Examining the relationship between risk, capital and efficiency: evidence from Nepalese commercial banks / Kabita Thapa 

Public ISBD Title : Examining the relationship between risk, capital and efficiency: evidence from Nepalese commercial banks Material Type: printed text Authors: Kabita Thapa, Author Publication Date: 2016 Pagination: 99p. Size: GRP/Thesis Accompanying material: 7/B Languages : English Descriptors: Bank and banking Risk Class number: 332.106 Abstract: The banking sector plays important role in the financial sector as well as worldwide economies. In modern finance, banks play a crucial role in the process of financial intermediation (Fungacova&Poghosyan, 2011). Das & Ghosh (2004) concluded that a commercial bank is an institution that provides financial services, including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit. Barr.et.al (1994) examined that efficiency has been constantly said to be the leading cause of bank failure. Hughes. et. al (2001) argued that it is necessary to know the concept of efficiency in empirical models of relationship between banking capital and risk. The recent credit crisis has emphasized the need to further understand the determinants of bank risk in an environment of lower bank capital (Festic et al., 2011). Thus, it is no surprise that the relationship between risk, capital and efficiency has recently become a cause for concern. Capital and risk may also be simultaneously determined by the level of efficiency of the banking firm (Kwan & Eisenbeis, 1997; and Hughes & Moon, 1995). The major purpose of the study is to examine the relationship between risk, capital and efficiency of Nepalese commercial banks. More specially, it identifies the structure and pattern of risk, capital and efficiency of Nepalese commercial banks, investigates structure and pattern of selected banks specific variables of Nepalese commercial banks., find out the relationship between bank specific variables and risk, capital and efficiency of Nepalese commercial banks and examines the most important variables affecting risk, capital and efficiency of Nepalese commercial banks. The study is based on the secondary data which includes observation period of 6 years from2009 to 2014 for 20 commercial banks which makes total number of observations of 120. The secondary sources of data for the study are obtained from the published financial statement of the commercial banks in Nepal. The data has been collected from various published sources. Data on bank specific variables are collected from bank supervision report and quarterly economic bulletin published by Nepal Rastra Bank and annual reports of selected banks. The result shows that credit to deposit ratio and capital are positively correlated to risk (loan loss provisions to total loan), whereas net loan to total assets and efficiency are negatively correlated to risk (loan loss provisions to total assets).Return on assets, interest revenue to total assets and efficiency have positive relationship with capital (equity to total assets), whereas bank size has negative relationship with capital.Non-performing loan to total loan and net loan to total assets are positively correlated to efficiency (equity to total assets), whereas liquid assets to total deposit, off balance sheet items to total assets, bank size and risk are negatively correlated to efficiency.Positive beta coefficient is observed for credit to deposit ratio and capital with risk (RISK) which reveals that higher the credit to deposit ratio and capital, higher would be the risk. The result found negative beta coefficient of net loan to total assets and efficiency for risk. It indicates that higher the net loan to total assets and efficiency (insignificant), lower would be the risk.The beta coefficients for interest revenue to total assets), return on assets, risk and efficiency are positive for capital. Where interest revenue to total assets is positively significant impact on capital.The beta coefficient for bank size negatively significant impact on capital.Which reveals that higher bank size, lower would be the capital. The study found that beta coefficient of liquid assets to total deposit, off balance sheet items to total assets, bank size and risk are negative with efficiency. Which reveals that higher the of liquid assets to total deposit, off balance sheet items to total assets, bank size and risk, lower would be the efficiency.The major conclusion of this study is that credit to deposit ratio plays a major role in determining the risk of Nepalese commercial banks. The bank size and interest revenue to total assets plays major role in determining the capital. Similarly, capital plays significant role in determining the efficiency. Examining the relationship between risk, capital and efficiency: evidence from Nepalese commercial banks [printed text] / Kabita Thapa, Author . - 2016 . - 99p. ; GRP/Thesis + 7/B. Languages : English Descriptors: Bank and banking Risk Class number: 332.106 Abstract: The banking sector plays important role in the financial sector as well as worldwide economies. In modern finance, banks play a crucial role in the process of financial intermediation (Fungacova&Poghosyan, 2011). Das & Ghosh (2004) concluded that a commercial bank is an institution that provides financial services, including issuing money in various forms, receiving deposits of money, lending money and processing transactions and the creating of credit. Barr.et.al (1994) examined that efficiency has been constantly said to be the leading cause of bank failure. Hughes. et. al (2001) argued that it is necessary to know the concept of efficiency in empirical models of relationship between banking capital and risk. The recent credit crisis has emphasized the need to further understand the determinants of bank risk in an environment of lower bank capital (Festic et al., 2011). Thus, it is no surprise that the relationship between risk, capital and efficiency has recently become a cause for concern. Capital and risk may also be simultaneously determined by the level of efficiency of the banking firm (Kwan & Eisenbeis, 1997; and Hughes & Moon, 1995). The major purpose of the study is to examine the relationship between risk, capital and efficiency of Nepalese commercial banks. More specially, it identifies the structure and pattern of risk, capital and efficiency of Nepalese commercial banks, investigates structure and pattern of selected banks specific variables of Nepalese commercial banks., find out the relationship between bank specific variables and risk, capital and efficiency of Nepalese commercial banks and examines the most important variables affecting risk, capital and efficiency of Nepalese commercial banks. The study is based on the secondary data which includes observation period of 6 years from2009 to 2014 for 20 commercial banks which makes total number of observations of 120. The secondary sources of data for the study are obtained from the published financial statement of the commercial banks in Nepal. The data has been collected from various published sources. Data on bank specific variables are collected from bank supervision report and quarterly economic bulletin published by Nepal Rastra Bank and annual reports of selected banks. The result shows that credit to deposit ratio and capital are positively correlated to risk (loan loss provisions to total loan), whereas net loan to total assets and efficiency are negatively correlated to risk (loan loss provisions to total assets).Return on assets, interest revenue to total assets and efficiency have positive relationship with capital (equity to total assets), whereas bank size has negative relationship with capital.Non-performing loan to total loan and net loan to total assets are positively correlated to efficiency (equity to total assets), whereas liquid assets to total deposit, off balance sheet items to total assets, bank size and risk are negatively correlated to efficiency.Positive beta coefficient is observed for credit to deposit ratio and capital with risk (RISK) which reveals that higher the credit to deposit ratio and capital, higher would be the risk. The result found negative beta coefficient of net loan to total assets and efficiency for risk. It indicates that higher the net loan to total assets and efficiency (insignificant), lower would be the risk.The beta coefficients for interest revenue to total assets), return on assets, risk and efficiency are positive for capital. Where interest revenue to total assets is positively significant impact on capital.The beta coefficient for bank size negatively significant impact on capital.Which reveals that higher bank size, lower would be the capital. The study found that beta coefficient of liquid assets to total deposit, off balance sheet items to total assets, bank size and risk are negative with efficiency. Which reveals that higher the of liquid assets to total deposit, off balance sheet items to total assets, bank size and risk, lower would be the efficiency.The major conclusion of this study is that credit to deposit ratio plays a major role in determining the risk of Nepalese commercial banks. The bank size and interest revenue to total assets plays major role in determining the capital. Similarly, capital plays significant role in determining the efficiency.

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Relationship between capital and risk: evidence from Nepalese commercial banks / Krishna Kumar Rokka 

Public ISBD Title : Relationship between capital and risk: evidence from Nepalese commercial banks Material Type: printed text Authors: Krishna Kumar Rokka, Author Publication Date: 2014 Pagination: 80p. Size: GRP/Thesis Accompanying material: 1/B General note: Including bibliography Languages : English Descriptors: Bank capital Banks and banking Commercial banks Nepal Risk Keywords: 'bank  bank and banking  commercial banks  nepal  risk  nepal' Class number: 332.106 Abstract: Banking is the most regulated industry in the world. Apart from the product and its service, banking regulation also cover its institution. The aim of the bank regulation is to increase prudential practices that will reduce the level of risk bank are exposed to. Furthermore, bank is also very important to the economy as the failure of banking will inhibit economic crisis. This motivation is known as systemic risk reduction motivation. In general, banking regulation is for the interest of depositors. In general capital regulation is very important because it plays an important role in banks' health and risk taking behavior, and its impact on competitiveness banks. This states that there is somehow relationship between banking capital and the risk taking behavior of commercial banks. There is far less researches on the empirical side. All work investigating the relationship between capital and risk relationship between banking capital and risk taking has focused on the developing countries. This study investigates the relationship between capital and banks if selected commercial banks of Nepal. The objectives of the study were to examine the relationship between the capital and risk with other bank specific variables viz. bank size, ROA and net lending to total assets, and to examine the opinion of banking practitioner on the capital and risk. This study is guided by M.M. theory to capital, Markowitz portfolio theory and managers incentive theory. M.M. theory states that that valuation of the firm is irrelevant to the capital structure of a company whether it is highly leverage or has lower debt component. Markowitz portfolio theory states that a single assets may be very risky when held in isolation, but not much risky when held in combination with other assets in a portfolio. Managers’ incentive theory states that manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximize shareholder wealth. However, it is in the manager's own best interest to maximize his own wealth. So there is conflict of interest and as a result agency cost problem arises. There are several studies conducted on the relationship between capital and risk. Some of the review showed positive relationship between capital and risk, large size banks hold less capital than small banks, profit and capital are positively related, net lending is inversely related with risk. Capital regulation has played important role in preventing commercial banks from failures by restricting them in involving excessive risk taking. This study has used both qualitative and quantitative approach by using descriptive research design. Data were collected from 14 commercial banks out of 31 commercial banks which existed and had the required data during the entire study period. The study used secondary data, which was retrieved from bank and financial statistics published by NRB and the individual bank’s financial statement. The primary source of data was collected through the questionnaire survey from the bank officers. The collected data was analyzed using SPSS software. Descriptive statistics, correlation analysis, portfolio analysis and regression analysis were carried out to analyze the secondary data. The result of the study showed that bank size and capital is significantly and negatively related with banking risk which implies that large size bank tens to be less risky and larger capital banks tend to reduce the risk taking behavior. Similarly, capital is negatively related to bank size indicating that larger banks tend to hold less capital due to their economies of scale and lower transaction cost. Profitability is positively related to capital but not statistically insignificant. The study also finds that regulators plays important role in controlling the risk taking activity of the commercial bank and it has helped banks in maintaining positive relationship between capital and risk. The study reveals that out of many factors, credit risk is more responsible for banking risk and market discipline and regulations have contributed a lot for capital base requirement. The major conclusion of the study is that there is inverse relationship between capital and banking risk. Similarly, the inverse relationship between bank size and risk indicates that large banks tend to have lower risk. Overall the results suggest that regulators should monitor closely bank loan expansion, and capital adequacy requirement on risk-taking activities so as to ensure a safer operating environment for banks in Nepal. And further studies are suggested with wide coverage of banks and financial system.   Relationship between capital and risk: evidence from Nepalese commercial banks [printed text] / Krishna Kumar Rokka, Author . - 2014 . - 80p. ; GRP/Thesis + 1/B. Including bibliography Languages : English Descriptors: Bank capital Banks and banking Commercial banks Nepal Risk Keywords: 'bank  bank and banking  commercial banks  nepal  risk  nepal' Class number: 332.106 Abstract: Banking is the most regulated industry in the world. Apart from the product and its service, banking regulation also cover its institution. The aim of the bank regulation is to increase prudential practices that will reduce the level of risk bank are exposed to. Furthermore, bank is also very important to the economy as the failure of banking will inhibit economic crisis. This motivation is known as systemic risk reduction motivation. In general, banking regulation is for the interest of depositors. In general capital regulation is very important because it plays an important role in banks' health and risk taking behavior, and its impact on competitiveness banks. This states that there is somehow relationship between banking capital and the risk taking behavior of commercial banks. There is far less researches on the empirical side. All work investigating the relationship between capital and risk relationship between banking capital and risk taking has focused on the developing countries. This study investigates the relationship between capital and banks if selected commercial banks of Nepal. The objectives of the study were to examine the relationship between the capital and risk with other bank specific variables viz. bank size, ROA and net lending to total assets, and to examine the opinion of banking practitioner on the capital and risk. This study is guided by M.M. theory to capital, Markowitz portfolio theory and managers incentive theory. M.M. theory states that that valuation of the firm is irrelevant to the capital structure of a company whether it is highly leverage or has lower debt component. Markowitz portfolio theory states that a single assets may be very risky when held in isolation, but not much risky when held in combination with other assets in a portfolio. Managers’ incentive theory states that manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximize shareholder wealth. However, it is in the manager's own best interest to maximize his own wealth. So there is conflict of interest and as a result agency cost problem arises. There are several studies conducted on the relationship between capital and risk. Some of the review showed positive relationship between capital and risk, large size banks hold less capital than small banks, profit and capital are positively related, net lending is inversely related with risk. Capital regulation has played important role in preventing commercial banks from failures by restricting them in involving excessive risk taking. This study has used both qualitative and quantitative approach by using descriptive research design. Data were collected from 14 commercial banks out of 31 commercial banks which existed and had the required data during the entire study period. The study used secondary data, which was retrieved from bank and financial statistics published by NRB and the individual bank’s financial statement. The primary source of data was collected through the questionnaire survey from the bank officers. The collected data was analyzed using SPSS software. Descriptive statistics, correlation analysis, portfolio analysis and regression analysis were carried out to analyze the secondary data. The result of the study showed that bank size and capital is significantly and negatively related with banking risk which implies that large size bank tens to be less risky and larger capital banks tend to reduce the risk taking behavior. Similarly, capital is negatively related to bank size indicating that larger banks tend to hold less capital due to their economies of scale and lower transaction cost. Profitability is positively related to capital but not statistically insignificant. The study also finds that regulators plays important role in controlling the risk taking activity of the commercial bank and it has helped banks in maintaining positive relationship between capital and risk. The study reveals that out of many factors, credit risk is more responsible for banking risk and market discipline and regulations have contributed a lot for capital base requirement. The major conclusion of the study is that there is inverse relationship between capital and banking risk. Similarly, the inverse relationship between bank size and risk indicates that large banks tend to have lower risk. Overall the results suggest that regulators should monitor closely bank loan expansion, and capital adequacy requirement on risk-taking activities so as to ensure a safer operating environment for banks in Nepal. And further studies are suggested with wide coverage of banks and financial system.  

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Relationship between capital and risks in Nepalese commercial banks / Bishnu Sapkota 

Public ISBD Title : Relationship between capital and risks in Nepalese commercial banks Material Type: printed text Authors: Bishnu Sapkota, Author Publication Date: 2015 Pagination: 77p. Size: GRP/Thesis Accompanying material: 3/B General note: Including bibliography Languages : English Descriptors: Bank capital Banks Banks and banking Commercial banks Nepal Risk Keywords: 'bank  bank and banking  commercial banks  nepal  risk  nepal' Class number: 332.106 Abstract: The relationship of risk and capital is very important for the banking industries. There are many studies published to examine this relationship. The relationship between capital and risks are studied extensively by several researchers. In regards to the relationship between capital and risks, researchers found different results. Some of the scholars’ state that, risks has negative relationship with capital. Meanwhile other researchers indicate the nonlinear negative and positive relationship between capital and risks. This study aims to examine the relationship between capital and risks of commercial banks of Nepal. The study has employed descriptive and causal comparative research designs to deal with the fundamental issues associated with capital and risks in the context of Nepal. The study is based on secondary data. The variables used in the study are core capital and total capital as dependent variables where as independent variables are credit risks, operational risks, and market risks.. Similarly this study covers data of sample banks for 7 years ranging for year 2008 to 2014. Thus, collected date were analyzed using excel, and SPSS statistical package. This study used methods such as mean, standard deviation, descriptive analysis, correlation analysis in order to analyze the data. The study reveals that risks have significant and positive impact on capital of banks and suggests specifically that bank should try to minimize risks in order to achieve the smooth functioning of the banks. More specifically, the study finds that credit risk, operational risk, and market risk, were statistically significant and positive impact on core capital and total capital of commercial banks in Nepal. The regression analysis also revealed that 96 percent in the dependent variable core capital is explained by all the independent variables. This suggests that relationship is found to be positive and significant relationship with core capital. Relationship between capital and risks in Nepalese commercial banks [printed text] / Bishnu Sapkota, Author . - 2015 . - 77p. ; GRP/Thesis + 3/B. Including bibliography Languages : English Descriptors: Bank capital Banks Banks and banking Commercial banks Nepal Risk Keywords: 'bank  bank and banking  commercial banks  nepal  risk  nepal' Class number: 332.106 Abstract: The relationship of risk and capital is very important for the banking industries. There are many studies published to examine this relationship. The relationship between capital and risks are studied extensively by several researchers. In regards to the relationship between capital and risks, researchers found different results. Some of the scholars’ state that, risks has negative relationship with capital. Meanwhile other researchers indicate the nonlinear negative and positive relationship between capital and risks. This study aims to examine the relationship between capital and risks of commercial banks of Nepal. The study has employed descriptive and causal comparative research designs to deal with the fundamental issues associated with capital and risks in the context of Nepal. The study is based on secondary data. The variables used in the study are core capital and total capital as dependent variables where as independent variables are credit risks, operational risks, and market risks.. Similarly this study covers data of sample banks for 7 years ranging for year 2008 to 2014. Thus, collected date were analyzed using excel, and SPSS statistical package. This study used methods such as mean, standard deviation, descriptive analysis, correlation analysis in order to analyze the data. The study reveals that risks have significant and positive impact on capital of banks and suggests specifically that bank should try to minimize risks in order to achieve the smooth functioning of the banks. More specifically, the study finds that credit risk, operational risk, and market risk, were statistically significant and positive impact on core capital and total capital of commercial banks in Nepal. The regression analysis also revealed that 96 percent in the dependent variable core capital is explained by all the independent variables. This suggests that relationship is found to be positive and significant relationship with core capital.

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Relationship between risk, capital and efficiency :evidence from Nepalese commercial banks / Prabha Paudel 

Public ISBD Title : Relationship between risk, capital and efficiency :evidence from Nepalese commercial banks Material Type: printed text Authors: Prabha Paudel, Author Publication Date: 2015 Pagination: 84p. Size: GRP/Thesis Accompanying material: 5/B General note: Including bibilography Languages : English Descriptors: Banks Banks and banking Commercial banks Nepal Risk Keywords: 'return on equity  return on assets  risk weighted assets' Class number: 332.106 Abstract: Bank efficiency has received much attention in academic literature. There is far less research on the empirical side. All the empirical work investigating relationship between risk, capital and efficiency has focused developed economy. This study investigates the relationship between risks, capital and efficiency behaviour of selected Nepalese commercial banks. This study is guided by economic efficiency theory and regulatory and efficient marketing monitoring hypothesis. Economic efficiency theory states that company should achieve their output at the lowest possible cost per unit produced. Regulators and efficient marketing monitoring hypothesis states that regulators encourage banks to increase their capital to commensurate with the amount of risk taken by the banks. There are several studies conducted on the relationship between risk, capital and efficiency. Some of the review showed that large banks enjoy better efficiency than smaller bank, more capital and large sized banks can improve the operating efficiency of banking firm. Local banks were doing better than foreign banks in case of ROA and ROE. Capital regulations and performance was more problematic in the case of merger and acquisition between a big bank having large workforce and a small bank having staff strength but high personnel cost. The main objective of the study is to assess the relationship between risk, capital and efficiency in Nepalese commercial banks. The other specific objectives are to identify the correlation of bank efficiency with nonperforming loan to total liabilities, capital fund to risk weighted assets, core capital to risk weighted assets, total equity to total assets and logarithm of total assets, examine correlation of banks capital with size, return on assets and total interest revenue to total assets, assess correlation of bank risk with efficiency, capital, net loan to total assets and loan to deposit ratio, analyze whether the higher capital ratio reduces overall bank risk. In order to achieve the objectives quantitative approach was used by using descriptive research. Data were collected from 15 commercial banks out of 30 commercial banks. The study used secondary data which was retrieved from published statements of accounts of the banks both from the central bank and the respective commercial banks for the period of ten years 2004-2013.The collected data was analyzed using Statistical Package for Social Sciences (SPSS) software. Descriptive statistics for panel data, correlation matrix and stepwise regression models were carried out to determine the effects of bank specific variables. The result of the study showed that non-joint ventures offer more loan to deposit ratio than joint venture and public banks. Public banks have low equity to total assets which means that public banks are likely burdened. The study showed that loan loss reserves to total assets have negative relationship with loan to deposit ratio which implies that higher credit to deposit increases the bank risk. Similarly, the study showed that capital and operating efficiency has negative relationship which indicates that whenever there is less efficiency than capital of the company decreases. In addition, there is positive relationship between efficiency and non-performing loan to total loan, total equity to total assets, capital fund to risk-weighted assets and loan loss reserves to total assets. The major conclusion of the study is risk and capital are negatively related in Nepalese Commercial Banks which implies that risk increases with the decrease of stock of capital in Nepalese Commercial Banks. Furthermore there is significant relationship between risk and efficiency which implies that efficient banks have higher risk. Further banks which have higher net loans to total assets composition has higher risk as there is positive relationship between net loans to total assets and risk. In addition risk and loan to deposit ratio has negative relationship which suggest that risk increases with decrease in loan to deposit ratio. In capital equation, there is positive relationship between capital and interest revenue to total assets which implies that capital increases with increase in interest revenue. Based on the findings, it shows inverse relationship between total assets and capital of commercial banks which shows larger banks has less capital, so firm willing to increase their capital should increase their return on assets and proper management of variables should be done in order to improve bank performance. And future studies can be carried out by selecting other development banks and finance companies and to generalize the findings and to further investigate the relationship between relationship between risk, capital and efficiency. Alternative accounting and market based indicators of banking-risk, Basel capital strength factors and alternative bank cost and efficiency measures are suggested in order to examine the consistency of findings. In future research more sophisticated statistical tools can be used to make findings more reliable and valid across different industry sectors in developing countries like Nepal. And also future research should cover macroeconomic condition of the country. Moreover, the definition of risk and capital should be changed to observed stronger theoretical foundation and for efficiency variable; future study should use cost and economic efficiency to give clear picture from different aspect. Relationship between risk, capital and efficiency :evidence from Nepalese commercial banks [printed text] / Prabha Paudel, Author . - 2015 . - 84p. ; GRP/Thesis + 5/B. Including bibilography Languages : English Descriptors: Banks Banks and banking Commercial banks Nepal Risk Keywords: 'return on equity  return on assets  risk weighted assets' Class number: 332.106 Abstract: Bank efficiency has received much attention in academic literature. There is far less research on the empirical side. All the empirical work investigating relationship between risk, capital and efficiency has focused developed economy. This study investigates the relationship between risks, capital and efficiency behaviour of selected Nepalese commercial banks. This study is guided by economic efficiency theory and regulatory and efficient marketing monitoring hypothesis. Economic efficiency theory states that company should achieve their output at the lowest possible cost per unit produced. Regulators and efficient marketing monitoring hypothesis states that regulators encourage banks to increase their capital to commensurate with the amount of risk taken by the banks. There are several studies conducted on the relationship between risk, capital and efficiency. Some of the review showed that large banks enjoy better efficiency than smaller bank, more capital and large sized banks can improve the operating efficiency of banking firm. Local banks were doing better than foreign banks in case of ROA and ROE. Capital regulations and performance was more problematic in the case of merger and acquisition between a big bank having large workforce and a small bank having staff strength but high personnel cost. The main objective of the study is to assess the relationship between risk, capital and efficiency in Nepalese commercial banks. The other specific objectives are to identify the correlation of bank efficiency with nonperforming loan to total liabilities, capital fund to risk weighted assets, core capital to risk weighted assets, total equity to total assets and logarithm of total assets, examine correlation of banks capital with size, return on assets and total interest revenue to total assets, assess correlation of bank risk with efficiency, capital, net loan to total assets and loan to deposit ratio, analyze whether the higher capital ratio reduces overall bank risk. In order to achieve the objectives quantitative approach was used by using descriptive research. Data were collected from 15 commercial banks out of 30 commercial banks. The study used secondary data which was retrieved from published statements of accounts of the banks both from the central bank and the respective commercial banks for the period of ten years 2004-2013.The collected data was analyzed using Statistical Package for Social Sciences (SPSS) software. Descriptive statistics for panel data, correlation matrix and stepwise regression models were carried out to determine the effects of bank specific variables. The result of the study showed that non-joint ventures offer more loan to deposit ratio than joint venture and public banks. Public banks have low equity to total assets which means that public banks are likely burdened. The study showed that loan loss reserves to total assets have negative relationship with loan to deposit ratio which implies that higher credit to deposit increases the bank risk. Similarly, the study showed that capital and operating efficiency has negative relationship which indicates that whenever there is less efficiency than capital of the company decreases. In addition, there is positive relationship between efficiency and non-performing loan to total loan, total equity to total assets, capital fund to risk-weighted assets and loan loss reserves to total assets. The major conclusion of the study is risk and capital are negatively related in Nepalese Commercial Banks which implies that risk increases with the decrease of stock of capital in Nepalese Commercial Banks. Furthermore there is significant relationship between risk and efficiency which implies that efficient banks have higher risk. Further banks which have higher net loans to total assets composition has higher risk as there is positive relationship between net loans to total assets and risk. In addition risk and loan to deposit ratio has negative relationship which suggest that risk increases with decrease in loan to deposit ratio. In capital equation, there is positive relationship between capital and interest revenue to total assets which implies that capital increases with increase in interest revenue. Based on the findings, it shows inverse relationship between total assets and capital of commercial banks which shows larger banks has less capital, so firm willing to increase their capital should increase their return on assets and proper management of variables should be done in order to improve bank performance. And future studies can be carried out by selecting other development banks and finance companies and to generalize the findings and to further investigate the relationship between relationship between risk, capital and efficiency. Alternative accounting and market based indicators of banking-risk, Basel capital strength factors and alternative bank cost and efficiency measures are suggested in order to examine the consistency of findings. In future research more sophisticated statistical tools can be used to make findings more reliable and valid across different industry sectors in developing countries like Nepal. And also future research should cover macroeconomic condition of the country. Moreover, the definition of risk and capital should be changed to observed stronger theoretical foundation and for efficiency variable; future study should use cost and economic efficiency to give clear picture from different aspect.

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