Transparency Index as a Preface to Support Financial Reports Transparency and to Increase Shareholder Protection Level (Published)
Purpose: The study aims to display negative effects on users of financial reports because of the lack of level of financial reports transparency, which makes it imperative to support the level of transparency of financial reports through organizing Voluntary disclosure using a proposed Transparency Index in order to meet the needs of financial reports users from information. The study also deals with trying to determine the nature of relationship between the level of transparency of the financial report and the financial performance and the level of shareholder protection in the Egyptian Exchange.Methodology: To verify the validity of the study hypotheses, the we conducted the Experimental Study through applying it to the Egyptian Exchange Index companies EGX50 after excluding the Financial Institutions through examining the financial statements, the attached Notes, the Board of Directors report, the governance report and the sustainability report for the EGX50 index companies for a period of three years 2016, 2017, 2018.Practical Results: The study sample presented in the forty-one companies listed in the Egyptian Exchange EGX50 index after excluding financial institutions from the index’s companies. The Experimental Study examined the financial statements, the attached Notes, the Board of Directors report, the governance report and the sustainability report for a period of three years 2016, 2017, 2018. After examination it was found that the average level of the Transparency Index in the financial reports for the whole years of study reaches 62.2%, which is a low rate indicating that the EGX50 index’s companies represent low transparency companies. In addition, it was found that the average level of the shareholder protection index in the EGX50 index companies reaches 58%. The foregoing confirms the need to support both the level of transparency and the level of shareholder protection through the application of the proposed Transparency Index. it has been concluded that the Transparency Index has a meaningful impact on both Tobin’s Q (financial performance) (the relationship between them is positive) and also on the stockholders’ protection Index (SPI) (the relationship between them is positive). Authenticity/ Value: The study deals with one of the most important study issues related to measure transparency level of financial reports in the Egyptian Exchange and determines the impact of supporting transparency level on financial performance as well as on supporting protection level of shareholders, The research also extends to suggest transparency index that allows providing most of information needs of users of financial reports according to the aforementioned. In many studies, the importance of research becomes evident In the context of the limited accounting research related to assessing the level of transparency of financial reports at Egyptian Exchange and indicating the positive effects on both the financial performance and the levels of shareholder protection resulting from supporting the level of transparency of financial reports, this is what the authors believe can represent a contribution to the debate about levels of transparency and shareholder protection in the Egyptian Exchange.
Income Smoothing and Financial Performance of Tier 11 Commercial Banks in Kenya (Published)
The most commonly used Income smoothing practices are attributed to bad corporate governance. Bank managers and bank accountants use strategies that seek to erode profit mechanisms that amount to severe consequences for the entire banking and finance industry. Therefore the purpose of this study was to determine the effect of income smoothing practices on financial performance of Tier II commercial banks in Kenya. The study was based on information theory, agency theory and positive accounting theory. This study adopted an exploratory research design in explaining the relationship between the independent and dependent variables. The target population for the study included10 CBK licensed tier II commercial banks in Kenya where 40 respondents were included: purposive sampling technique was used to select Finance managers, internal auditors and accountants. The researcher obtained sample from all the 10 tier II commercial banks in their head offices in Nairobi, Kenya. Primary data was collected using a structured Questionnaire while complimentary data was collected from published financial statements from CBK Supervisory reports. The data was analyzed using the Statistical Package for Social Sciences (SPSS) version 20, by use of both descriptive and inferential statistics. The study results revealed that Income Smoothing had an insignificant coefficient of 0.296 with the Financial Performance of tier II commercial banks in Kenya.. According to the findings, exclusion of liabilities activities are the source of funds for the banks. Based on these findings, the study recommended that watchdogs of the accounting practices need to exercise strict oversight on the extent to which Commercial bank adopt income smoothing issues. The study findings would form a timely and solid foundation that the banking industry pundits and policy makers would base most of their policy priorities in responding to the volatile accounting situation in Kenya today.
Effect of Inventory Management on Financial Performance: Evidence From the Saudi Manufacturing Company: Case Study (Published)
During this recent period of time, the world has witnessed a severe financial crisis that has affected many international companies and economies that had planned their production rates on the basis of marketing forecasts that were prepared just before the global crisis. This study explores the relationship between inventory control and the financial performance of a particular company through the use of a case study approach. It also examines factors that draw back the process of inventory control. The results showed that the profitability of a company has a significant relationship with inventory management, and this suggests that if the management of inventory is done effectively, it ensures more profitability, while poor management translates to a poor financial performance.
Credit Management, Credit Policy and Financial Performance of Commercial Banks in Uganda (Published)
This study was carried out with the purpose of analyzing the effects of credit management on the financial performance of commercial banks in Uganda. Specifically, the study sought to establish whether there is a relationship between credit policy and performance, Capital Adequacy and performance and credit risk control and performance. In achieving the objectives assigned by the study, a causal research design was undertaken and that was facilitated by the use of secondary data which was obtained from published audited financial statements of commercial banks and the BOU annual supervision reports. The study used universal sampling techniques, where all banks licensed and operational in Uganda were selected, multiple regression was used. The findings indicated a significant relationship (r = 0.639) between credit management and the financial performance of commercial banks in Uganda. The coefficient of determination R² was 0;408 meaning that credit management indicators explain up to 40.8% of variations in the financial performance of commercial banks in Uganda. The results from the coefficients summary in the regression model indicate that the significance of coefficients of credit policy (LR), capital adequacy (CAR) and Credit Risk Control (NPL/TL) are -0.031, -0.555 and -1.005 respectively. It was therefore found that both the CAR and the NPL/TL are significant though have an impact at different significance i.e. capital adequacy and Credit Risk control have a greater impact compared to Credit policy (LR) on the financial performance of commercial banks in Uganda. It was established that there is no significant relationship between credit policy and performance of banks in Uganda, however, a significant relationship between the credit risk control, capital adequacy and the performance of commercial banks was established. It was recommended that should use a moderate credit policy as a stringent credit will undermine the financial performance. Moreover, commercial banks should seek to adequately control their credit risk by keeping lower their ratio of nonperforming loans which is the major determinant of commercial banks’ financial performance as shown in the study. The bank of Uganda should encourage banks in Uganda to use credit metrics model in controlling its risks
Board Diversity as Moderator on Firm Characteristics and Financial Performance of Listed Conglomerate Companies in Nigeria (Published)
Financial performance of companies has attracted a lot of attention globally from financial experts and management of firms as a result of 2008 global financial crisis and the failure of major companies. Prior studies on the effect of firm characteristics on financial performance have reported mixed and contradictory results suggesting the existence of certain factors that have not been factored in modeling the relationship. It is against this backdrop that this study examined the effects of firm characteristics on financial performance of listed conglomerate firms in Nigeria in the presence of board diversity. The population of the study consists of six (6) listed conglomerate firms in Nigeria as at 31st December 2017. The six (6) firms were selected to form the sample of the study for the period of eleven years (2007-2017). The census sampling technique was adopted for the study. Secondary data was extracted from the annual report and accounts of the sampled companies A multiple regression analysis was used to test the null hypotheses of the study. The Hausman test indicated random effect model as the appropriate model for the study. The results of study show that leverage has negative and significant effect on return on asset, while firm size and operating expense revealed an insignificant positive effect on return on asset. The sales growth shows a negative and insignificant effect on the return on asset. For model two, it also documented that foreign director positively and significantly moderates the relationship between leverage and sales growth to financial performance of the listed conglomerate firms in Nigeria. It is recommended among others that the management of conglomerate firms in Nigeria should make it mandatory to have an average of 32% of their board members as foreign directors. Also reduce their debt structure to avoid high cost of operation
Analysis of Financial Performance of PDAMs Affected by Environmental Performance and Environmental Accounting With Agency Cost Mediation (Published)
Financial Performance is a benchmark for a company in assessing the success and sustainable companies of each age. At this time, the environment is very influential on the performance of the company’s finances. This study will analyze the financial performance of PDAM Indonesia which is influenced by environmental performance and environmental accounting by mediating agency costs. This study only used a sample of 37 PDAMs that met established criteria with the type of research being used as explanatory research. The research method used is multiple linear regression with data analysis using SPSS software. The test results show that the financial performance of PDAMs is negatively affected directly by environmental performance and is insignificant while environmental accounting in contrast has a positive effect. Meanwhile, environmental performance is mediated by agency costs so that it does not directly affect the positive effect on PDAM’s financial performance as well as environmental accounting. PDAMs that provide high agency costs to the PDAM board of directors increase PDAM financial performance
Financial Performance Analysis in the Influence of Environmental Performance and Environmental Disclosure with Moderating by Organization Culture (Published)
This study aims to analyze financial performance that is influenced by environmental performance and environmental disclosure by moderating by organization culture. The analysis used is descriptive and verification analysis. The sample used is companies listed on the Indonesia Stock Exchange from 2014 to 2017 in the manufacturing sector. The company is a PROPER with gold, green and blue ratings and has a positive ROA value. Samples that met these criteria during the period 2014 – 2017 were 163 samples. The results showed that financial performance was positively influenced by environmental performance by 5.2 and positively environmental disclosure by 3.463. Another thing, organizational culture is not able to increase the effect of environmental performance and environmental disclosure on financial performance and even weaken environmental performance by 70,701. Based on this research, environmental management and disclosure is a positive signal for investors in considering investment decision making so that it can improve the company’s financial performance, while the organization culture is still implemented to maintain the company’s performance in other fields.
Credit Risk and Financial performance: An empirical study of deposit money banks in Nigeria (Published)
Money deposit banks’ ability to mitigate credit risks has been a contemporary and controversial debate in literature, in contributing and extending the frontiers, this study examined the effect of credit risk on financial performance of money deposit banks in Nigeria. The study adopted an expo facto research design, descriptive and using inferential statistics to analyse the data. The population consisted of all the 19 money deposits banks (MDB) listed on the Nigeria stock exchange as at 31st December, 2018. A sample of 13 MDB were chosen on purpose, based mainly on availability of complete data within the study period under consideration. The study covered 169 firm-year observations for the period of 2006-2018. The study extracted secondary data from the financial statements of the banks explored for the study. The study identified three variables of financial performance (dependent variable) surrogated with return on capital employed (ROCE), the independent variable of credit risk proxied with non-performing loans, capital adequacy ratio, loan loss provisions loan to deposit ratio and the control variables of bank Size. The study found that credit management had a positive significant effect on financial performance of the MDB.(Ad R2=0.028,F(4,4170) =2.26;P-value <0.05)When the control variable of bank size (BSZ), stronger effect was exhibited, the study found that credit risk with bank size had a stronger significant effect on financial performance of MDB in Nigeria(Ad.R2=0.4311,F(4,4170)=321.95;p-value<0.05). The study concluded that credit management influences the financial performance of Deposit Money Banks in Nigeria. The study recommended that management of the MBD should design and maintain a robust credit management strategy and framework as well as stringent credit policy that would decrease non-performing loan and default level; and improve their performance level in Nigeria.
Capital Structure Composition and Financial Performance: Empirical Evidence From Quoted Deposit Money Banks in Nigeria (Published)
This study investigates the effect of capital structure composition on the financial performance of deposit money banks in Nigeria. This study employs the ex post facto research design, and data were obtained for the selected deposit money banks from factbook covering 2009-2018 financial year. Data estimation was done using the Ordinary Least Square (OLS) techniques. Descriptive statistic, correlation, and time-series regression analysis were further conducted. Some residual diagnostic test and model selection criteria were employed to ascertain the good fit of the model using E-views 9 econometric package. Findings from the empirical analysis show that debt-equity ratio, debt-capital employed ratio, and equity-capital employed ratio have significant and positive correlation with return on total assets which is the surrogate for firm performance for the study period. The study recommends that in the face of trade-off in capital structure decision, DMBs should have an optimal mix of capital structure, and should also monitor the dynamics and level of leverage that could eliminate the tax shield and reduce return on total assets.
Effect of Bond Issuance on Financial Performance of Firms listed on Nairobi Securities Exchange (Published)
The bonds market in Kenya has experienced tremendous growth in the recent past. Firms listed on Nairobi Securities Exchange (NSE) have gone ahead to undertake secondary bond issues as they pursue their growth strategies. Looking at the financial performance (Return on Equity) of these firms that have undertaken secondary bond issues, there are declines at particular periods after these issues. Understanding the effect of bond issues on financial performance is important for the survival of firms. Studies on the relationship between debt and financial performance of firms have shown that debt has an effect on financial performance. This study went further to find out the effect of debt in form of bond issuances on listed firm financial performance as measured by return on equity. The study collected dated from all the six firms that had issued bonds in tranches or additional bonds within the period 2008 to 2017. Data was analyzed via regression to assess whether bonds issuance has any effect on the financial performance of firms listed on NSE. Results indicate that about 75.4 percent of variance in financial performance could be explained by bond issuance as characterized by bond price, bonds coupon rate, bond proportion, and bond yield to maturity. Bond proportion and bond yield to maturity were found to have a statistically significant effect on financial performance. The study concluded that bond issues affected financial performance of listed firms in Kenya. It was recommended that the listed firms ought to take into consideration the various aspects of bond issues in order to enhance their financial performance.
Influence of Micro-Finance Non-Financial Services on Financial Performance of Small Enterprises in Kenya (Published)
Small Enterprises are now recognized globally as drivers of economic growth and development and it is agreed that the microfinance sector is a major backbone in the sustenance and survival of small enterprises. The study employed descriptive research design. A sample of 67 respondents was picked through stratified random sampling technique. Questionnaires through self-administration were used to collect data. Inferential data analysis was done. All the three null hypotheses were rejected. The results of the study indicated that record keeping on its own explained 22.4% of variability of financial performance of small enterprises in Kenya whereas credit management advisory and budgeting and control explained 35.7% and 22.9% respectively. The joint independent variables together explained 70.1% of the variability of financial performance. The study concluded that there is indeed a significant influence of record keeping, credit management advisory and budgeting and control on financial performance of small enterprises in Kenya. However, there are other factors that explain the variability of the financial performance in small businesses in Kenya that were not included in the model.
Ownership Structure, Bank Stability and the Financial Performance of Commercial Banks in South Sudan (Published)
Since independence in 2011 the Republic of South Sudan has witnessed growth in the financial systems and the overall economy. This has led to growth in the number of the financial institutions in the country. Central to this growth pattern are commercial banks both domestic and foreign-owned. However despite their presence within the country for the last half-decade there has been scant literature examining their stability in the face of the numerous internal factors and economic shocks. Hence the current research sought to determine the effect of ownership structure, bank stability and the financial performance of commercial banks in South Sudan. The study was primarily grounded on the CAMEL model and theory of the firm. The study further adopted the positivism philosophy which guided the research. The research employed a descriptive research design. The population for the study was all the 29 commercial banks in south Sudan from which the research targeted one senior manager. The research relied on a mixed methodology which encompassed both quantitative and qualitative data. Secondary data was collected for the period 2012-2017 from audited annual financial reports of individual banks and from the Central Bank of South Sudan reports while primary data was collected by use of a semi-structured questionnaire. The collected data was edited, sorted and coded into SPSS 23 for subsequent data analysis using SPSS 23 statistical analysis tool. The research utilized both descriptive and inferential statistical methods in the analysis. The statistical tests to be utilized in the study included t-tests, f-test, regression models and ANOVA models. The findings of the research were presented using frequencies, percentages, means, standard deviation, correlation coefficients, charts, tables and other statistical measures. The results of the study indicated there was a statistically significant moderating effect of ownership structure on the financial performance of commercial banks in South Sudan. The study recommends that the government should adopt better measures to safeguard public owned commercial banks to improve their efficiency and performance.
Faithful Representation of Accounting Information and Financial Performance of Quoted Banks in Nigeria (Published)
The study examined faithful representation of accounting information and financial performance of quoted banks in Nigeria using secondary data obtained from Nigeria stock exchange spanning from 2007 to 2016. Price to earnings ratio- PER and Earnings yield-ENY were selected as financial performance proxies while absolute discretionary accruals (ABSDA) was used as a measure of faithful representation of accounting information. ABSDA was subjected to Hausman test and also regressed against performance variable. Findings indicate that ABSDA is negatively correlated with PER but positively correlated with ENY. The study also confirmed a significant negative effect of ABSDA on PER and ENY implying that the more intense the practice of accounting information manipulation through the use of absolute discretionary accruals is, the greater the adverse effects on price earnings ratio and earnings yield. This is because it introduces bias which hurts the neutrality of accounting information (SFAC 8, 2010). We recommend that regulators should increase scrutiny or constraints over accounting discretion and flexibilities allowed by accounting standard to curtail distortions by financial statement preparers in order to eliminate earnings manipulation and achieve high level of faithful representation.
Environmental Responsibility Reporting and Financial Performance of Quoted Oil and Gas Companies in Nigeria (Published)
This study examined the relationship between environmental responsibility reporting and financial performance of quoted oil and gas companies in Nigeria. The study used secondary data obtained from the annual reports of 13 oil and gas companies quoted on the floor of the Nigeria Stock Exchange (NSE) for the years 2012- 2017. The study adopted the ordinary least square (OLS) regression method as the basic technique of data analysis. The study found significant positive relationship between financial performance and environmental responsibility reporting in the oil and gas sector of Nigeria. However, the findings of the study indicate that environmental responsibility reporting in Nigeria is still developing and that organizations operating in the oil and gas sector report very little information about the impact of their operations on the environment. This finding is not quite surprising as most multinational oil and gas companies are not quoted on the NSE, as such were not included in the study. The study recommended, amongst others, that the relevant authorities in the country formulate regulatory policies for the oil and gas sector organizations to abide by in order to include more information on environmental responsibility practices in their annual reports.
The Influence of Mergers and Acquisitions on Financial Performance and Stock Return of Indonesian Banks (Published)
Business environment has changed rapidly due to dynamic changes in the current global era. Merger and acquisition activities are not a new phenomenon in the business world, and it’s an important business phenomenon. One of the changes that can be seen from the merger and acquisition activities are company’s financial performance and stock return. The purpose of this study is to analyze banks financial performance with financial ratios before and after mergers and acquisitions, analyze the effect of mergers and acquisitions on bank financial performance and analyze the factors that influence the success of mergers and acquisitions. This research used Kolmogorov-Smirnov normality test and Wilcoxon test and logistic regression. The results showed that ROA, OER, NPL, NIM and LDR improved after mergers and acquisitions. Mergers and acquisitions also affect the differences in ROA, OER, NPL, NIM, and LDR before and after mergers and acquisitions. Factors that affect the success of mergers and acquisitions are foreign ownership, acquisition percentage and firm size when viewed the success of merger and acquisition from bank’s ability to increase its net profit. In addition, when viewed from the stock returns obtained factors that affect the success of a merger and acquisition are foreign ownership, the percentage of acquisitions and industry relatedness.
In the recent past, a number of organisations across the world failed irrespective of internal controls. This has raised concerns about the relevance and influence of internal control, especially as it affects the financial performance of an organisation. The main objective of this study was to determine the effect of internal control on financial performance of hospitality organisations (HOs) in Rivers State. The survey research design was adopted for this study. The population of the study was made up of all HOs operating in Rivers State. Convenience sampling technique was adopted in selecting twenty HOs that constitute the sample of this study. Data collection was done primarily using structured questionnaire and secondarily through journals, textbooks and the internet. The questionnaire was validated by senior academic and professional colleagues. The reliability index of the instrument was 0.765 obtained using the Cronbach Alpha technique. Data analysis was carried out using descriptive statistics of percentages, means and standard deviations. Linear regression and correlation analysis were used in testing the hypotheses postulated. The investigation found that internal controls to a significant extent influence financial performance of HOs and that a positive relationship exist between internal control and financial performance of HOs in Rivers State. The study concluded that the control environment affects total revenue as such influences the financial performance of HOs, its non-existence or inadequacy may spell doom for an orgainsation. One of the recommendations made was that management of HOs should regularly upgrade their information and communication framework to enable them cope with the frequent changes in the global environment and as such improve their financial performance.
Corporate Board Size, Risk Management and Financial Performance of Listed Deposit Money Banks in Nigeria (Published)
This study examined the effect of corporate board size, risk management on financial performance of listed deposit money banks in Nigeria for the period of 2011-2016. The population of the study is fifteen (15) listed deposit money banks in Nigeria out of which a sample of fourteen (14) were used for the study due to the accessibility and availability of data. Corporate board size and risk management as the independent variable was proxy with numbers of board of directors, liquidity risk, credit risk and operating risk, while the return on equity(ROE) and earnings per share (EPS) were used to proxy financial performance. Data were collected from secondary source through the annual report and account of the banks for the period under study and the data was analysed using multiple panel regression techniques. The findings reveal that board size, credit risk and operating risk are significant negative effect on return on equity (ROE) and earnings per share (EPS) respectively. The study also shows that liquidity risk is negative and insignificant effect on ROE and EPS of the study banks in Nigeria. It is recommended among others that the banks should regulate their risk management practices and ensure they minimize the non-performing loan as it has been found empirically to reduce the quality of the firm’s financial performance. They should also reduce their operational cost for better performance
The Influence of Financial Support Services on the Financial Performance of Women-Owned Enterprises in Eldoret, Kenya (Published)
Micro-credit services target low income clients who lack access to banking and related services. The study sought to establish the influence of micro-credit services on financial performance of women-owned enterprises in Eldoret. The financial performance measures were the net profit, current, inventory and times interest earned ratio. Based on the research, this paper discusses the influence of financial support services on the financial performance of women-owned enterprises which are funded through micro-credit. The study targeted a population of 1721 which constituted of women who owned enterprises and were registered with the county government of Uasin Gishu County. Study samples were drawn through purposive random sampling. A sample size of 313 was obtained using the Krejcie and Morgan formula. Questionnaires were used to collect data. Descriptive and inferential statistics were used to present and analyse the data obtained. Data was then presented in form of tables, and explanations provided. There results showed that there was no significant influence of financial support services on financial performance of women-owned enterprise (p=0.00). From the study, it was observed that the financial performance of the women-owned enterprises in Eldoret improved due to the increase in the net profit, current, inventory turnover and times interest earned ratio. The study concluded that multiple loan products and favourable loan terms helps boost the financial performance of women owned enterprise. The study recommended that microfinance institutions should restructure the collateral and interest requirements by the women entrepreneurs by using credit scoring and business history as alternatives to asset-based security. This paper underscores the need to carry out more research on factors affecting women-owned enterprise in other areas of similar socio-economic patterns to ascertain whether or not financial support services have had a positive impact on the financial performance of women-owned enterprises. Moreover, a study should be conducted on the influence of micro-finance lending on financial performance of women-owned enterprises in Eldoret town.
The Influence of Capital Adequacy Ratio on the Financial Performance of Second-Tier Commercial Banks in Kenya (Published)
Performance of most mid-tier commercial banks in Kenya has been fluctuating over the past few years. Meanwhile, some of them continue to post impressive results as majority report losses and others merge in order to remain sustainable. This situation points to financial performance affecting the mid-tier commercial banks in Kenya. The government, through the Central Bank of Kenya, introduced prudential regulations aimed at bringing sanity in the banking industry. This move led to closure of Dubai Bank and Imperial Bank while Chase Bank went under statutory management awaiting new investors. From this, an investigation was done on how Central Bank regulations influenced financial performance of second-tier commercial banks in Kenya. Based on the study, this paper explores how capital adequacy ratio influences financial performance of commercial banks in Kenya. The study was purely quantitative research and, therefore, correlation research design and descriptive research designs were used. The study was conducted in 14 second tier commercial banks in Kenya. It collected financial data from 2013 to 2016, considering that the regulations came into effect in 2013 from CBK and commercial banks websites. The data was sourced from Central Bank of Kenya after getting permission and approval from National Commission for Science, Technology and Innovation (NACOSTI). Data collected was analysed using descriptive and inferential statistics. Multiple Regression Analysis was used to test the study research hypothesis. Findings were presented through tabulations and graphical illustrations. Computed correlation showed that capital adequacy ratio had significant strong positive relationship (p<0.05) with financial performance of mid-tier commercial banks. In conclusion, it was found that capital adequacy ratio is among the main predictors of mid-tier commercial banks’ financial performance. It was therefore recommended that CBK needs to regularly monitor commercial banks by ensuring that they publish their quarterly results to the public. The investment regulators in the country such as the Capital Markets Authority (CMA), Kenya Banker Association (KBA) and Central bank of Kenya can use these study findings to understand the bottom line impact of bank regulatory requirements and in understanding banks decision on to its customers.
The Relationship of the Capital Structure and Financial Performance: Empirical Evidence of Listed Banks in Thailand (Published)
This paper aims to determine the relationship between capital structure and banks’ performance in Thailand. We utilize the quarterly data set containing firm-specific characteristics and profitability from 1997 to 2016. By employing the random effect model and robustness check to tackle the endogeneity problem, the result proves that capital structure is significant and negatively correlated with profitability which implies that pecking order theory is valid in data set used. Moreover, credit risk and liquidity risk significantly decrease the financial performance. Based on the result and the theoretical background, this paper would like to suggest that governments and banks should focus on controlling the credit process to reduce the non-performing loans. Moreover, they should pay attention to the fund allocation to avoid the shortage of funding which may be costly to banks. Also, while improving banks’ financial performance, banks’ managers should be aware of over utilizing debt which reduces banks’ profitability.