The determinant of capital adequacy ratio: empirical evidence from Vietnamese banks (a panel data analysis)

Anh, Nguyen Ngoc; Minh, Nguyen Khac

doi:10.1504/aajfa.2020.104406

Cited by 8 publications

(8 citation statements)

References 25 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Ozili (2015) conducted an empirical study and discovered that bank profitability is significantly influenced by bank capital adequacy, which is a crucial determinant of bank profitability. Thoa et al (2020) investigated the determinants of Vietnamese banks' CAR using secondary data from banks' annual reports during 2009-2015. The study used panel data and found that bank size and liquidity had a significant negative impact on CAR, while loan loss reserve and loans had a negative impact but were statistically insignificant.…”

Section: Literature Reviewmentioning

confidence: 99%

Exploring the Determinants of Capital Adequacy in Commercial Banks: A Study of Bangladesh's Banking Sector

Naoaj

2023

EJBMR

View full text Add to dashboard Cite

This study investigates the factors that influence the capital adequacy of commercial banks in Bangladesh using panel data from 28 banks over the period of 2013-2019. Three analytical methods, including the Fixed Effect model, Random Effect model, and Pooled Ordinary Least Square (POLS) method, are employed to analyze two versions of the capital adequacy ratio, namely the Capital Adequacy Ratio (CAR) and Tier 1 Capital Ratio. The study reveals that capital adequacy is significantly affected by several independent variables, with leverage and liquidity risk having a negative and positive relationship, respectively. Additionally, the study finds a positive correlation between real GDP and net profit and capital adequacy, while inflation has a negative correlation. For the Tier 1 Ratio, the study shows no significant relationship between leverage and liquidity risk, but a positive correlation with the number of employees, net profit, and real GDP, while a negative correlation with size and GDP deflator. Pooled OLS analysis reveals a negative correlation with leverage, size, and inflation for both CAR and Tier 1 Capital Ratio, and a positive correlation with liquidity risk, net profit, and real GDP. Based on the Hausman test, the Random Effect model is deemed more suitable for this dataset. These findings have important implications for policymakers, investors, and bank managers in Bangladesh by providing insights into the factors that impact the capital ratios of commercial banks.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Exploring the Determinants of Capital Adequacy in Commercial Banks: A Study of Bangladesh's Banking Sector

Naoaj

2023

EJBMR

View full text Add to dashboard Cite

show abstract

“…Bank capital as measured by the capital adequacy ratio (CAR) is determined to be a minimum of 8% of risk-weighted assets (Bank Indonesia, 2011). If the capital is large enough, it can also be used to increase the credit distributed, thereby increasing profitability (Thoa, Anh, & Minh, 2020). Siddique et al, (2022); Ikpesu & Oke., (2022) and Mir & Shah., (2022) found that CAR had a positive effect on profitability, while Sari et al, (2022) and (Sahyouni & Wang, 2019) actually found that CAR had no effect on profitability.…”

Section: Ijfbs Vol 12 No 3 Issn: 2147-4486mentioning

confidence: 99%

An In-Depth Analysis of Credit, Capital, and Operational Risks on Regional Development Banks' Performance Amidst the Covid-19 Pandemic

Sutrisno

2023

IJFBS

View full text Add to dashboard Cite

The Covid-19 pandemic has hit the world since the end of 2019 and has damaged the world economy, including Indonesia. Banking as a financial institution that provides funding to companies is also affected. Because the pandemic has reduced the company's performance, and this decline in performance has had an impact on banking. The aim of this research is to test whether the Covid-19 pandemic has an impact on the relationship between risk factors and bank performance. Bank performance is measured by profitability which consists of return on assets (ROA) and return on equity (ROE), while bank risk in this study consists of credit risk, liquidity risk, capital, operational risk and the Covid-19 pandemic. The population in this research is the Regional Development Banks (BPD) in Indonesia totaling 34 banks with a sample of 30 banks. The observation period was 4 years with quarterly data so that 320 observation data were collected. Hypothesis testing uses panel data regression, and to select the best regression model, the model will be tested using the Chow-test, Hausman-test, and Lagrange Multiplier test. After the model test was carried out, the fixed effect model was selected as the best model. The research results show that credit risk and operational risk have a significant and negative influence on all profitability, both ROA and ROE. Meanwhile, liquidity risk (LDR) has no effect on both types of profitability, while capital has an effect on ROE but has no effect on ROA. Another interesting result is that the Covid-19 pandemic has no impact on the influence of risk on bank performance.

show abstract

“…Pertumbuhan kredit (loan) yang tinggi berpengaruh secara signifikan terhadap variabel tertentu dari bank. Pertumbuhan kredit antar tahun meningkatkan nonperforming loans (NPL) yang pada akhirnya dapat menurunkan tingkat Capital adequacy ratio (CAR) bank dengan jeda waktu beberapa tahun karena bank harus menanggung kerugian kredit (loan loss) dari NPL tersebut (Amador, Gómez-González, dan Pabón, 2013;Kashif, Iftikhar, dan Iftikhar, 2016) dan cadangan kerugian kredit (loan loss reserves) meningkat akibatnya berpengaruh negatif terhadap rasio kecukupan modal (CAR) bank (Blose, 2001;Dreca, 2013;Thoa, Anh, dan Minh, 2020).…”

Section: Kajian Literatur Dan Pengembangan Hipotesisunclassified

“…Bukti ini mendukung hasil penelitian Amador, Gómez-González, dan Pabón, (2013); Kashif, Iftikhar, dan Iftikhar, (2016). Selain itu cadangan kerugian kredit (loan loss reserves) yang harus disediakan oleh bank juga tetap tinggi sehingga berpengaruh negatif terhadap rasio kecukupan modal (CAR) bank (Blose, 2001;Dreca, 2013;Thoa, Anh, dan Minh, 2020). Distribusi kredit (loan) yang tinggi tersebut mereduksi nilai rasio modal karena jumlah kredit yang tinggi memperbesar provisi kerugian kredit yang akhirnya menggerus nilai modal (Baradwaj et al, 2015;Foos et al, 2010;Messai dan Jouini, 2013).…”

Section: Metode Penelitianunclassified

Likuiditas, Profitabilitas dan Kecukupan Modal Bank Di Indonesia

Perdana¹

2022

Wahana

View full text Add to dashboard Cite

The bank liquidity become a serious concern for the government with the issuance of regulations that require banks in Indonesia to meet the liquidity coverage ratio. However, the effort to establish an adequate level of liquidity has resulted in banks having to make adjustments to their capital structure so that they are thought to have an influence on the capital adequacy ratio, on the other hand, banks must also increase profitability for business continuity. This study investigates the effect of the level of liquidity proxied by loan-to-asset ratio and profitability proxied by return-on-equity and net-profit margin on the level of capital adequacy ratio of the sample. 40 banking sector companies listed on the Indonesia Stock Exchange during the 2014-2020 period. The data were analyzed using a multivariate model with an ordinary least squares approach. The results of this study prove that the loan-to-asset ratio and return-on-equity ratio have a negative effect on the capital adequacy ratio. While the net-profit margin has a positive effect on the capital adequacy ratio.

show abstract

The determinant of capital adequacy ratio: empirical evidence from Vietnamese banks (a panel data analysis)

Cited by 8 publications

References 25 publications

Exploring the Determinants of Capital Adequacy in Commercial Banks: A Study of Bangladesh's Banking Sector

Exploring the Determinants of Capital Adequacy in Commercial Banks: A Study of Bangladesh's Banking Sector

An In-Depth Analysis of Credit, Capital, and Operational Risks on Regional Development Banks' Performance Amidst the Covid-19 Pandemic

Likuiditas, Profitabilitas dan Kecukupan Modal Bank Di Indonesia

Contact Info

Product

Resources

About