Welcome to the Uniglobe Library
From this page you can:
Home |
Author details
Author Narayan Prasad Belbase |
Available item(s) by this author
Refine your search Apply to external sources
Determinants of bank stability : A case of nepalese commercial banks / Narayan Prasad Belbase
Title : Determinants of bank stability : A case of nepalese commercial banks Material Type: printed text Authors: Narayan Prasad Belbase, Author Publication Date: 2019 Pagination: 124p. Size: GRP/Thesis Accompanying material: 15th Languages : English Abstract: A financial system is in a range of stability when it dissipates financial imbalances that arise endogenously or as a result of significant adverse and unforeseen events. In stability, the system will absorb the shocks primarily via self-corrective mechanisms, preventing adverse events from having a disruptive effect on the real economy or on other financial systems. Bank stability is paramount for economic growth, as most transactions in the real economy are made through the banking system. Bank stability is a system that can be characterized as stability in the absence of excessive volatility and stress or crises in the banking sector. A common measure of stability at the level of individual institutions is the z-score. The popularity of the z-score stems from the fact that it has a clear (negative) relationship to the probability of a bank and financial institution’s insolvency, that is, the probability that the value of its assets becomes lower than the value of its debt. A higher z-score therefore implies a lower probability of insolvency.
The study attempts to examine the determinants of bank stability of the Nepalese commercial banks. Bank stability measured in terms of Z-score return on assets and Z-score return on equity are the dependent variables. The independent variables are bank size, income diversity, operating expenses, liquidity ratio, gross domestic product and inflation. The study is based on secondary data of 18 commercial banks with 126 observations for the period of 2011/12 to 2017/18. The secondary data and information have been collected from annual reports of selected commercial banks. The regression models are estimated to test the significance and impact of different variables on financial stability of Nepalese commercial banks. The findings of the paper are largely original in the area of bank stability of Nepalese banking.
The result shows that average Z-score of return on assets is highest for NABIL (4.37) and lowest for MBL(1.82), average Z-score of return on equity is highest for NABIL (4.27) and lowest for MBL (1.75), average bank size is highest for RBBL (Rs.142.91 billion) and lowest for NBBL(Rs.38.73 billion), average income diversity is highest for NBBL (3.08 percent) and lowest for RBBL (-4.55 percent), average operating expenses is highest for ADBL (3.62 billion) and lowest for NMB (0.39 billion) and average liquidity is highest for ADBL (89.73 percent) and lowest for SCBL (57.43 percent).
The descriptive statistics shows that the Z-score return on assets ranges from a minimum of 0.38 percent to a maximum of 6.29 percent to an average of 2.86 percent. Similarly, the Z-score return on equity ranges from minimum of 0.23 percent to a maximum of 8.38 percent, leading to an average of 2.67 percent. Bank size varies from a minimum of 21.30 to a maximum of 26.01, leading to an average of 24.81. Similarly, Income diversity ranges from a minimum of -5.81 percent to a maximum of 0.57 percent, leading to an average of 0.28 percent. Operating expenses varies from a minimum of 18.44 to a maximum of 22.15, leading to an average of 20.73, liquidity ratio ranges from minimum of 46.08 percent to a maximum of 96.33 percent, leading to an average of 77.29 percent. Similarly, the gross domestic product ranges from minimum of 0.20 percent to a maximum of 7.40 percent, leading to an average of 4.41 percent. Likewise, inflation varies from 4.10 percent to a maximum of 9.90 percent, leading to an average of 7.57percent.
The result shows bank size has a positive relationship with Z-score return on assets. It indicates that higher the bank size, the bank would be more stable. Similarly, the results also show that income diversity has a positive relationship with Z-score return on assets. It indicates that higher the income diversity, higher would be the bank stability. Operating expenses has a positive and significant relationship with Z-score return on assets. It reveals that higher the operating expenses, the bank would be more stable. Likewise, liquidity ratio has a negative relationship with Z-score return on assets. It indicates that increase in liquidity leads bank to be less stable. Result also shows that gross domestic product has a positive relationship with Z-score return on assets. It indicates that higher the gross domestic product, the bank would be more stable. However, inflation rate has a negative relationship with Z-score return on assets. It reveals that higher the inflation rate lower would be the bank stability.
The result also reveals that bank size has a positive and significant relationship with Z-score return on equity. It indicates that higher the bank size, the bank would be more stable. Similarly, income diversity has a positive relationship with Z-score return on equity. It reveals that higher the income diversity, higher would be the bank stability. Operating expenses has a positive relationship with Z-return on equity. It indicates that higher the operating expenses, higher would be the bank stability. Similarly, liquidity ratio has a negative relationship with Z-score return on equity which indicates that higher the liquidity the bank would be less stable. However, gross domestic product has a negative and significant relationship with Z-return on equity. It indicates that higher gross domestic product, lower would be the bank stability. The result also shows that inflation rate has a positive relationship with Z-return on equity. It reveals that higher the inflation rate, higher would be the bank stability.
The regression results of Z-score return on assets shows that the beta coefficients for inflation are negative with Z-score return on assets. It indicates inflation has negative impact on level of stability. However, the beta coefficients for bank size are positive with Z-score return on assets. This indicates that bank size has positive effect on level of stability. Likewise, the result shows that the beta coefficients for income diversity are positive with Z-score return on assets. It shows that income diversity has positive impact on level of stability. Likewise, the beta coefficients for operating expenses are positive with Z-score return on assets. It shows that for operating expenses has positive impact on level of stability. The result also shows that the beta coefficients for liquidity are negative with Z-score return on assets. It indicates liquidity ratio has negative impact on stability. Similarly, the beta coefficients for gross domestic product are positive with Z-score return on assets. It shows that gross domestic product has positive impact on level of stability. The result also shows that the beta coefficients for operating expenses are significant at 1 percent level of significance and bank size is significant at 5 percent level of significance
The regression results of Z-score return on equity shows that the beta coefficient for liquidity ratio is negative with Z-score return on equity. This indicates that liquidity ratio has negative effect on level of stability. Likewise, the beta coefficients for gross domestic product are negative with Z-score return on equity. It indicates that gross domestic product has negative effect on level of stability. The result also shows that the beta coefficients for gross domestic product are significant at 5 percent level of significance. However, the results also show that the beta coefficients for bank size are positive with Z-score return on equity. It shows that bank size has positive impact on level of stability. The result also shows that the beta coefficients for income diversity are positive with Z-score return on equity. It indicates income diversity has positive effect on stability. Similarly, the beta coefficients for operating expenses are positive with Z-score return on equity. It shows that operating expenses has positive impact on level of stability. Likewise, the beta coefficients for inflation are positive with Z-score return on equity. It shows that for inflation has positive impact on level of stability. The result also shows that the beta coefficients for GDP and inflation are significant at 5 percent level of significance and beta coefficients for bank size and liquidity are significant at 1 percent level of significance
Determinants of bank stability : A case of nepalese commercial banks [printed text] / Narayan Prasad Belbase, Author . - 2019 . - 124p. ; GRP/Thesis + 15th.
Languages : English
Abstract: A financial system is in a range of stability when it dissipates financial imbalances that arise endogenously or as a result of significant adverse and unforeseen events. In stability, the system will absorb the shocks primarily via self-corrective mechanisms, preventing adverse events from having a disruptive effect on the real economy or on other financial systems. Bank stability is paramount for economic growth, as most transactions in the real economy are made through the banking system. Bank stability is a system that can be characterized as stability in the absence of excessive volatility and stress or crises in the banking sector. A common measure of stability at the level of individual institutions is the z-score. The popularity of the z-score stems from the fact that it has a clear (negative) relationship to the probability of a bank and financial institution’s insolvency, that is, the probability that the value of its assets becomes lower than the value of its debt. A higher z-score therefore implies a lower probability of insolvency.
The study attempts to examine the determinants of bank stability of the Nepalese commercial banks. Bank stability measured in terms of Z-score return on assets and Z-score return on equity are the dependent variables. The independent variables are bank size, income diversity, operating expenses, liquidity ratio, gross domestic product and inflation. The study is based on secondary data of 18 commercial banks with 126 observations for the period of 2011/12 to 2017/18. The secondary data and information have been collected from annual reports of selected commercial banks. The regression models are estimated to test the significance and impact of different variables on financial stability of Nepalese commercial banks. The findings of the paper are largely original in the area of bank stability of Nepalese banking.
The result shows that average Z-score of return on assets is highest for NABIL (4.37) and lowest for MBL(1.82), average Z-score of return on equity is highest for NABIL (4.27) and lowest for MBL (1.75), average bank size is highest for RBBL (Rs.142.91 billion) and lowest for NBBL(Rs.38.73 billion), average income diversity is highest for NBBL (3.08 percent) and lowest for RBBL (-4.55 percent), average operating expenses is highest for ADBL (3.62 billion) and lowest for NMB (0.39 billion) and average liquidity is highest for ADBL (89.73 percent) and lowest for SCBL (57.43 percent).
The descriptive statistics shows that the Z-score return on assets ranges from a minimum of 0.38 percent to a maximum of 6.29 percent to an average of 2.86 percent. Similarly, the Z-score return on equity ranges from minimum of 0.23 percent to a maximum of 8.38 percent, leading to an average of 2.67 percent. Bank size varies from a minimum of 21.30 to a maximum of 26.01, leading to an average of 24.81. Similarly, Income diversity ranges from a minimum of -5.81 percent to a maximum of 0.57 percent, leading to an average of 0.28 percent. Operating expenses varies from a minimum of 18.44 to a maximum of 22.15, leading to an average of 20.73, liquidity ratio ranges from minimum of 46.08 percent to a maximum of 96.33 percent, leading to an average of 77.29 percent. Similarly, the gross domestic product ranges from minimum of 0.20 percent to a maximum of 7.40 percent, leading to an average of 4.41 percent. Likewise, inflation varies from 4.10 percent to a maximum of 9.90 percent, leading to an average of 7.57percent.
The result shows bank size has a positive relationship with Z-score return on assets. It indicates that higher the bank size, the bank would be more stable. Similarly, the results also show that income diversity has a positive relationship with Z-score return on assets. It indicates that higher the income diversity, higher would be the bank stability. Operating expenses has a positive and significant relationship with Z-score return on assets. It reveals that higher the operating expenses, the bank would be more stable. Likewise, liquidity ratio has a negative relationship with Z-score return on assets. It indicates that increase in liquidity leads bank to be less stable. Result also shows that gross domestic product has a positive relationship with Z-score return on assets. It indicates that higher the gross domestic product, the bank would be more stable. However, inflation rate has a negative relationship with Z-score return on assets. It reveals that higher the inflation rate lower would be the bank stability.
The result also reveals that bank size has a positive and significant relationship with Z-score return on equity. It indicates that higher the bank size, the bank would be more stable. Similarly, income diversity has a positive relationship with Z-score return on equity. It reveals that higher the income diversity, higher would be the bank stability. Operating expenses has a positive relationship with Z-return on equity. It indicates that higher the operating expenses, higher would be the bank stability. Similarly, liquidity ratio has a negative relationship with Z-score return on equity which indicates that higher the liquidity the bank would be less stable. However, gross domestic product has a negative and significant relationship with Z-return on equity. It indicates that higher gross domestic product, lower would be the bank stability. The result also shows that inflation rate has a positive relationship with Z-return on equity. It reveals that higher the inflation rate, higher would be the bank stability.
The regression results of Z-score return on assets shows that the beta coefficients for inflation are negative with Z-score return on assets. It indicates inflation has negative impact on level of stability. However, the beta coefficients for bank size are positive with Z-score return on assets. This indicates that bank size has positive effect on level of stability. Likewise, the result shows that the beta coefficients for income diversity are positive with Z-score return on assets. It shows that income diversity has positive impact on level of stability. Likewise, the beta coefficients for operating expenses are positive with Z-score return on assets. It shows that for operating expenses has positive impact on level of stability. The result also shows that the beta coefficients for liquidity are negative with Z-score return on assets. It indicates liquidity ratio has negative impact on stability. Similarly, the beta coefficients for gross domestic product are positive with Z-score return on assets. It shows that gross domestic product has positive impact on level of stability. The result also shows that the beta coefficients for operating expenses are significant at 1 percent level of significance and bank size is significant at 5 percent level of significance
The regression results of Z-score return on equity shows that the beta coefficient for liquidity ratio is negative with Z-score return on equity. This indicates that liquidity ratio has negative effect on level of stability. Likewise, the beta coefficients for gross domestic product are negative with Z-score return on equity. It indicates that gross domestic product has negative effect on level of stability. The result also shows that the beta coefficients for gross domestic product are significant at 5 percent level of significance. However, the results also show that the beta coefficients for bank size are positive with Z-score return on equity. It shows that bank size has positive impact on level of stability. The result also shows that the beta coefficients for income diversity are positive with Z-score return on equity. It indicates income diversity has positive effect on stability. Similarly, the beta coefficients for operating expenses are positive with Z-score return on equity. It shows that operating expenses has positive impact on level of stability. Likewise, the beta coefficients for inflation are positive with Z-score return on equity. It shows that for inflation has positive impact on level of stability. The result also shows that the beta coefficients for GDP and inflation are significant at 5 percent level of significance and beta coefficients for bank size and liquidity are significant at 1 percent level of significance
Hold
Place a hold on this item
Copies
Barcode Call number Media type Location Section Status 700/D NAR Thesis/Dissertation Uniglobe Library Philosophy & Psychology Available