Title :	Risk management and financial performance of Nepalese commercial banks
Material Type:	printed text
Authors:	Chetan Shila Shrestha, Author
Publication Date:	2018
Pagination:	98p.
Size:	GRP/Thesis
Accompanying material:	11/B
Languages :	English
Descriptors:	Banks Banks and banking Risk management
Keywords:	'risk management  bank management banks  commercial banks
Class number:	332.106
Abstract:	Banks play an important role for economic development and foster economic growth by providing number of financial services. Risk management is the identification, assessment and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events (Njogo, 2012). Al-Tamimi et al. (2007) analyzed that all banks are exposed to a large number of risks such as credit, liquidity risk, foreign exchange risk, market risk and interest rate risk, among others- the risk which may create some source of threat for a bank’s survival and success. Olusanmi (2015) analyzed the importance of risk management that has become a concept and has been given more attention from practitioners in today’s competitive economic world. These cannot be underrated or overlooked as the practice of risk management minimizes financial losses to the firm. Tabari et al. (2013) revealed that both the credit risk as well as the liquidity risk has negative impact on the performance of banks. Bank's size and bank's asset have a positive effect on the performance of banks. Athanasoglou et al. (2008) revealed credit risk, liquidity, capital adequacy ratio have negative and significant affect on the performance of conventional banks. Irungu (2013) found that there is strong positive relationship between financial performances of commercial banks with interest rate spread. Hess and francis (2004) revealed that there is inverse relationship between the cost to income ratio and bank’s profitability. Bourke (1989) investigated that debt ratios are positively related to profitability. Poudel (2012) found that non-performing loan and capital adequacy ratio have significant negative relationship with return on assets. This study examines the risk management and financial performance of Nepalese commercial banks. The return on assets and earnings per share are the dependent variables. Non-performing loan ratio, liquidity ratio, capital adequacy ratio, debt to asset ratio, interest rate spread, cost to income ratio and bank size are the independent variables. This study is based on secondary data of 16 commercial banks for the period of 2008/09 to 2015/16, leading to a total of 128 observations. The data are collected from the Banking and Financial Statistics and Bank Supervision Report published by Nepal Rastra Bank and annual reports of the selected Nepalese commercial banks. The regression models are estimated to test the significance and importance of the risk management and financial performance of Nepalese commercial banks. The result shows that there is a positive relationship of debt to assets ratio, interest rate spread and bank size with bank performance. It indicates that an increase in debt to assets ratio, interest rate spread and bank size leads to increase in bank performance (returns on assets and earnings per share). However, the study shows the negative relationship of non-performing loan ratio, liquidity ratio, capital adequacy ratio and cost to income ratio with bank performance. It indicates that increase in the non-performing loan ratio, liquidity ratio, capital adequacy ratio and cost to income ratio leads to decrease in bank performance. The regression results also show that beta coefficients are positive for debt to assets ratio, interest rate spread and bank size with the performance of Nepalese commercial banks. However, the beta coefficients are negative for non-performing loan ratio, liquidity ratio, capital adequacy ratio and cost to income ratio with banks performance. Yet, the coefficients are significant only for liquidity ratio, cost to income ratio, debt to asset ratio, interest rate spread and bank size at 5 percent level of significance.

Risk management and financial performance of Nepalese commercial banks [printed text] / Chetan Shila Shrestha, Author . - 2018 . - 98p. ; GRP/Thesis + 11/B.
Languages : English

Descriptors:	Banks Banks and banking Risk management
Keywords:	'risk management  bank management banks  commercial banks
Class number:	332.106
Abstract:	Banks play an important role for economic development and foster economic growth by providing number of financial services. Risk management is the identification, assessment and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events (Njogo, 2012). Al-Tamimi et al. (2007) analyzed that all banks are exposed to a large number of risks such as credit, liquidity risk, foreign exchange risk, market risk and interest rate risk, among others- the risk which may create some source of threat for a bank’s survival and success. Olusanmi (2015) analyzed the importance of risk management that has become a concept and has been given more attention from practitioners in today’s competitive economic world. These cannot be underrated or overlooked as the practice of risk management minimizes financial losses to the firm. Tabari et al. (2013) revealed that both the credit risk as well as the liquidity risk has negative impact on the performance of banks. Bank's size and bank's asset have a positive effect on the performance of banks. Athanasoglou et al. (2008) revealed credit risk, liquidity, capital adequacy ratio have negative and significant affect on the performance of conventional banks. Irungu (2013) found that there is strong positive relationship between financial performances of commercial banks with interest rate spread. Hess and francis (2004) revealed that there is inverse relationship between the cost to income ratio and bank’s profitability. Bourke (1989) investigated that debt ratios are positively related to profitability. Poudel (2012) found that non-performing loan and capital adequacy ratio have significant negative relationship with return on assets. This study examines the risk management and financial performance of Nepalese commercial banks. The return on assets and earnings per share are the dependent variables. Non-performing loan ratio, liquidity ratio, capital adequacy ratio, debt to asset ratio, interest rate spread, cost to income ratio and bank size are the independent variables. This study is based on secondary data of 16 commercial banks for the period of 2008/09 to 2015/16, leading to a total of 128 observations. The data are collected from the Banking and Financial Statistics and Bank Supervision Report published by Nepal Rastra Bank and annual reports of the selected Nepalese commercial banks. The regression models are estimated to test the significance and importance of the risk management and financial performance of Nepalese commercial banks. The result shows that there is a positive relationship of debt to assets ratio, interest rate spread and bank size with bank performance. It indicates that an increase in debt to assets ratio, interest rate spread and bank size leads to increase in bank performance (returns on assets and earnings per share). However, the study shows the negative relationship of non-performing loan ratio, liquidity ratio, capital adequacy ratio and cost to income ratio with bank performance. It indicates that increase in the non-performing loan ratio, liquidity ratio, capital adequacy ratio and cost to income ratio leads to decrease in bank performance. The regression results also show that beta coefficients are positive for debt to assets ratio, interest rate spread and bank size with the performance of Nepalese commercial banks. However, the beta coefficients are negative for non-performing loan ratio, liquidity ratio, capital adequacy ratio and cost to income ratio with banks performance. Yet, the coefficients are significant only for liquidity ratio, cost to income ratio, debt to asset ratio, interest rate spread and bank size at 5 percent level of significance.