The study aims to examine the impact of liquidity on the profitability of Nepalese commercial banks. Investment ratio, capital ratio and liquidity ratio are the independent variables and return on assets is dependent variable. Secondary sources of data have been used from the annual reports of sampled commercial banks. The regression models are estimated to test the effect of bank liquidity on performance of Nepalese commercial banks. Study results reveal that investment ratios and liquidity ratios are negatively related to return on assets indicating that higher the investment ratios and liquidity ratios, lower would be the return on assets and vice versa. Further, the relationship between capital ratios and return on assets is found to be positive indicating that higher the capital ratios of the bank, higher would be the return on assets. Similarly, beta coefficient for capital ratio is positively significant with bank performance, which indicates that increase in capital ratio leads to increase the performance of the banks. However, beta coefficients for investment ratio and liquidity ratio are negative with return on assets indicating increased liquidity ratio and investment ratio decrease the return on assets of the bank.
This study examines the impact of credit risk management on profitability of Nepalese commercial banks. Default rate, cost per loan assets and capital adequacy ratio are the independent variables used in this study. The dependent variables are return on assets (ROA) and return on equity (ROE). The secondary sources of data have been used from annual reports of selected commercial banks and supervision report of Nepal Rastra Bank. The regression models are estimated to test the significance and effect of credit risk management on profitability of Nepalese commercial banks. The beta coefficient of default rate and cost per assets with profitability (ROA, ROE) has been found negative and statistically significant. The negative sign indicates that there is statistically negative relationship between default rate and cost per loan assets with profitability. Likewise, the beta coefficient of capital adequacy ratio with ROA and ROE is found to be positive and statistically significant. The positive sign of beta coefficient indicates that there is statistically positive relationship between capital adequacy ratio and profitability. The study thus recommends an effective credit risk management for commercial banks of Nepal that maintains an optimum level of capital adequacy ratio, controls and monitors cost per loan assets and balances default rate to enhance financial performance.
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