon Sir Stephen Timms, former Chair, Work & Pensions Committee
Nigel Waterson, ILC Trustee
Jackie Wells, Strategy and Policy Consultant, ILC Strategic Advisory Board
What Lessons Can New Investors Learn from Newman Leech’s Success?Newman Leech
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What Lessons Can New Investors Learn from Newman Leech’s Success?
The determinants of banks’ capital ratio in developing countries
1. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol 3, No 1, 2012
The Determinants of Banks’ Capital Ratio in Developing Countries:
Empirical Evidence from Tunisia
Mohamed Romdhane
University of Tunis- Institut Supérieur de Gestion
41, Rue de la liberté, Le Bardo 2000, Tunis, Tunisia
moromd@gmail.com
Abstract
In this paper, we try to study the determinants of the banks' capital ratio in an emerging country. To do
so, we model the relationships between some variables of the banks and this ratio. Our aim is to explain
its high level. We try also to answer to a new question. Is it affected by the same factors in the
emerging countries as in the industrialized ones?
The sample is composed of 18 banks. The data are half yearly. The period sample is from 2002 to 2008.
We find that the interest margin and the risk affect strongly the capital ratio. They explain the excess of
the capital held by the Tunisian banks. So, this excess is not explained only by regulatory pressures.
The deposit variability and the intermediation rate have the same sign. But, the equity cost and the
deposits ratio both have a negative impact. The main determinants are the same for all the countries.
Keywords: Capital ratio, commercial bank, capital determinants, capital structure, developing
countries.
1. Introduction
The financial intermediation specificity and the regulation make the commercial banks different from
the non financial firms. Marques and Santos (2003) stated that capital regulation is the first external
determinant of the banks’ capital structure. Many other authors arrived at the same conclusion. This
may be true in developed countries. But in developing small countries, there are no enough studies that
show this influence. If the Basel rules are imposed on the commercial banks over the world, their
influences must be the same, whatever the size of the banks. Consequently, only one theoretical
approach must be observed in the banking industry.
The Commercial banks hold capital because they are required to do so by authorities. Nevertheless, the
capital level is determined by the bank requirements, by the risk and by the capital cost. With high
equity cost, bank managers try to hold the minimum capital required. However, if the risk taken is high
they must increase the capital.
Schaeck and Čihák (2007) stated that if banks operate in a competitive environment, they tend to hold a
higher capital ratio. This is consistent with the idea that if an economy is bank-based, the competition
degree in the capital markets is week. This may be the case of the Tunisian banking market.
Murinde and Yaseen (2004) found that the capital requirements affect commercial banks’ capital
decisions in the MENA region. They said that regulatory pressure did not induce banks to increase their
capital.
Brewer et al. (2008) demonstrated that if the banking sector is relatively small, the banks maintain a
higher capital adequacy ratio. When the authorities practice prompts corrective actions, this ratio is
high too.
The capital structure of small banks operating in a local market has not been enough investigated. So,
we will try to analyze empirically the validity of the banks’ capital theory in an emerging country. This
will allow us to test the universality of the rules and the relationships demonstrated by the previous
studies.
We will analyze those relationships in the Tunisian commercial banks by applying a linear model. We
insert two new variables not tested in previous empirical studies: The deposit variability and the
intermediation rate which represent the banking activity. Rapid deposits variability characterizes the
35
2. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol 3, No 1, 2012
Tunisian banks. It may directly affect their capital ratio.
This paper is organized as follows. In the next section, we will present the Tunisian banking
characteristics. The third section is devoted to the literature of capital structure in commercial banks.
In the fourth section, we will analyze empirically the determinants of capital ratio in Tunisian banks.
The main results are drawn in the fifth section. The conclusion constitutes the sixth section.
2. Tunisian Banking Characteristics
The Tunisian banking industry is small. In 2010, there are 30 small domestic commercial banks. They
are based in Tunis and big towns. The three first largest banks are state owned. It is characterized by its
high degree of concentration. In fact, the public banks hold more than half of total market share. In this
case, the authorities can easily influence their strategies and their decisions. As displayed in Table 1,
large public banks hold often less capital than the private ones. After the reforms, the Tunisian banks
have adopted a new governance system. It is the same as those of European banks. They are well
managed and well organized.
Tunisia’s banks are actively involved with European banks. In addition to financial flows, some foreign
banks have shares in the capital of Tunisian banks.
Capital requirements in Tunisia have been dictated by Basel I. Basel I rules had started to be applied in
1992. It was 5% of risk weighted assets, and then it rose to 8% in 1999. The recorded rates were
between 8.4% and 13.4%. They were so high.
During the sample period, the annual capital ratio was as shown in Table 1.
For small as for large banks, the capital ratio was often higher than that required one. As noted by
Berger et al. (2008), the excess of equity makes it difficult to any analyst to tell how banks manage
their capital. For Tunisian banks, the problem of adjustment did not arise. This is due to the banks'
policies. They adopted risky loan strategies, and they increased their equity to escape the regulator
pressures.
Table 1 shows that since 2004, the private banks’ ratio is higher than that of public banks. This can be
explained by the large size of the stated owned banks. Their size had notably increased after their
mergers with the development banks. Moreover, they are often sustained by the authorities.
It is noted that during the same period, Trier 1 was higher than the minimum imposed by Basel I.
The notable increase of the capital ratio is due to the 2001 law. All the Tunisian banks increased their
capital by issuing of new shares. During the last decade, their average ROE was 13%. Their rate of
earnings' retention was high. This had led to an increase in equity.
As it has been pointed out above, the Tunisian banks adopt new methods of management, and they
apply the international prudential rules. However, they are not as large and powerful as the American or
the European banks. Compared to those banks, Tunisian banks are too small. Their total asset is equal
or lower than these of a single bank in a developed country. In Tunisia, the banking sector is small. It
has some characteristics: the number of banks is very limited, the dominant banks are public and the
concentration degree is high. With these specificities, the Tunisian banks may differ from those of other
countries.
These specificities lead us to ask several questions: If the banks’ capital ratios were often high, why did
the authorities impose the Basel ratio? Does the level of equity constitute a result of other factors
specific to Tunisian banks? Are the determinants of capital ratio the same in emerging countries as in
developed ones?
The capital structure of small banks operating in a local market has not been enough investigated. So,
we will try to analyze empirically the validity of the banks’ capital theory in an emerging country. This
will allow us to test the universality of the rules and the relationships demonstrated by the previous
studies.
3. Banks’ Capital Structure
3.1 Theoretical Fundamentals
For the firms, two main alternative theories are identified for their capital structure: the Trade-off and
36
3. Research Journal of Finance and Accounting www.iiste.org
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol 3, No 1, 2012
the Pecking Order. The first holds that the capital structure is determined by the trade off between the
benefits and the debts ' costs. The second holds that the short run costs exceed the benefits of adjusting
the capital structure. Thus, firms rely first on retained earnings and then on the debts. They issue stocks
only if the marginal costs of the additional debts exceed the costs of this new issuing. The commercial
banks prefer first the retained earnings. The pecking order theory suggests that the dividend provides a
good signal about the future prospects of the firm. So, the managers will issue new equity as there is
less information asymmetry in the capital market.
For the banks, the subjects relating to the problems of the liquidity creation and the loan risk were
considered a priority for a long time. The capital structure of the banks has not been considered as an
important topic. Marques and Santos (2003) considered that the studies on the bank's capital are very
limited. In fact, the issue has not been treated for long years. There are two reasons to think that the
capital ratio does not deserve to be studied. The first is the absence of limits for the deposits. The
second is the ease of the access to the capital market.
Baltensperger (1973) stated that the banks maximize their profit when the mix liabilities equity is
optimal. Then, they have to hold an appropriate capital ratio. In this case, their deposits and their loan
ratios are optimal too.
Kohen and Santomero (1980) demonstrated that a regulation based only on the “equity /assets” ratio
cannot necessarily lead to the expected results. They proposed a ratio with weighted risk assets. They
cited other determinants: The deposit growth, the asset size and the revenue.
For Brewer et al. (2008), under regulation, the capital ratio may be determined by one or other of these
theories. The trade-off assumptions with binding regulation have a testable prediction. In instance, if
there is only one ratio, banks should operate above the required minimum. The Pecking order
hypothesis assigns a significant role to the government rules.
With nonbinding regulation hypotheses, the both theories have the same results. They retain that the
market forces have an important role. In fact, they determine the cushion banks seek to maintain their
capital over the minimum.
Gropp and Heider (2007) found that the determinants of the capital of the firms are also significant for
the banks.
3.2 Banking Capital Theory After Basel I
After the application of the Basel I rules, the issue of the capital ratio attracted the researchers in
developed countries. In the last two decades, several studies are carried out. Their aim is to explain the
relationships between this ratio and some internal and external variables.
Berger et al. (1995) stated that the theory of capital structure of the firms cannot be fully applied to the
financial institutions. This is due to the regulation. They also pointed to the importance of external
factors that affect the capital of the banks.
Diamond and Rajan (2000), affirmed that the high capital reduces the creation of liquidity by the bank.
But it enables them to be solid and to avoid the bankruptcy.
Why do commercial banks hold often more capital than the minimum required? Does it mean that their
economic capital is determined by the intermediation volume? Or it is determined by their risk level?
For Alfon et al. (2005), the capital adequacy is a positive signalling for the market and for all the
partners to modify their perceptions. Asarkaya and Ozcan (2007) pointed out that when economic
growth is high, the banks make more profit. This profit may contribute to their capital increase. So,
they hold more capital. These authors stated that with the Basel I accord, the notion of capital used in
the approach of risk based capital could not adequately explain the bank’s capacity to compensate the
losses. They also pointed out that the risk criteria that they employed were not satisfactory. Certainly,
the managers of the commercial banks realized this reality. To guard themselves against the risks, they
take care that the capital ratio is high.
Gropp and Heider (2007) found that the profitable banks tend to have relatively more equity. Their
findings are consistent with the prediction of the pecking order theory.
Kleff and Weber (2008) demonstrated that the capital level is positively correlated with the profit. The
accumulation of the profit breeds the capital growth.
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Brewer et al. (2008) pointed out that for the banks, the use of the equity should be determined by the
same set of forces that influence other firms. But the combined impacts of the government safety net
policies and the regulation must be taken in account.
The findings of Ahmad et al. (2009) for Malaysian banks are inconsistent with the previous results.
They demonstrated that the earnings affect negatively the capital ratio. For them, these findings
contradict the view that a high ratio (earnings/franchise value) provides the managers an easy access to
equity. High earnings may cause bank management to reduce capital cushioning accordingly.
Most of the previous studies demonstrated that the regulation is not the unique determinant of the
capital ratio. There are many other macroeconomic and banks’ specific Determinants. They are rather
numerous and they have a power in explaining the variation of this ratio.
Further the regulation, the main determinants are: The profitability, the capital cost, the risk, the
deposits and the asset size.
4. Empirical analysis of the Tunisian banking industry
4.1 Sample and Data
We employed half-yearly data from the Tunisian banking industry for the period January 2002-
December 2008. The data are obtained from financial statements published by banks and from
quarterly and annual reports of central bank of Tunisia. This period was selected to observe the
determinants of the bank capital ratios after the 2001 reform. Many banks have increased their capital
after this reform. There were many mergers and, during this period, strange commercial banks became
shareholders in Tunisian banks.
This factor makes it difficult to adjust the previous data to make them comparable to the data collected
after 2001. For all relating variables to be used in our regressions, each bank must have data for seven
years.
In addition, we excluded two banks recently created, the development banks and all other development
banks recently transformed into deposit banks. After this selection, our final sample contains 18
commercial banks.
For empirical regression, the equity cost is annual because the dividend is annual. We consider that for
the first half year, the cost of equity is the same as that of the second period of the previous year. The
cost for the second half year is determined for the same year. With this temporal shift, each cost will be
used twice times, but in two different years.
4.2 Descriptive Statistics
Tables 2 and 3 provide descriptive statistics for the independent variables.
The means of the variables are presented in Table 2 by six months. The banks of our sample have an
average of capital ratio of 11.37%.
The Risk was very high although its decrease from 18.6% in the first half of 2002, to 16.4% in the
second half of 2008. The Tunisian commercial banks finance more and more the risky activities. For
the sample period, its average is 17.3%.
The equity cost decreased over time from 12.8% in 2002 to 9.51% in the second half of 2008. This is
due to the increase more than proportional of equity compared to the dividend.
The mean of the ratio “term deposits/demand deposits” is around 55% and it has increased since 2002.
In 2008, it is around 65%. The stability of the deposits improved, but their average cost increased. The
interest margin rate recorded small semi-annual increases and its average is around 8.73% during the
sample period.
The intermediation rate has improved for all the banks, essentially for the large banks. Its average is
74%.
The size of the assets of the banks of our sample has increased over the period 2002 - 2008.
Demand deposit variability has increased with constant rhythms. This means that the share of the
deposits in liabilities has dropped. It was 48.23% in the first half of 2002 and it increased to 63.74% in
2008, for all the commercial banks. Its average is 57.67%.
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The average capital ratio of the banks has been higher than the minimum required over time. It was
around 10.6% in 2002 and around 11.2% at the end of 2008. Its mean is around 10.93%.
Table 4 displays the correlation matrix of the variables of the model. It shows that three variables are
negatively correlated with capital ratio. They are the deposit ratio, the equity cost and the asset size.
The negative sign of the variable size means that the larger banks have lower capital ratio. All the other
variables are positively correlated with the capital.
4.3 The Model
The general empirical regression is specified as follows:
Yit = λ0 + Σ λj Xjit + εit (1)
Where,
Yit is the capital ratio in time t for the bank i
λ0 is a constant
Xjit is the jth explanatory variable for the ith bank in period t
λj is the parameter to estimate
εit is the error term
4.3.1 Empirical Specification and Methodology
Our model helps to determinate the capital ratio of bank i at time t. We will use the standard
capital determinants as explanatory variables. Market value is used only for equity. The equity cost is
approximated by the ratio “dividend/equity”. The deposit ratio measures the structure of the deposits.
To allow a better comparison, the assets must be adjusted by the consumer price index.
We exclude the external economic variables. They may be correlated with the bank specific factors.
The variable regulation is excluded too. Its elimination is justified by the very high capital ratios during
the sample period. This will allow us to highlight the effects of the banks’ specific variables.
We propose two new bank specific variables: The intermediation rate and the deposit variability.
4.3.1.1 Deposit Variability
The variability of demand deposits has an impact on the liquidity of the banks and on their insolvency
risk. A high variability may be a synonym of the weakness of the financial resources. It is the case
when the proportion of the term deposits is low. If this situation is accompanied with a rather great
loans portfolio, the banks would be obliged to increase their capital.
This variable can be approximated by the ratio “outflows of deposits/inflows of deposits” of the period.
When outflows are higher than inflows, the variability is speedy.
The analysis of the deposits’ movements of all the banks shows that for the households and the small
savers, it increases remarkably in summer and during the month of Ramadan and at the end of the year.
For all banks’ customers, this variability is cyclical. It has an influence on the structure of loans.
Indeed, the faster is this variability, the more the banks grant short-term credits.
More there are cheaper deposits, more intermediation brings back profits. But when the share of
deposit decreases, the banks will borrow at a higher cost. This decrease can be compensated by debts
and by additional equity.
In our model, we retain the average of the ratios recorded for each six month period. It is expected that
it influences negatively the capital ratio.
4.3.1.2 Intermediation Rate
This variable is determined by the ratio “Total loans / total deposits". It represents the volume of
activity of the banks. The more this rate is high, the more the bank are efficient, and the more it is able
to profit from economies of scale.
A high intermediation rate means that the bank grants more loans. Its liquidity risk and its loans losses
may be high. We expect that this rate influences positively the capital ratio.
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4.3.1.3 Panel equation
It is written as follows:
Capitalit = λ0 + λ1 RISKit + λ2 IMRit + λ3 COEQit + λ4 DEPVARit + λ5 INTRATit
+ λ6 DEPRi,t + λ 7 AVCPt + λ8 ln ASSZi,t + εit (2)
Where,
Capital: The capital ratio for bank i at period t.
RISK: The ratio “loans loss reserve/loans” for bank i at time t.
IMR: Interest margin rate is the ratio inflation-adjusted “net interest margin / Asset” for bank i at
period t.
COEQ: Cost of equity for bank i at period t.
DEPVAR: The demand deposits variability approximated by the ratio “deposits inflows/deposits
outflows” for bank i at period t.
INTRAT: Intermediation rate for bank i at period t measured by the ratio “loans/ deposits”.
DEPR: Is the ratio “term deposit/ demand deposit” for bank i at time t.
AVCP: The average capital adequacy ratio of all the banks of the sample at period t.
ASSZ: The size of the bank measured by total assets adjusted by the consumer price index. It is the
natural log of total assets.
εit : The error term.
4.3.4 Multicollinearity Test
To detect multicollinearity, we determinate the variance inflation factor (VIF) of the independent
variable. The VIF measures how much the variance of a coefficient (square of the standard deviation) is
increased because of collinearity.
R-squared and VIF of our model’s independent variables are presented in Table 5.
Table 5 shows that none of the R-squared are near to 1.0. The variance of inflation factor (VIF) is
always less than 5. Thus, there is no multicollinearity problem.
5. Empirical results
5.1 Results Significance
Table 6 reports the regression results. We employ the Hausman specification to test whether the
individual random effects are correlated with explanatory variables or not. The Breussch-Pagan
Lagragian multiplier is used to test the significance of random effect in the model. It is also used to test
the validity of the exogeneity of the explanatory variables.
The null hypothesis is rejected. Thus, the unobserved individual heterogeneity is uncorrelated with the
explanatory variable. For our study, the within estimator is the best to perform.
According to Baltagi (1995), the random effects model FGLS estimates the error variance–covariance
matrix. It assumes that the errors follow a panel specific autoregressive process. In the same time, the
variance of the error is allowed to be different across units. He pointed out that the fixed effects model
is appropriate when focusing on a specific set of N firms and when the inference is restricted to their
behavior. In our study, this model is performed to make comparisons with previous studies. Both
models will be run using feasible general least squares (FLGS) estimators.
It is worth noting that the signs of the coefficients are similar for all the regressions. In fact, we see that
in the columns (1) (2) and (3), most of the coefficients magnitudes have not changed significantly.
The Table 6 shows that only three variables are negatively correlated with the dependent variable: The
deposits ratio, the equity cost and the asset size. All the other variables are positively correlated with
the capital ratio.
With the p-values significance of all the explanatory variables, we estimate that our model is a reliable.
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The variance analysis shows that there is a strong relationship between all the explanatory variables
and the dependent variable.
5.2 Relationships’ Signs
The Asset size has a negative sign. So, it influences capital in the opposite direction. As it is shown in
the Table 6, this variable might have an important impact on the equity level. This result is explained
by the great increase of the total assets of all the Tunisian banks since 2002. The average rate of this
increase is higher than that of the capital.
Our result is in accordance with those found by Alfon et al. (2005), Asarkaya and Ozcan (2007) and
Gropp and Heider (2007). For Tunisian banks, this can be explained by the fact that the large banks
have more depositors. The public banks have a lower ratio, because they have easy access to the
financial market.
The sign of the deposits ratio coefficient is negative. A high deposits ratio means that the banks have
more stable resources. Consequently, the share of all the deposits in the liabilities is high too.
However, when the deposit ratios are high, the banks have costly deposits. But this cost remains lower
than the cost of all the other funds. Therefore, the capital may relatively decrease.
According to the results of our regression, the banks that take higher risks have a higher capital ratio.
They need to hold more capital to provide a buffer against losses. It is the same result as those of Rime
(2001), Asarkaya and Ozcan (2007) and Gropp and Heider (2007). The coefficient of the variable
“Risk” is the smallest. That means that risk influences the capital ratio less than the other variables.
The coefficients of the equity cost are high. As Alfon et al. (2005), we find that it has a negative impact
on capital. The Tunisian banks yearly pay a relatively important dividend. In this case, banks may be
encouraged to have more loans because of the high equity cost.
Table 6 shows that the interest margin rate is significant at the 0.05 level in explaining the capital ratio.
In our regression, its coefficients are positive and higher than all the other coefficients. Thus, earnings
and capital are strongly related. The profitability is the first determinant of capital structure in Tunisian
banks. Demirgüç-Kunt and Huizinga (2000), and Kuo and Lee (2003) found the same strong
relationship.
There may be two way causalities between the equity cost and the interest margin rate in one hand, and
the dependant variable in another one. Indeed, a higher profitability can infer an increase of the equity
cost. In this case, the stockholders may require an increase of their dividends. The managers must
determine the optimal retained earnings in order to increase capital to the desired level. This result
shows that the Pecking order theory seems to be verified in the Tunisian banks.
We notice that the signs of the deposit ratio and the demand deposit variability are opposite. Table 6
shows that deposit variability has more influence on capital level. The deposit ratio has improved, but
it has not compensated the increase of the demand deposits variability. This explains why the capital
ratio has increased during the sample period.
The intermediation rate is significant at the 0.05 level. It influences positively the capital ratio. Its
coefficient is high. This is due to the increase of the volume of activity. This evolution leads to higher
risks and best profits. With These improvements, the equity might increase.
The sector average ratio is significant at the 0.01 level. A high average ratio may influence managers
in increasing the capital. Each bank tries to have a ratio capital near or equal to the average. Its aim is
to send a positive signal to the market and to the authorities. For commercial banks, there are self
incentives to raise their capital. They seek to avoid the successive interferences by the central bank.
6. Conclusion
This study extends those carried out for the bank's capital ratio in the developed countries. We tried to
explain the relationships between the capital ratio and the bank's variables. The proposed model has
eight variables.
All our findings are in line with those of the p studies curried out in the industrial countries. Therefore,
the relations developed in theory in the developed countries are also observed in the emerging ones.
The risk and the revenue have a positive impact on the dependent variable. They are significant in
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explaining the bank’s capital excess. This excess is not due only to regulatory pressures.
The improvement of the intermediation rate and the asset size leads to a higher ratio. All the banks
adjust it to make it close to the average. So, their capital increases.
The increase in the cost of equity reduces the capital. The deposit variability and the ratio of deposits
have a negative effect on the capital.
The annual rates of the funds increase give us an idea on the financing order. The banks rely firstly on
the deposits. Then, they raise their equity and finally, they make use of debts. This order is justified by
the costs of the funds and by the high ROE. Thus, a specific Pecking Order seems to be verified in the
Tunisian banks.
During the last decade, the rate of growth was high. All the banks had to finance the investments. So,
their loans and their risk increased. This explains why their capital ratios were high.
If we take to account the economic conditions, the results might change. The bank's index of the
management efficiency may affect the equity level. It is a new research question.
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Table 1: Tunisian banks’ Capital ratio (%)
Ratios 2002 2003 2004 2005 2006 2007 2008
Banking industry capital ratio 9.6 9.3 11.6 12.4 11.3 11.0 11.2
Private banks capital ratio 8.9 8.4 12.4 13.4 12.1 11.5 11.8
Public banks capital ratio 10.2 10.8 10.1 10.0 9.3 10.0 10.3
Source: Central bank of Tunisia and APB annual reports.
Table 2(a): Half annual means of variables
Variables 2002- 2002-2 2003-1 2003-2 2004-1 2004-2 2005-1
1
Capital ratio 9.73 9.89 10.37 10.76 11.08 11.32 11.54
Risk 18.60 18.50 18.20 18.40 18.30 18.50 18.10
Net margin interest 8.24 8.32 8.49 8.64 8.71 8.63 8.85
Equity cost 12.41 11.12 11.12 11.05 11.05 10.83 10.83
Ratio of deposits 48.23 48.58 49.86 50.16 51.79 52.34 54.42
Deposit variability 52.11 53.23 53.16 54.37 55.24 56.48 57.64
Intermediation rate 65.32 65.92 67.69 68.08 68.49 70.83 71.26
Ratio of the Sector 10.62 10.87 11.39 10.74 11.36 13.71 12.58
Asset size 13.82 13.34 14.53 14.61 15.08 14.70 15.24
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Table 2(b): Half annual means of variables
Variables 2005-2 2006-1 2006-2 2007-1 2007-2 2008-1 2008-2
Capital ratio 11.59 11.42 12.54 12.73 12.68 11.67 11.91
Risk 17.80 17.70 17.20 16.90 17.10 16.70 16.40
Net margin interest 8.93 8.86 9.07 8.98 9.12 9.21 9.38
Equity cost 10.31 10.31 9.96 9.96 9.78 9.78 9.51
Ratio of deposits 56.12 55.09 55.94 61.60 62.89 63.47 64.54
Deposit variability 58.90 59.31 59.56 60.27 60.86 62.59 63.74
Intermediation rate 72.14 72.76 72.88 72.44 73.57 74.71 75.62
Ratio of the Sector 11.01 11.68 11.85 10.47 9.83 11.27 11.18
Asset size 15.67 15.88 15.69 15.93 16.05 16.42 16.46
RISK: the ratio “bank provision/loans”
IMR: interest margin rate is the ratio inflation-adjusted “interest margin / Assets”.
COEQ: Cost of equity approximated by “Dividend/market value equity”
DEPVAR: the demand deposits variability approximated by the ratio “outflows of deposits
/inflows”
INTRAT: intermediation rate approximated by the ratio “loans /deposits”
DEPR: is the ratio “term deposit/ demand deposit”
AVCP: the average capital adequacy ratio of all the banks of the sample,
ASSZ: the size of assets adjusted by the consumer price index. It is the natural log of total
assets.
Table 3: Descriptive statistics
Variables Means Std Dev Min Max
Capital ratio 11.3764 2.8943 8.64 12.98
Risk 17.3634 11.0164 38.73 72.47
Net margin interest 8.8164 3.6178 7.84 12.34
Equity cost 9.4437 2.9452 8.41 10.83
Ratio of deposits 55.4314 16.2687 39.23 72.38
Deposit variability 57.6715 17.2657 48.23 63.74
Intermediation rate 74.1664 14.5254 67.68 93.26
Ratio of the Sector 10.9362 2.3173 10.80 11.90
Asset size 15.6428 5.6128 13.34 16.46
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Table 4: Correlation matrix for dependent and explanatory variables
Capital ratio Risk IMR COEQ DPER DEPVAR INTRAT ASEZ AVCP
Capital ratio 1
Risk 0.4474 1
IMR 0.5464 0.4326 1
COEQ -0.2548 0.1496 0.0986 1
DPER -0.1897 0.0687 0.2876 -0.1879 1
DEPVAR 0.2167 0.1092 -0.0832 0.1427 -0.0169 1
INTRAT 0.2452 0.0957 -0.2417 -0.2417 0.1528 -0.8246 1
ASEZ -0.0742 0.0508 0.0529 -0.0537 0.0884 -0.0031 -0.0568 1
AVCP 0.0937 -0.3112 0.0713 -0.1818 0.0233 -0.0697 0.0286 -0.0162 1
Table 5: Multicollinearity Test
Variables R-squared VIF
Risk 0.195247 1.242617299
Net margin interest 0.426832 1.744689166
Equity cost 0.119425 1.135621608
Ratio of deposits 0.315139 1.460150307
Deposit variability 0.438634 1.781369017
Intermediation rate 0.463956 1.865518502
Ratio of the Sector 0.528914 2.122754465
Asset size 0.628545 2.692116137
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Table 6: Regression results
Regression model
Explanatory variables
Fixed effects (within) Fixed effects(FGLS) Random effects (FGLS)
Constant 20.4568 (7.5249) *** 9.4685 (3.9246) * 8.8533 (3.7654) ***
Risk 0.0842 (0.0157) * 0.0598 (0.0107) ** 0.0748 (0.0144) **
Net margin interest 0.2758 (0.1856) ** 0.1985 (0.1036) ** 0.2151 (0.1462) ***
Equity cost -0.1742 (0.1286) ** -0.1637 (0.0787) *** -0.1389 (0.4673) ***
Ratio of deposits -0.0819 (0.0294) *** -0.1048 (0.0384) *** -0.0962 (0.0216) ***
Deposit variability 0.1335 (0.05179) * 0.1537 (0.4642) *** 0.1623 (0.6174) ***
Interrmediation rate 0.1172(0.0567)** 0.1242(0.0587)* 0.1058(0.0463)**
Ratio of the Sector 0.0986 (0.0465) *** 0.1179 (0.0409) *** 0.0914 (0.0319) ***
Asset size -0.1442 (0.0856) ** -0.1318 (0.0964) ** -0.1121 (0.0886) **
Wald chi 2 1742.38 537.92
R- Squared 0.6724 0.6229
Within 0.7427 0.6927
Between overall 0.7182 0.7463
F-test (p-value) 0 0 0
Nb observation 80 80
Reported in parentheses are robust standard errors.
*** Significant at 1% level, ** significant at 5% level and * significant at 10% level.
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