Branch banking variability and rural banks' performance: a GMM approach
Haruna Maama; Emmanuel Okofo-Dartey
Afro-Asian J. of Finance and Accounting, Vol. 13, No. 5 (2023) pp. 612 - 628
The study employed the resource-based view (RBV) theory to investigate the impact of the number of branches and city branches on the financial performance of rural banks in Ghana. The study used 492 annual reports of 76 rural banks in Ghana for the analysis. Return on capital employed (ROCE), return on equity (ROE) and net interest margin (NIM) were used as proxies for financial performance. A generalised method of moment was employed for the regression analysis. The evidence showed that the number of rural bank branches positively impacted their ROCE and ROE but negatively impacted their NIM. Consistent with the RBV theory, the study further found that the establishment of rural banks in cities positively impacted their performance. The number and location of rural bank branches can impact their financial performance. This study might be the first to empirically test the relationship between branch variability and the performance of banks.
Tag: profitability
Impact of cash conversion cycle on financial performance: an empirical study of listed companies in Botswana
Impact of cash conversion cycle on financial performance: an empirical study of listed companies in Botswana
C.R. Sathyamoorthi; Christian John Mbekomize; Lame Bakwenabatsile
Afro-Asian J. of Finance and Accounting, Vol. 13, No. 4 (2023) pp. 415 - 433
The study examines the impact of cash conversion cycle (CCC) on the financial performance of selected listed companies in Botswana Stock Exchange for the period 2012-2018. Financial statements are the main source of data. Return on assets (ROA) and return on equity (ROE) are the dependent variables measuring financial performance. The data is analysed using descriptive statistics, correlation analysis, and multiple regression analysis. Correlation analysis reveals a non-significant negative relationship between CCC and profitability, whereas the control variables of size and debt exhibit a significant negative relationship with firm profitability. The regression results show that CCC has an insignificant positive effect on ROA but has a significant impact on ROE. Both size and debt have a significant impact on ROA and ROE. The findings highlight the need for the firms to focus on policies and strategies that will reduce the length of CCC to enhance profitability and firm value.
Are banks profitable and efficient? A case of Pakistan
Are banks profitable and efficient? A case of Pakistan
Muhammad Ali; Chin Hong Puah
Afro-Asian J. of Finance and Accounting, Vol. 12, No. 2 (2022) pp. 254 - 277
The aim of this study is to investigate the impact of bank-specific factors and macroeconomic environment on bank profitability and management efficiency in Pakistan. The sample data comprised of 24 banks over a sample period of 2007-2015. The panel least squares regression with fixed effect model suggests that bank profitability is significantly affected by bank size, credit risk and bank stability. On the other side, bank efficiency was significantly predicted by liquidity risk, credit risk and funding risk. The robustness of results was also confirmed in the presence of the macroeconomic environment. Overall, this research provides a new insight into bank profitability and efficiency literature. Additionally, prior studies have neglected the management efficiency as the dependent variable. Therefore, we consider this article as superior, which has laid a foundation for future studies.
Trade credit in an emerging market: evidence from Kuwaiti firms
Trade credit in an emerging market: evidence from Kuwaiti firms
Yomna Abdulla
Afro-Asian J. of Finance and Accounting, Vol. 12, No. 2 (2022) pp. 216 - 231
We investigate the trade credit policy in Kuwaiti firms during the period 2011-2016. Specifically, we examine the impact of the decline in oil prices on the level of trade credit and on the relationship between trade credit and firms' profitability. The findings show that the decline in oil prices had no significant impact on the level of trade credit or the relationship between trade credit and profitability. We find that cashflow, cash holdings, current assets, short-term debt and size are the main determinants of trade credit. The results also show that the level of trade credit has a negative impact on a firm's profitability and is more pronounced in financially unconstrained firms.
Analysing the stability of bankruptcy prediction models
Analysing the stability of bankruptcy prediction models
Rohani Md-Rus; Kamarun Nisham Taufil Mohd; Rohaida Abdul Latif
Afro-Asian J. of Finance and Accounting, Vol. 10, No. 4 (2020) pp. 554 - 568
The aim of this study is to assess the predictive power of logit model and hazard model in predicting bankruptcy and to analyse the stability of the models. Using Malaysian listed companies and a sample span from 1998 to 2014, this study found that, for the hazard model, all variables were significant while for the logit model only five variables were significant. The results also show that the logistic and hazard models both had predictive accuracies of more than 90%. However, the hazard model had a predictive accuracy of 99.4% while logit model had a predictive accuracy of 91.8%. The hazard model was more stable than logit model as the predictive accuracy of the hazard only changed a little when a smaller sample was chosen. Lastly, the study showed that, even though both models were good in predicting distress, the hazard model is better than logit model.
Factors that drive dividend payout decisions: an investigation in the context of Bangladesh
Factors that drive dividend payout decisions: an investigation in the context of Bangladesh
Afrin Rifat; Anika Bushra; Nabila Nisha
Afro-Asian J. of Finance and Accounting, Vol. 10, No. 3 (2020) pp. 380 - 408
Generally, dividend policies guide the financial rewards of the shareholders. It is often a challenging decision for companies to determine the appropriate level of dividend for the shareholders. While some past studies argue that microeconomic factors drive the decision of dividend policies, many other researchers claim that it is the macroeconomic factors of a country which ultimately influence the dividend payouts. However, there is a paucity of research in this area for emerging countries like Bangladesh. This study thus examines impacts of a set of pre-determined microeconomic and macroeconomic factors upon cash dividend payouts by analysing a sample of listed firms of the Dhaka Stock Exchange (DSE), Bangladesh. Findings are analysed based on liquidity, leverage, growth, and size of the sample firms for microeconomic factors; while, macroeconomic factors are analysed upon dividends on an average basis. The results provide policy implications for shareholders, management, policymakers and the government of Bangladesh.
Capital structure and profitability in a tax-free country: evidence from the UAE
Capital structure and profitability in a tax-free country: evidence from the UAE
Imen Tebourbi; Irene Wei Kiong Ting; Qian Long Kweh; Harith Ali Hamood Al Huseini
Afro-Asian J. of Finance and Accounting, Vol. 10, No. 3 (2020) pp. 430 - 444
The balance between debt and equity is a key factor explaining profitability. This study examines how capital structure affects the profitability of firms listed on stock exchanges in the United Arab Emirates (UAE), a country that does not have a federal corporate income tax regime. The proxies of capital structure used include total, short-term, and long-term debt ratios, while those of profitability are return on assets and return on equity. Over a 2001-2016 sample period, this study documents a significantly negative association between capital structure and profitability. This study finds that the negative association is mainly found in companies with a high level of debts. The results of this study not only imply that information asymmetry exists, they also highlight how capital structure and profitability are associated in the context of a corporate tax-free country.
The impact of companies’ internal factors on stock liquidity in Pakistan
The impact of companies' internal factors on stock liquidity in Pakistan
Badal Khan; Muhammad Tahir; Abdul Majid Nasir; Muhammad Mushtaq
Afro-Asian J. of Finance and Accounting, Vol. 9, No. 4 (2019) pp. 459 - 473
This study aims to find out the impact of corporate internal factors on the stock liquidity of companies listed on Karachi Stock Exchange (KSE) Pakistan. The companies' financial factors, liquidity, leverage, activity, profitability, and valuation multiples, are taken as internal factors, while stock liquidity is measured by illiquidity ratio of Amihud. The study obtains five years' daily data from July 2010 to June 2015 of listed manufacturing firms from KSE. Only those firms are considered that close their financial year in June to avoid any periodical gap between share information and financial data. The regressed relationship of cross panel data is tested using panel least squares. The empirical results conclude that total assets turnover and profit margin are the financial factors that positively influence stock liquidity, whereas debt ratio and return on assets inversely influence stock liquidity. Moreover, the size of the corporation, liquidity (current ratio), market-book multiples, and price-earnings multiples are not significant to influence the stock liquidity.
The impact of bank capital on profitability and risk in GCC countries: Islamic vs. conventional banks
The impact of bank capital on profitability and risk in GCC countries: Islamic vs. conventional banks
Habib Hasnaoui; Ibrahim Fatnassi
Afro-Asian J. of Finance and Accounting, Vol. 9, No. 3 (2019) pp. 243 - 268
This study analyses how capital influences profitability and risk in the context of Islamic and conventional banking in Gulf Cooperation Council (GCC) countries. It achieves this through structure-conduct-performance, moral hazard, and regulatory hypotheses. We apply the generalised method of moments (GMM) technique for dynamic panels using bank-level data from 85 banks for the 2003-2011 period. We first found that highly capitalised Islamic banks generate low profitability, while in contrast, highly capitalised conventional banks generate high profitability. Secondly, we found highly capitalised GCC banks (both Islamic and conventional) to be characterised by greater risk. Additionally, all profitability and risk variables demonstrate persistence. We then ultimately arrive at the same conclusions about capital, profitability, and risk relationship with the introduction of regulatory variables.