The study examined the impact of financial risk management practices on the financial performance of commercial banks in Botswana. The study used Return on Asset and Return on Equity to measure financial performance. Inflation, Interest rates, total debt to total assets, total debt to total equity, total equity to total assets and loan deposit ratios were used as proxies for financial risk management. The research population was all the 10 commercial banks in Botswana and the study covered a period of 8 years from 2011 to 2018. This descriptive study sourced monthly secondary data from Bank of Botswana Financial Statistics database. Descriptive statistics, correlation and regression analyses were applied to analyze the data. The results from regression analysis showed that interest rates had a negative and significant impact on return on assets and on return on equity. On the other hand, total debt to total assets showed a negative and insignificant effect on return on assets. However, total debt to total assets, revealed a positive and insignificant effect on return on equity. The loan deposit ratio indicated a negative and significant impact on return on assets and on return on equity. Findings suggest that banks should strike a proper balance between financial risk management practices and financial performance by engaging in appropriate market, credit, and liquidity risk management practices that will ensure safety for their banks and yield positive profits.
The theory of the Efficient Market Hypothesis (EMH) has been debated extensively. In this study the runs test was employed on the Botswana Stock Exchange daily Domestic Companies and Foreign Companies indices to test whether the Botswana stock market follows the random walk process and subsequently determine weak-form market efficiency. The results of the runs test showed that the indices do not follow the random walk process. As a result the Botswana stock market is determined to be weak-form market inefficient and rejects the efficient market hypothesis accordingly.
This study examines the impacts of the stock market development on economic growth using Botswana as a case study. The study uses times series data covering a decade from 2006 to 2016. The method of analysis used is the Auto regressive distributed lag (ARDL) bounds model. The stock market capitalization ratio (MCR) was used as a proxy for market size while value of shares traded ratio (ST) and Turnover ratio (TR) were used as a proxy for liquidity, collectively representing stock market development. Real gross domestic product (GDP) growth rate was used to represent economic growth .The results show that market capitalization and turnover ratio have a negative correlation with economic growth, while the value of shares traded has a strong positive correlation with economic growth. This result implies that liquidity has propensity to stimulate economic growth in Botswana. The results of this study also found that there exists no causality relationship between stock market development and economic growth. The government should make policies that boost the interest of domestic investors in Botswana as this might spur investors' interest and boost stock market activity which will improve liquidity and therefore stimulate economic growth.
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