Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks

Roy, Sudipa Saha; Misra, Arun; Padhan, Purna Chandra; Rahman, Molla Ramizur

doi:10.1080/23322039.2019.1664845

Cited by 15 publications

(10 citation statements)

References 35 publications

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“…Using ROA and sales growth, the results regarding the influence of liquidity on these variables have not been consistent. If on the one hand, some authors find empirical evidence for a positive relationship (Nguyen and Nguyen, 2020 or Tahir et al , 2020), others show a negative relationship (Fuertes-Callén and Cuellar-Fernández, 2019; Nguyen et al , 2020 or Roy et al , 2019).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Determinants of wine firms’ performance: the Iberian case using panel data

Neves

Dias

Ferreira

et al. 2022

IJAIM

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Purpose In the macroeconomic environment of the Iberian Peninsula, this paper aims to understand which factors, intrinsic to management, affect the performance of wine companies. Design/methodology/approach The sample comprises 3,113 wine Iberian companies between 2011 and 2018. This study has used the panel data methodology, specifically the generalized method of moments system estimation method of Arellano and Bond (1991); Arellano and Bover (1995); and Blundell and Bond (1998) to test the hypotheses proposed. Findings Using return on assets (ROA) and sales growth as measures of corporate performance, this study’s results suggest that sales growth is the variable that has the most significant determining factors, both specific to the company and given the macroeconomic environment. Investors and civil society well understand the meaning of sales growth, namely, in a sector close to the final consumer. When using ROA as a dependent variable, the results suggest that because it is a pure management variable, the manager tends to be more concerned with maintaining adequate levels of economic profitability to ensure sustainability and future solvency, without giving prominence to the macroeconomic environment. Originality/value To the best of the authors’ knowledge, this is the first time that a study has been carried out in the Iberian Peninsula on the wine industry using ROA and sales growth as measures of corporate performance. This study shows that sales growth is a measure traditionally known to external stakeholders, and to that extent, its determining factors are the variables that these players most value in the market.

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Section: Literature Review and Hypothesesmentioning

confidence: 99%

Determinants of wine firms’ performance: the Iberian case using panel data

Neves

Dias

Ferreira

et al. 2022

IJAIM

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show abstract

“…Roy et al. (2019) define bank liquidity as the assurance banks have on ensuring that they can invest in assets and at the same time cover all their required commitments at the right time and at rational spending levels. Yusuf et al.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Capital, liquidity, and profitability in European banks

Adelopo

Vichou

Cheung

2021

J Corp Accounting Finance

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The research aims to investigate the impact of increased capital requirements and high liquidity levels on the profitability of European banks in the post crisis period. The study examines the largest banks in the European Union spanning 28 countries using data from 2010 to 2018. It used three measures to define bank profitability: return on average assets, return on average equity, and operating profit to risk weighted assets. Capital, liquidity, size, and asset quality represent bank specific determinants, while economic growth and inflation are considered as the main external determinants having influence on profitability. We used multiple regression models to analyze the association amongst the variables. The results revealed a positive and significant association between liquidity level and bank performance. Asset quality showed a negative and statistically significant influence on bank performance, while economic growth and inflation have no significant influence on bank performance. The study concludes that there is limited influence of the Basel III on bank profitability although the policy is important in achieving banking stability. This study contributes to the literature by empirically analyzing the impact of capital regulation on bank performance for the biggest banks in Europe. Although the Basel III framework is important for prudential banking, its effects on the performance of European bank is debatable.

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“…Hence, to investigate the impact of EPU and IQ indicators on bank risk-taking behavior, this study applies a two-step system GMM estimator with Windmeijer (2005) since this estimator can address as well as quite robust in solving the potential endogeneity and gives consistent estimates, tackle autocorrelation and heteroscedasticity problems (Arellano and Bover, 1995;Blundell and Bond, 2000). To check robustness, this study further applied two-stage least squares (2SLS) instrumental variable (IV) for dealing with potential endogeneity in line with existing studies like Bilgin et al (2021), Roy et al (2019), Beck et al (2013), Soedarmono et al (2013) etc. Thus, in line with previous authors, for this study two-step system, GMM was utilized for our main findings, and 2SLS estimation methods to check the robustness of the result so that Impacts of EPU and IQ it is possible to get more valid results.…”

Section: Methods Of Analysismentioning

confidence: 92%

Impacts of economic policy uncertainty (EPU) and institutional quality (IQ) on bank risk-taking behavior

Moudud‐Ul‐Huq

Akter

2022

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PurposeThe primary aim of this study is to evaluate the impacts of institutional quality (IQ) and economic policy uncertainty (EPU) on bank risk-taking behavior, especially after the global financial crisis of 2007–2008.Design/methodology/approachAfter considering the outlier effect, missing figure and inconsistent data, the study’s final sample contains 24,364 firm-year observations of 4,367 banks. A total of 27 countries were considered as those data are available on the “EPU index” introduced by Baker et al. (2016) for 2011–2020. To estimate the core results, the dynamic panel generalized method of moments (GMM) has been used to examine the effects of IQ and EPU on bank risk-taking behavior. Later, this study also validates the core results by using two-stage least squares (2SLS).FindingsThe authors found a positive relationship between EPU and banks' risk-taking behavior of banks', but imperatively, a significant and negative relationship exists between IQ and bank risk-taking behavior. This study also has a remarkable and distinct findings from Uddin et al. (2020) one of the vital indicators of IQ quality measurement “voice and accountability” (VACC) impacted negatively on bank risk-taking behavior. It indicates that when VACC is well established, banks tend to take the low risk under the prevailing EPU conditions and vice-versa. Moreover, the lagged dependent variable significantly impacted the bank's risk-taking negatively.Originality/valueTo the best of the authors' knowledge, very few studies endeavored to investigate the dominance or impact level of IQ and EPU on the area, i.e. bank risk-taking behavior which inspired us to contribute to the banking literature to address this issue in a broader aspect – the connection between EPU and bank risk-taking behavior, also a relationship between IQ and bank risk-taking behavior and finally linking them with bank risk-taking behavior.

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Interrelationship among Liquidity, Regulatory Capital and Profitability- A Study on Indian Banks

Cited by 15 publications

References 35 publications

Determinants of wine firms’ performance: the Iberian case using panel data

Determinants of wine firms’ performance: the Iberian case using panel data

Capital, liquidity, and profitability in European banks

Impacts of economic policy uncertainty (EPU) and institutional quality (IQ) on bank risk-taking behavior

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