• The Journal of the Convergence on Culture Technology
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• v.7 no.1
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• pp.511-517
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• 2021

In this paper, we analyzed the impact of capital adequacy requirements on the profitability of Korean banks using DOLS model. As a result of the analysis, the impact of BIS capital ratios on commercial and regional banks was different. Demand for capital adequacy has a greater and more significant negative impact on regional banks than on commercial banks. It was shown that bank characteristic variables rather than macroeconomic variables have a more significant effect on bank profitability. In addition, a rise in the BIS capital ratio reduces the profitability of commercial and regional banks, and the higher the ratio of loan-loss provisions, the stronger the relationship. In the case of commercial banks, it is estimated that the demand for capital adequacy did not have a significant impact as they are relatively large and faithful in capital compared to regional banks. However, in the case of regional banks, safer assets need to be selected to meet the BIS capital ratio, and the increasing propotion of these safe assets seems to have a relatively greater negative impact on profitability. Consequency, the financial authorities should consider this results and implement the bank's capital regulation policy.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.7
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• pp.477-489
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• 2021

The purpose of this study is to examine the effects of credit risk on commercial banks' profitability in Afghanistan. Due to the availability of limited data, this study applies the Fixed Effects estimator on balance panel data of six domestic private commercial banks over the period 2014-2018. The study uses LLRTL, TLTA, and TLTD as credit risk indictors, size as bank-specific determinant, ROAA, ROAE, and NIM as profitability indicators. The study finds a robust negative and significant effect of LLRTL on ROAA, and ROAE, but positive and insignificant on NIM. The results also reveal significant positive effect of TLTA on NIM, however insignificant negative on ROAA while insignificant positive on ROAE. The study finds negative effect of TLTD on ROAA, ROAE, and NIM, but only significant on NIM. Further, this study reveals a robust negative and significant effect of size on all profitability indicators. The mean comparison of profitability demonstrates that NIM is in a better situation than others profitability indicators, which is a good sign for the Afghan banking sector. The findings of this study suggest that improving credit management, increasing efficiency of asset management or effectiveness of business model can increase commercial banks' profitability in Afghanistan.

• Asia-Pacific Journal of Business
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• v.5 no.1
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• pp.33-41
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• 2014

Since depositors are motivated by returns, it is important for Islamic banks management to understand the extent that rates of return on deposits influence their customers' decision to deposit. The main objective of the study is to explore the degree of influence of conventional bank's interest rate on Islamic bank's profitability and vice-versa. It has been seen from 2005 to 2011 that the rate of interest declared on deposit by conventional banks has a negative impact on profitability of both types of banks in Bangladesh. Rate of profit declared on deposit by Islamic banks is positively related with their profit earned but negatively related with profit earned by conventional banks. We see that rate of interest declared on deposit by Conventional Banks is positively related with their deposit volume but negatively related with Islamic Bank's deposit. On the other hand, rate of profit declared on deposit by Islamic Banks is negatively related with deposit levels of both types of banks. The survey result shows that almost 85% of the respondents are choosing Islamic banks only from their religious point of view and more than 60% of the sampled Islamic bank customers are reluctant to leave the bank even if conventional banks offer better interest rates.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.11
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• pp.657-668
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• 2020

This paper investigates the effect of market structure, including some bank-specific variables and macroeconomic conditions, on the profitability of Indonesian Islamic rural banks. We apply the structure conduct performance (SCP) and the relative market power (RMP) hypothesis. Panel data comprising 142 Islamic rural banks from 2013Q1 to 2018Q4 are employed. This study breaks them apart, associated with the level of economic development consisting of Java as developed regions and outside Java as less developed regions. This study employs static and dynamic panel regression. The GMM method, however, is appropriate because of the dynamic nature of profitability. Our results confirm the SCP hypothesis and fail to support the RMP hypothesis. The higher market concentration allows Islamic rural banks to generate a significantly higher profit by conducting a collusive strategy. More interestingly, the collusive behavior may result in more profit for Islamic rural banks located in the developed regions than those in less developed regions. Evidence also highlights the importance of operating efficiency and impaired financing on profitability. High operating efficiency and low impaired financing can improve profit. Our results suggest that capitalizing market share by improving efficiency and optimizing financing contracts between PLS and non-PLS contracts also improve profit.

• Asia-Pacific Journal of Business Venturing and Entrepreneurship
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• v.6 no.2
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• pp.25-50
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• 2011

The purpose of this study is to investigate the difference of performance between banks with electronic-based banking service and banks without electronic-based banking service in Korea. The performance indicators we use are DEA efficiency and profitability such as NI, ROA and ROE. The findings are that the performance of bank with electronic banking service are significantly different from that of bank without electronic banking service in DEA efficiency, financial efficiency(cost and revenue) and profitability. But there are some differences among the type of electronic-based service channel that banks provide. The banking channels comprise two major groups: the traditional channels and e-channels. E-channels provide cost-saving for banks and their clients. Among them, only card-related ATM significantly affects the profitability of banks in the positive direction, and technical efficiency also affects the bank's profitability. But the others do not affect.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.9
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• pp.19-30
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• 2020

This paper investigates, in a single equation framework, the effect of bank-specific and macroeconomic determinants on micro-, small- and medium-sized loans by commercial banks in Indonesia. This study uses a sample of 790 observations from 79 commercial banks in Indonesia over the years 2006-2015. This study uses two estimation methods for our panel regressions: static and dynamic generalized method of moments (GMM) panel estimator. In static relationships, the literature usually uses the least square methods on fixed effects (FE) or random effects (RE). I found evidence that all banks, bank profitability and size are positively and significantly related to micro-, small- and medium-sized loans, while the coefficients of liquidity are significantly positive in all specifications, except government banks which is significantly negative. The relationship between risk and credit growth is negative for non-government banks. All estimated equations show that the effect of the capital variable on lending banks to MSMEs is not important in government banks and non-government banks. Finally, macroeconomic variables, such as inflation and gross domestic product, clearly affect the lending of the banking sector particularly non-state banks. The findings have several policy implications to Indonesia government, regulatory authority and bank managers in order to improve bank profitability through bank lending.

• The Journal of Asian Finance, Economics and Business
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• v.5 no.2
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• pp.35-42
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• 2018

In recent decades, financial crises in various countries have often been preceded by the rise in non-performing loans (NPLs) in the banks' asset portfolios. The increase in NPLs is proven to have adverse impact on the banking sector so that understanding the determinant of NPLs is immensely crucial to ensure the efficiency and soundness of the overall economy. This study aims to shed light on bank-specific factors that affect loan default problems in developing countries whose banking sectors play a major role in the overall economy. This study analyzes panel data sets of 36 commercial banks listed in the Indonesian Stock Exchange during the period 2008-2015. Applying fixed-effects panel regression model reveals that Indonesian banks' profitability and credit growth negatively influence the number of NPLs. Moreover, banks with higher profitability are proven to have lower NPLs because they can afford adequate credit management practices. Likewise, banks with higher credit growth evidently have lower NPLs in the sense that they demonstrate more specialized lending activity and thus have better credit management systems. These findings imply that, in order to lower loan defaults that can deteriorate banks' asset quality, banks should maintain their level of profitability and increase, rather than decrease, their credit supply to debtors.

• Journal of Information Technology Services
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• v.13 no.1
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• pp.23-42
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• 2014

This study investigates the impact of Internet Banking Systems on the business performance of bank. Although Internet Banking Systems were introduced about 15 years ago in Korea, there were few studies which evidenced the relationship between Internet Banking Systems and the performance of banks. For this empirical investigation, this study collected the panel data of 13 domestic banks over 8.5 years and divided the dataset into two parts-the first half period (2003~2007) and the second half period (2008~2011) in order to examine the dynamic changes in the impact of Internet Banking Systems. The fixed-effects panel regression results were different in the two parts of dataset. Internet Banking Systems showed only cost-efficiency impact in the first half period. However, in the second half period, Internet Banking Systems showed positive impact on the bank profitability. Moreover, the dummy variable regarding local bank showed no additional impact on this result, implying that the impact of Internet Banking Systems was still significant for the local banks. The results will deliver managerial interpretation on the value of Internet Banking Systems and additional implication on the strategic planning of Internet Banking Systems for many domestic banks.

• Asia Marketing Journal
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• v.22 no.1
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• pp.1-26
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• 2020

Firms employing hierarchical loyalty programs (HLPs) periodically demote customers from higher to lower status level to divest from unprofitable customers and boost profitability. However, existing literature lacks objective evidence on how customer demotion affects demoted customers' future purchase behaviors and ultimately profitability for the firm. Moreover, customers in the HLP's higher position may respond to customer demotion differently from those in the HLP's lower position. Drawing upon emotions and equity theories, this study quantifies how the profits that customers contribute to the firm change after customer demotion, and compares demoted customers' behavioral reactions from top-tier with those from bottom-tier based on customers' actual behavior data from a major retail bank in South Korea. The findings show that withdrawing customer status actually deteriorates customer profitability, and customers with top-tier status decrease their profitability more dramatically than those with bottom-tier status after demotion. The results contribute to previous literature on customer demotion and relationship marketing, and provide specific guidelines into how firms should design and implement customer demotion in HLPs.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.3
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• pp.487-495
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• 2021

As Islam supports fair trade, the Murabaha is the most popular and most common mode of Islamic financing. It is a contract of sale between the bank and its client for the sale of goods at a price plus an agreed profit margin for the bank. The contract involves the purchase of goods by the bank which then sells them to the client at an agreed mark-up. While their characteristics and values are unique, they are also subject to conventional measurement of efficacies. This study investigates how the primary health predictors of conventional banks under the Basel III regime could provide a positive means to assess the Murabaha funding and subsequently secure long-term profitability. This study constructed a path analysis (from 120 databases) to assess whether Islamic banks' leverage and capital adequacy may alter the Murabaha funding and increase stock equity directly and indirectly. The research findings are mixed where leverage does not alter the Murabaha funding but only affects the profitability; besides, capital adequacy increases the outgoing funding significantly but does not increase stock equity. Murabaha funding is essential to Islamic bank equity. This study implies Murabaha funding are expensed, despite increasing debts in Islamic banks.