| 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.
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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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