Determinants of Profitability in Banking Sector: Empirical Evidence from Bangladesh

Gazi, Md. Abu Issa; Alam, Md. Shahbub; Hossain, G. M. Anwar; Islam, SM Nahidul; Rahman, Muhammad Khalilur; Nahiduzzaman, Md.; Hossain, Abu Ishaque

doi:10.13189/ujaf.2021.090616

Cited by 16 publications

(19 citation statements)

References 33 publications

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“…It is the ratio of return between a firm's net income and its shareholders' equity [71]. Formula: ROA = Net Income after Tax/Shareholders Equity [22] Not Applicable…”

Section: Return On Equity Roementioning

confidence: 99%

“…Formula: DER = Total Liabilities/Total Shareholders Equity [77] +/− Equity-to-asset ratio EAR Equity-to-asset ratio refers to how much a firm's assets are funded by shareholders' equity rather than debt [78]. Formula: EAR = Total Shareholders Equity/Total Assets [22,78] +/− Loan-to-asset ratio LAR Loan-to-asset ratio is a financial ratio that represents the portion of the loan amount compared to the total assets of the company. Formula: LAR = Total Loans/Total Assets [79] +/− Liquid-asset-to-totalassets ratio LATAR Liquid-asset-to-total-assets ratio expresses how much of a cash asset or cash equal asset is available in terms of total assets of the firm.…”

Section: Capital Adequacy Ratio Carmentioning

confidence: 99%

“…The banking sector of Bangladesh and the banking sector worldwide are primarily associated with macroeconomic variables. The profitability and financial performance of banks perform in terms of changes in the macroeconomic variables of the country [22]. The banking sector of Bangladesh has been poorly affected [23] by the COVID-19 pandemic.…”

Section: Introductionmentioning

confidence: 99%

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Impact of COVID-19 on Financial Performance and Profitability of Banking Sector in Special Reference to Private Commercial Banks: Empirical Evidence from Bangladesh

et al. 2022

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The current crisis caused by the COVID-19 pandemic has hit the global economy hard, causing significant damage to every aspect of the global banking system, and Bangladesh is no exception. For that reason, its performance and profitability have been affected. In this study, we investigate the impact of COVID-19 on the financial performance and profitability of the listed private commercial banks in Bangladesh. We initially compute each bank’s financial performance index (FPI) to determine the position according to their financial performance individually before and the current period of COVID-19 by the standardized CAMELS rating system. After assessing the position, the fixed-effect regression model is used to explore the impact of the bank’s specific variables and macroeconomic variables along with the banks’ variables on the banks’ profitability. The banks that performed better during the pre-pandemic period of COVID-19 also performed better during the pandemic period of COVID-19. The performance of AIBL, EBL, and BBL was almost autonomously higher during both periods. In the case of bank profitability, our paper discovered that during the pandemic period of COVID-19, high non-performing loan rates, holding more liquid assets, a high amount of hedging capital, and inappropriate bank size lessened the banks’ profitability. In contrast, a low leverage position and inflation rate enhanced the bank’s profitability during this period. The outcome of this study will help bank authorities detect the loopholes and take preventive measures that can improve their profitability during a crisis period like COVID-19. The investors and depositors who invest money in banks can precisely decide their portfolios.

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“…It is the ratio of return between a firm's net income and its shareholders' equity [71]. Formula: ROA = Net Income after Tax/Shareholders Equity [22] Not Applicable…”

Section: Return On Equity Roementioning

confidence: 99%

Section: Capital Adequacy Ratio Carmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Impact of COVID-19 on Financial Performance and Profitability of Banking Sector in Special Reference to Private Commercial Banks: Empirical Evidence from Bangladesh

et al. 2022

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“…A prior study also assumed that the design features of a web page are the supreme yardstick of perceived e-service quality in the internet banking activities of customers (Qalati et al, 2021). Another study also prevailed that website quality reflects on website design, security, language, color, and ease of navigation, that affect customer satisfaction (Gazi et al, 2021). Nevertheless, Sharma and Bahl (2018) also illuminated that attractive web design reflects customers' purchase intention and customer satisfaction.…”

Section: Literature Reviewmentioning

confidence: 99%

Relationship between e-service quality dimensions and online banking customer satisfaction

Islam

Karim

et al. 2023

Banks and Bank Systems

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Recently, the demand for internet banking has been gradually increasing the number of online banking customers, where the banking clients or customers do not need to visit a bank branch for their transactions. The principal focus of this inquiry is to ascertain how various aspects of e-service quality relate to online baking customers’ happiness, particularly with regard to Bangladeshi commercial banks. Data information was collected from three commercial banks in Bangladesh using an online survey questionnaire, and this study is quantitative and exploratory in nature. The study considered those bank customers who use frequently online/internet banking services. The sample size was n=200, and the study adopted a non-probability sampling approach. Five-point Likert scale was used to measure an item-wise question where “1” stands for “Highly Disagree” and “5” stands for “Highly Agree”. The consequences of this study demonstrate that e-service quality dimensions play a significant role in creating customer satisfaction for online banking customers. The study proposes four hypotheses, and the hypotheses are accepted in this research. Based on this study, bank management should have utilized e-service quality dimensions such as perceived security risk, perceived ease of use, perceived website quality, and perceived responsiveness to create the relationship between e-service quality dimensions and online banking customer satisfaction. Bank management will receive some guidance on developing policies and strategies to improve the satisfaction level of online customers.

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“…According to Garc ıa Osma et al, 2019, the justification for this debate lies in the fact that, ultimately, financial transparency emanates from accounting standards and practices. Gazi et al (2021) explain that a country's stability and economic growth depend on the soundness of its banking sector. This "public interest" of financial institutions was used as an argument to intervene in accounting regulation and influence the accounting practices of these institutions (Giner and Mora, 2020).…”

Section: Introductionmentioning

confidence: 99%

Income smoothing management and loan loss provisions in the banking system

Gómez-Ortega,

Licerán-Gutiérrez,

Horno-Bueno

2023

JRF

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PurposeThe “public interest” of financial institutions was used as an argument to intervene in accounting practices. The Bank of Spain's standard was not compatible with International Accounting Standard (henceforth IAS) 39 and the Spanish banking sector had become one of the most provisioned in Europe. This makes it an interesting case study of the relationship between provisioning and income smoothing. The 2008 financial crisis revealed that provisions were insufficient and a reinforcement regulation process began in 2012. This paper aims to examine whether, since 2012, the Bank of Spain's regulatory effort on impairment accounting standards has induced less income smoothing, correcting its countercyclical effect.Design/methodology/approachA regression model is applied during the period 2005–2020, to test whether there is a trend change in the correlation between the level of provisions and annual earnings in 2012.FindingsThe results show that from 2012 onwards (when the Bank of Spain reinforced the regulation on provisioning), there was a correction in income smoothing behaviour.Originality/valueThis study provides empirical evidence that reinforces the claim that accounting policy can affect decision-making accounting practices, in this particular case, at the Bank of Spain.

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Determinants of Profitability in Banking Sector: Empirical Evidence from Bangladesh

Abstract: Bangladesh is a developing country. The vital Return on Equity (ROE). All the research findings are very useful to the investors, shareholders, bank's authority, policy makers, and government for the improvement of the performance in the banking sector of Bangladesh.

Cited by 16 publications

References 33 publications

Impact of COVID-19 on Financial Performance and Profitability of Banking Sector in Special Reference to Private Commercial Banks: Empirical Evidence from Bangladesh

Impact of COVID-19 on Financial Performance and Profitability of Banking Sector in Special Reference to Private Commercial Banks: Empirical Evidence from Bangladesh

Relationship between e-service quality dimensions and online banking customer satisfaction

Income smoothing management and loan loss provisions in the banking system

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