The Effect of Efficiency and Liquidity on the Profitability of the Saudi Commercial Banks (Published)
This study aimed at finding the effect of efficiency and liquidity on the profitability of the Saudi Commercial Banks. The profitability as a dependent variable is measured by return on assets, return on equity, operating profit Ratio, net interest margin ratio and net interest income ratio. Meanwhile, the efficiency and liquidity as independent variable are measured by Cost to income, Loans to total assets, total customer deposits to total assets and Loans to deposits. The study sample included 12 banks for the period 2014 to 2020. A set of statistical tools and financial indicators were used to test the validity of hypotheses. The results indicated that first, second and fifth hypothesis were rejected and third and fourth were accepted. The study recommend that Saudi commercial banks should focus more on liquidity and follow appropriate policies to gain more profitability. Finally, more studies and research work are required in the same field.
Citation: Ahmad Mohammad Alamri and Ahmad Aref Almazari (2021) The Effect of Efficiency and Liquidity on the Profitability of the Saudi Commercial Banks, European Journal of Accounting, Auditing and Finance Research, Vol.9, No. 8, pp.1-13
Liquidity and profitability are two important variables in the banking industry. In this article, we studied. The impact of liquidity on bank profitability in the Tunisian context. We used a sample of 18 banks over the period (2000…2017). We employ 2 models of panel static in the empirical research. We found that (liquid assets / total assets) and (total credits / total deposits) have a positive and significant impact on return on assets (ROA) whereas (current assets / current liabilities) have not significant impact on ROA. Also, we found that (liquid assets / total assets), and (total credits / total deposits) have a negative and significant impact on ROE (return on equity). Whereas (current assets / current liabilities) have not significant impact on ROE.
Working Capital Management Firm Liquidity and Stock Market Seasonality: Evidence from Nigeria (Published)
This study examines the relationship between Working Capital Management Firm Liquidity and Stock Market Seasonality among quoted firms in Nigeria. Six hypotheses were formulated following the dependent variable of Stock Market Liquidity. The independent variables employed for this study include: Liquidity Ratio, Account Payable Day, Account Receivable Day, Inventory Day, Firm Leverage and Firm Size. This study is based on ex-post facto research design and employed a panel data set collected Fifty (50) non-financial companies over an eight year period ranging from 2011 to 2018 financial year. We analyzed the data set using descriptive statistics, correlation and Panel Ordinary Least Square Regression Analysis. Our finding lends credence to the efficient market theory which holds that share markets prices are unpredictable and as such cannot be forecasted. Specifically, the finding suggests that market liquidity cannot predict stock market returns irrespective of the season of the year. Hence, we carefully hold that the stock market in Nigeria is efficient due to its randomness and will rapidly respond to any information or anomalies presented to it. The study recommends among others that policy makers in emerging markets such as Nigeria should ease entry barriers for prospective firms so as to enhance liquidity. The study further recommends that, proper inventory management system should be put in place in order to avoid working capital mismanagement.
In the business world, stakeholders are subject to several risks on investment including losing their venture. The existence of a healthy corporate structure is vital to the pursuit of the going concern objective of firms. This study investigates determinants of listed Deposit Money Banks’ (DMBs) survival in Nigeria. The sixteen listed DMBs in Nigeria as at December 2017 were used as the population and fifteen were sampled by applying a judgemental sampling technique. The study adopted descriptive and ex-post facto research design. The Emerging Market score (EM score) model was applied in the prediction of going concern status of sampled DMBs. The data used were obtained from the annual reports and accounts of the DMBs for 2007 to 2017 accounting periods. The data were analysed using Robust GLS Regression model. The study found that there is a positive and significant impact of liquidity, leverage, profitability, solvency and asset management on DMBs’ going concern (GC). This implies that, any increase in these determinants would lead to increase in GC of DMBs. With the adjusted r2 of 0.98 and F-value significance at 0.000 from the model used in the study, the study concludes that the independent variables in the EM score model are relevant in determining the GC of DMBs. It is highly recommended that DMBs should enhance their survival status (EM score of 5.48) by improving on their liquidity, profitability, solvency, leverage and asset management ratios to solidify their GC status.
The relevance of banking sector in an economy is defensible for the fact that it is the foremost channel of savings and its allocations to various economic units. Banks are characterized by some unavoidable variables, for this study, they are capital, loans and advances and liquidity. It is therefore assumed that banking business, especially the deposit money banks in Nigeria cannot financially perform satisfactory without these variables in place. The objective of this study is to examine the impact of these characteristics on profitability. The study adopts ex-post facto research design and secondary source data drawn from the financial statements of the selected banks were used. Regression analysis was adopted in analyzing the data. The findings of the study show that bank capital, loan and advance have a significant relationship with earnings but liquidity is not during the period of study. The study recommends that the Nigerian banks’ regulatory authorities should focus and continue to regulate banks’ capitals as necessary with a view to improving the profitability of deposit money banks in Nigeria, the management of deposit money banks, should develop credits policies that will always be in agreement with the CBN’s policies on credits and CBN should review the liquidity requirements with a view to investing idle liquidity to encourage earnings.
Risk Management, Risk Concentration and the Performance of Deposit Money Banks in Nigeria (Published)
This study investigated the effect of risk management and risk concentration on the performance of Deposit Money banks in Nigeria for the period 1997 to 2016. The study adopted credit risk, liquidity risk and capital adequacy risk as proxies for risk management/concentration, and return on assets as the measure for performance of Deposit Money banks. Secondary data was collected from the annual financial statements of listed banks and the Nigerian Stock Exchange fact book. The study employed multiple regression technique based on the E-views 7 software for analysis of data. The results of the analysis indicated that credit risk and liquidity risk had positive and significant effect on return on asset, while capital adequacy risk had negative and insignificant effect on return on asset. The study concluded that risk management/concentration affected the performance of banks in Nigeria. Based on the findings, the study recommended that the management of banks should establish sound lending policies, adequate credit administration procedure, and effective and efficient machinery to monitor the lending function in line with established guidelines. Also, the character and financial statement of the borrower must be properly scrutinized and a careful evaluation of the customer’s credit worthiness be carried out before extending loan facilities to potential borrowers.
Banking Sector Reforms and the Performance of Banking Business in Nigeria – An Econometric Analysis (Published)
The study examines the effect of financial reforms on banking sector efficiency in Nigeria from 1986- 2016. The objective of the study is to evaluate the extent to which exchange rate, (EXCH), interest rate (INT) and liquidity (LQT) have affected the efficiency of banking operations in Nigeria. The dependent variable in measuring banking sector efficiency is proxy by Nonperforming Loan (NPL). The OLS regression was adopted for test of the three hypotheses formulated. The findings indicate that financial reform targets have significantly affected banking sector efficiency in Nigeria in the long run. The study recommends that the regulatory and supervisory framework should be strengthened while interest rate policy should be made to stimulate savings through high real deposit rate and lending rate so as to promote financial deepening and thus banking efficiency.
Role of Economic Growth of Achaemenids Dynasty in Evolution of the Family Institution of Iran (Published)
In the pre-history era and the Stone Age human societies lived in groups because of the lack of economic growth and the strong need for each other to obtain food. In this era families were very big. With the growth of agriculture, the notion of family almost evolved into its present form, but evolution of families was not as quick as other west Asian countries. The shortage of water was the main cause of impeded economic growth and urbanism in most parts of Iran before the entrance of Aryans. As a result, families were bigger and related to meet their needs. Entrance of Aryans was accompanied by political evolutions in the region. The powerful Assyrian government was ending, native Iranian folks were tired of fighting this cruel enemy in the western areas, and thus Aryans were enabled to gain power. The Medians were often at war and they progressed in terms of military power. As the Achaemenids gained power, a new era of progress and growth started for west Asian civilizations. The Achaemenids properly learned from civilizations of adjacent tribes and actualized the Iranian culture and civilization with their innate wit and wisdom. The factor that considerably contributed to evolution of the institution of family in Iran in the Achaemenid era, especially with the reign of Darius I, was economic measures taken by Darius. These measures increased the government wealth as well as the body of Iranian society (to a lesser extent). Prevalence of coin on the macro level, creation of new jobs, and growth of wages were accompanied by financial independence of the nation. As a result, people were allowed to form families without the need for large families, and thus families transformed from extended families to nuclear families.
Determinants of Disclosure Completeness of Financial Statements an Empirical Study in Indonesia (Published)
This study aims to determine the effect of firm size, liquidity, and leverage on the completeness of the disclosure of financial statements on mining companies listed on the Indonesia Stock Exchange in 2010-2014. The data used in this research is secondary data, such as financial statements. The number of companies who researched many as 18 companies over five years, bringing the total number of samples totaling 90 samples. Data analysis technique used is multiple linear regression analysis using software eviews 8.0. The results of this study showed that simultaneous company size, liquidity, and leverage significant effect on the completeness of the disclosure of financial statements. Partially size and liquidity significantly influence the completeness of the disclosure of financial statements, but leverage does not significantly influence the completeness of the disclosure of financial statements
This study aims to determine the factors that affect the profitability of commercial banks in Indonesia. This research is a quantitative research using a sample six largest banks with total assets under ICMD. The banks included in the sample in this study is that Bank Mandiri (Persero) Tbk., Bank Rakyat Indonesia (Persero) Tbk., Bank Central Asia Tbk., Bank Negara Indonesia (Persero) Tbk., Bank Danamon Indonesia Tbk., and Bank Pan Indonesia Tbk. The research data in the form of panel data obtained from the annual financial statements of the bank. Techniques using multiple linear regression analysis. The results showed that the variables of liquidity of banks, non-performing loans and capital adequacy simultaneously affect the bank’s profitability. The partial effect of liquidity and non-performing loans significantly influence the profitability of banks. While the capital adequacy ratio of no significant impact on the profitability of commercial banks in Indonesia
Assessing the Impact of Liquidity and Profitability Ratios on Growth of Profits in Pharmaceutical Firms in Nigeri (Published)
This paper assesses the impact of liquidity and profitability ratios on growth of profits in Pharmaceutical firms in Nigeria. Eight ratios: acid test, current ratio, net working Capital. Return on assets, returns on capital employed, returns on equity, gross profit ratio and net profit ratio were regressed against the dependent variable growth of profit. Haussmann test was conducted to choose between Fixed Effect and Random Effects model. Results justified the use of Fixed Effect model. Test results indicate significant contributions of all the variables to profit growth of pharmaceutical companies in Nigeria implying that continued improvement in the variables can lead to increases in growth of profit by the Pharmaceutical firms.
THE IMPACT OF EFFECTIVE CREDIT POLICY ON LIQUIDITY OF MANUFACTURING COMPANIES IN NIGERIA (Published)
This study examines the impact of effective credit policy on liquidity of manufacturing companies in Nigeria. Credit policy from this perspective was viewed from the angle of controlling or regulating credit sales. The study looked into the problems of non-monitoring and the non-review of the credit policy of organizations as a cause of the liquidity problems associated with credit sales. The study centered mainly on the effects of each of the individual components of credit period, the cash discount and the collection period on an organization’s liquidity. Also to ascertained the type of effects that a company’s credit policy has on its liquidity. The study involved a survey of four manufacturing companies which include Unilever Nigeria PLC, Cadbury Nigeria PLC, Nestle Nigeria PLC and Nigerian Bottling Company PLC. The Annual Reports and Accounts of year 2007-2011 of the selected companies as well as a questionnaire were subjected to statistical analysis. Analysis of variance (ANOVA) and regression analysis were used in the hypothesis testing. The study revealed that when a company’s credit policy is favourable, liquidity is at a desirable level. And also, that manufacturing companies do not monitor and review their credit policy regularly and as a result the allowance of cash discounts could not be minimized as much as expected. We therefore recommended that companies should consider their mission, the nature of business and business environment before setting up a credit policy.
A Critical Analysis of Financial Performance of Agricultural Development Bank (Adb, Ghana) (Published)
Until recently, many of the banks in developing countries were state owned or locally established with varied mandates to focus on different sectors of the economy. Some of these state banks are bedevilled with peculiar set of challenges making some of them inefficient and unprofitable and in some instances insolvent. Financial performance analysis is aimed at keeping the banks in checks by highlighting low and high performance areas with the understanding that it will bring about improvement in performance. The PELARI (Profitability, Efficiency, Liquidity, Asset Quality, Risk Measures and Investor analyses) model was developed for analysis by the researchers which is similar to the CAMELS’ rating. Financial ratio analysis is employed in the analysis. Troubled signals models such as the Altman z-score for non-manufacturing companies and risk index were also used to measure risk. The Altman z-score generated for 2011 and 2012 showed a figure of less than 1.1 which put the bank in the distress zone category. It was evident from the analysis that ADB’s focus on agricultural financing is diminishing since a sector analysis of loans and advances indicates that the agriculture sector lost its first position to the services sector which recorded 38% compared with agriculture 29% in 2012. The bank’s liquidity showed a downward trend and slipped further down in 2010 confirming the Ghana Banking Survey (2011) assessment that the bank is illiquid.
Comparative analyses of Strategic Financial Management Practices in Faith-based and Community-interest organizations (Review Completed - Accepted)
Non-profit organizations render certain services not provided by business or public sectors such as skills development, employment creation and fostering of pathways for social inclusion. In spite of their generally-acknowledged significant contribution to the society, researches on the management of their finance are not much. This research therefore advances the frontiers of knowledge by comparatively analysing the financial management practices of two non-profit organizations––a faith-based and a community-interest organization. The research adopted a field-based approach by evaluating the financial management practices of study organizations using methods such as interviews, study of documents, artefacts and published annual reports. The research found out that though the two organizations are fully aware of the risks involved in the management of finance, different strategies are adopted to mitigate the risks. Though not established for commercial purposes, Non-Profit organizations are encouraged to embark on cost control and reduction to justify their funding by financiers.