| Title : | Ownership structure and firm Profitability in Nepalese banking sector | | Material Type: | printed text | | Authors: | Shaubhagyavati Kumari Rana, Author | | Publication Date: | 2016 | | Pagination: | 94p. | | Size: | GRP/Thesis | | Accompanying material: | 7/B | | Languages : | English | | Descriptors: | Stock ownership
| | Class number: | 658.152 | | Abstract: | Bank’s profitability is the ability of a bank to generate revenue in excess of cost, in relation to the bank’s capital base. Profitability is of important information in economic decision makings and it has been always used by investors, managers and financial analyzers as guide of dividend payment, tool for measuring management efficiency and instrument for predicting and evaluating decision makings (Saghafi and Aghaei, 1994). The effect of ownership structure and performance is an important issue in the literature of finance theory. Ownership concentration may improve performance by decreasing monitoring costs(Shleifer and Vishny, 1997). However, it may also work in the opposite direction. There is a possibility that large shareholders use their control rights to achieve private benefits.Ownership structure and concentration are considered as important factors that affect a firm’s health. If the ownership structure and concentration affects a firm’s health, then it is possible to use the ownership concentration and structure to predict the probability of default.
The selection of ownership such as foreign, local, public, private, state, etc. is important in the context of non-bank firms but becomes crucial in the context of a bank (Boubakriet al., 2005). However, it is an essential element for the development of a healthy banking system in developing countries (Lang and So, 2002). Changes in ownership structures without a supporting regulatory and supervisory body in place are likely to lead to a banking crisis. The issue of ownership structure is of particular interest for the banking industry as several factors interact and alter governance, such as the quality of bank regulation and supervision and the opacity of bank assets.
The major objective of the study is to reveal the empirical relationship between the ownership structure and bank’s profitability. However, the specific objectives are: to identify the most important indicators of the ownership structure and bank specific, investigate the effect of each indicator (government ownership, foreign ownership, private ownership, liquid ratio, bank size, bank age, and financial leverage) on the bank’s profitability as well as to identify the most influential variables of ownership structure and bank specific to explain the profitability of commercial banks of Nepal.
The study results show that there is positive relationship of foreign ownershipwith Nepalese commercial banks profit in term of return of assets, return on equity and net interest margin. It indicates higher proportion of foreign ownership, higher would be Nepalese commercials banks profit. Similarly, increase in proportion of private ownershipwill increase the banks’ return on equity and net interest margin. However, higher the proportion of government ownership, lower will be the profit of Nepalese commercial banks.
The study also concludes that the liquid ratio, bank size, bank age and financial leverage are statically significant factors that determine the profitability of commercial banks in Nepal. Banks with higher liquid ratio are more likely to earn return on assets. Larger banks are able to earn stable profitability in term of return on assets, return on equity and net interest margin. Bank age has positive and significant impact on return on assets and net interest margin. Similarly, financial leverage is also statistically significant factors that determine the return on equity, net interest margin and return on assets. However, the result did not support the significant effect of liquid ratio and size on return on assets and return on equity.
|
Ownership structure and firm Profitability in Nepalese banking sector [printed text] / Shaubhagyavati Kumari Rana, Author . - 2016 . - 94p. ; GRP/Thesis + 7/B. Languages : English | Descriptors: | Stock ownership
| | Class number: | 658.152 | | Abstract: | Bank’s profitability is the ability of a bank to generate revenue in excess of cost, in relation to the bank’s capital base. Profitability is of important information in economic decision makings and it has been always used by investors, managers and financial analyzers as guide of dividend payment, tool for measuring management efficiency and instrument for predicting and evaluating decision makings (Saghafi and Aghaei, 1994). The effect of ownership structure and performance is an important issue in the literature of finance theory. Ownership concentration may improve performance by decreasing monitoring costs(Shleifer and Vishny, 1997). However, it may also work in the opposite direction. There is a possibility that large shareholders use their control rights to achieve private benefits.Ownership structure and concentration are considered as important factors that affect a firm’s health. If the ownership structure and concentration affects a firm’s health, then it is possible to use the ownership concentration and structure to predict the probability of default.
The selection of ownership such as foreign, local, public, private, state, etc. is important in the context of non-bank firms but becomes crucial in the context of a bank (Boubakriet al., 2005). However, it is an essential element for the development of a healthy banking system in developing countries (Lang and So, 2002). Changes in ownership structures without a supporting regulatory and supervisory body in place are likely to lead to a banking crisis. The issue of ownership structure is of particular interest for the banking industry as several factors interact and alter governance, such as the quality of bank regulation and supervision and the opacity of bank assets.
The major objective of the study is to reveal the empirical relationship between the ownership structure and bank’s profitability. However, the specific objectives are: to identify the most important indicators of the ownership structure and bank specific, investigate the effect of each indicator (government ownership, foreign ownership, private ownership, liquid ratio, bank size, bank age, and financial leverage) on the bank’s profitability as well as to identify the most influential variables of ownership structure and bank specific to explain the profitability of commercial banks of Nepal.
The study results show that there is positive relationship of foreign ownershipwith Nepalese commercial banks profit in term of return of assets, return on equity and net interest margin. It indicates higher proportion of foreign ownership, higher would be Nepalese commercials banks profit. Similarly, increase in proportion of private ownershipwill increase the banks’ return on equity and net interest margin. However, higher the proportion of government ownership, lower will be the profit of Nepalese commercial banks.
The study also concludes that the liquid ratio, bank size, bank age and financial leverage are statically significant factors that determine the profitability of commercial banks in Nepal. Banks with higher liquid ratio are more likely to earn return on assets. Larger banks are able to earn stable profitability in term of return on assets, return on equity and net interest margin. Bank age has positive and significant impact on return on assets and net interest margin. Similarly, financial leverage is also statistically significant factors that determine the return on equity, net interest margin and return on assets. However, the result did not support the significant effect of liquid ratio and size on return on assets and return on equity.
|
|
Refine your search Apply to external sourcesOwnership structure and firm Profitability in Nepalese banking sector / Shaubhagyavati Kumari Rana
