| Title : | Factors influencing the profitability of domestic and foreign commercial banks of Nepal | | Material Type: | printed text | | Authors: | Kalpana Parajuli, Author | | Publication Date: | 2015 | | Pagination: | 92p. | | Size: | GRP/Thesis | | Accompanying material: | 5/B | | General note: | Including bibilography | | Languages : | English | | Class number: | 658.9364 | | Abstract: | Although there are several evidences on factors affecting profitability, the issues relating to factors influencing the domestic and foreign commercial bank profitability are still not yet known. Identification of the factors that determines the profitability is important for all the stakeholders and is even more crucial in a developing country like Nepal for the economic development. The major objective of this study is to analyze the factors that influencing the profitability of domestic and foreign commercial banks of Nepal.For the purpose of study, 18 domestic and 6 foreign commercial banks are taken as sample and required data such as capital adequacy, assets quality, liquidity, bank size, inflation and gross domestic product we are collected from various secondary sources for period of 5 years i.e. 2009 to 2013. Three measurements of profitability are usedwhich are return on assets, return on equity and net interest margin. Descriptive statistics, correlation andregression analysis are used to show the relationship between the bank’s profitability and its determinants.
The study observed that the positive relationship between capital adequacy, assets quality, liquidity and bank size are the factors influencing the profitability of domestic and foreign commercial banks in Nepal. The result shows that there is a positive impact of profitability on return on assets, return on equity as well as net interest margin of commercial banks. The relationship of capital adequacy is positive and significant with return on assets, return on equity and net interest margin. Similarly, assets quality represented by bank loan is positively related with banks profitability. There is significant relationship between assets quality and return on assets. Whereas liquidity is also positively related with bank profitability and significant with return on assets, return on equity and net interest margin. Similarly, bank size represented by bank assets is positively related with domestic and foreign commercial banks return on assets, return on equity and net interest margin. Bank size is positively related with foreign commercial banks return on assets, return on equity and net interest margin. Whereas there is no significant relationship with domestic commercial banks return on assets, return on equity and net interest margin.
The study observed that the positive relationship between capital adequacy and profitability of domestic and foreign commercial bank. Hence the bank willing to increase profitability should increase the capital adequacy. The study revealed that a bank loan represents by asset quality is positively correlated with profitability of domestic and foreign commercial banks. Hence increase in bank loan also increases the bank’s profitability. It is found that the positive relationship between bank size represent by bank assets and profitability of domestic and foreign commercial banks. Hence the bank willing to increase profitability should increase the bank size. The result indicated that domestic and foreign commercial banks which have higher liquidity. It provides the higher profitability. It has positive relationship with liquidity so increase in liquidity also increase in profitability.
The major limitation of the study is that it has included 24 banks as a sample from 31 sized population and 9 variables are taken into consideration for study. Although there are limitations, the findings have significant result which can help to those who want to make further study including these variables in determining profitability of commercial banks in Nepal. |
Factors influencing the profitability of domestic and foreign commercial banks of Nepal [printed text] / Kalpana Parajuli, Author . - 2015 . - 92p. ; GRP/Thesis + 5/B. Including bibilography Languages : English | Class number: | 658.9364 | | Abstract: | Although there are several evidences on factors affecting profitability, the issues relating to factors influencing the domestic and foreign commercial bank profitability are still not yet known. Identification of the factors that determines the profitability is important for all the stakeholders and is even more crucial in a developing country like Nepal for the economic development. The major objective of this study is to analyze the factors that influencing the profitability of domestic and foreign commercial banks of Nepal.For the purpose of study, 18 domestic and 6 foreign commercial banks are taken as sample and required data such as capital adequacy, assets quality, liquidity, bank size, inflation and gross domestic product we are collected from various secondary sources for period of 5 years i.e. 2009 to 2013. Three measurements of profitability are usedwhich are return on assets, return on equity and net interest margin. Descriptive statistics, correlation andregression analysis are used to show the relationship between the bank’s profitability and its determinants.
The study observed that the positive relationship between capital adequacy, assets quality, liquidity and bank size are the factors influencing the profitability of domestic and foreign commercial banks in Nepal. The result shows that there is a positive impact of profitability on return on assets, return on equity as well as net interest margin of commercial banks. The relationship of capital adequacy is positive and significant with return on assets, return on equity and net interest margin. Similarly, assets quality represented by bank loan is positively related with banks profitability. There is significant relationship between assets quality and return on assets. Whereas liquidity is also positively related with bank profitability and significant with return on assets, return on equity and net interest margin. Similarly, bank size represented by bank assets is positively related with domestic and foreign commercial banks return on assets, return on equity and net interest margin. Bank size is positively related with foreign commercial banks return on assets, return on equity and net interest margin. Whereas there is no significant relationship with domestic commercial banks return on assets, return on equity and net interest margin.
The study observed that the positive relationship between capital adequacy and profitability of domestic and foreign commercial bank. Hence the bank willing to increase profitability should increase the capital adequacy. The study revealed that a bank loan represents by asset quality is positively correlated with profitability of domestic and foreign commercial banks. Hence increase in bank loan also increases the bank’s profitability. It is found that the positive relationship between bank size represent by bank assets and profitability of domestic and foreign commercial banks. Hence the bank willing to increase profitability should increase the bank size. The result indicated that domestic and foreign commercial banks which have higher liquidity. It provides the higher profitability. It has positive relationship with liquidity so increase in liquidity also increase in profitability.
The major limitation of the study is that it has included 24 banks as a sample from 31 sized population and 9 variables are taken into consideration for study. Although there are limitations, the findings have significant result which can help to those who want to make further study including these variables in determining profitability of commercial banks in Nepal. |
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