The Effect of Capital Adequacy on Return on Investment: A Study based on Commercial Banks in Bangladesh

The Effect of Capital Adequacy on Return on Investment: A Study based on Commercial Banks in Bangladesh

Md. Shohel Rana

Contact

Md. Mehedi Hasan

Contact

Shafiqul Islam

Contact

Begum Rokeya University

North South University

The Effect of Capital Adequacy on Return on Investment: A Study based on Commercial Banks in Bangladesh

Article Fingerprint

ReserarchID

C: FINANCEYB8CA

The Effect of Capital Adequacy on Return on Investment: A Study based on Commercial Banks in Bangladesh Banner

AI TAKEAWAY

Connecting with the Eternal Ground

Abstract

The main purpose of study was to establish the effect that capital adequacy have on the investments. It also found at how this capital adequacy was involved in other variables such as liquidity, management efficiency, asset quality and operating efficiency. Side by side, it found at whether other variables had a role to play in the investments. In this study, the collected data were applied in empirical analysis with regression analysis to analysis. A random sample from the population of total commercial bank in Bangladesh was taken as secondary sources of data from financial statement. A linear regression model of the returns on investments versus capital adequacy, liquidity, management efficiency, asset quality, operating efficiency was to test relationship among the variables. The results established that the relationship between capital adequacy of commercial banks and return on investment is negative and significant. The study found that capital adequacy had a negative effect on return on investments while liquidity had a positive impact on the returns. For this negative effect of capital adequacy on the returns in investment, the study recommends that a central depository fund for commercial Banks be set up to assist Banks have cheaper way for short term borrowing to useful to temporary liquidity crisis.

References

37 Cites in Article

Reference Format

V Agrawal,A Vaish,P Vaish (1997). Groundwater quality: focus on fluoride and fluorosis in Rajasthan.
Allen Berger,Gregory Udell (1994). Did Risk-Based Capital Allocate Bank Credit and Cause a "Credit Crunch" in the United States?.
A Berger,R Herring,G Szegö (1995). The role of capital in financial institutions.
B Bernanke,C Lown,B Friedman (1991). The credit crunch.
R Bichsel,J Blum (2005). Capital regulation of banks: Where do we stand and where are we going?.
Jacob Bikker,H Hu (2012). Cyclical Patterns in Profits, Provisioning and Lending of Banks.
Jürg Blum (1999). Do capital adequacy requirements reduce risks in banking?.
Emile Brinkmann,Paul Horvitz (1995). Risk-Based Capital Standards and the Credit Crunch.
Ralph Chami,Thomas Cosimano (2010). Monetary policy with a touch of Basel.
R Clark,J Pratt,R Zeckhauser (1985). Principals and agents: The structure of business.
Bruce Collins,Frank Fabozzi (1999). Derivatives and Risk Management.
Douglas Diamond,Raghuram Rajan (2000). A Theory of Bank Capital.
G Donaldson (1961). Corporate Debt Policy.
Kathleen Eisenhardt (1989). Agency Theory: An Assessment and Review.
Kathleen Eisenhardt (1989). Agency Theory: An Assessment and Review.
Murray Frank,Vidhan Goyal (2003). Testing the pecking order theory of capital structure.
Craig Furfine (2001). Bank Portfolio Allocation: The Impact of Capital Requirements, Regulatory Monitoring, and Economic Conditions.
Philippe Gaud,Elion Jani,Martin Hoesli,Andre Bender (2005). The Capital Structure of Swiss Companies: an Empirical Analysis Using Dynamic Panel Data.
Saibal Ghosh,D Nachane,Aditya Narain,Satyananda Sahoo (2003). Capital requirements and bank behaviour: an empirical analysis of Indian public sector banks.
R Gilbert,David Wheelock (2007). Measuring Commercial Bank Profitability: Proceed with Caution.
Andika Gunadi,Paul Rushton,Leah Mchale,Amanda Gutek,John Finer (2016). Characterization of 40 soybean (Glycine max) promoters, isolated from across 5 thematic gene groups.
I Gunadi,E Deriantino,A Budiman Increasing Banking Capital for Promoting Financial Stability and Banking Response to Monetary Policy: Evidence from Indonesia1.
Franz Hahn (2002). The Effects of Bank Capital on Bank Credit Creation.
Brian Hall (1993). How Has the Basle Accord Affected Bank Portfolios?.
Diana Hancock,James Wilcox (1993). Has There Been a "Capital Crunch" in Banking? The Effects on Bank Lending of Real Estate Market Conditions and Bank Capital Shortfalls.
Diana Hancock,Andrew Laing,James Wilcox (1995). Bank capital shocks: Dynamic effects on securities, loans, and capital.
S Haron (2004). Determinants of Islamic bank profitability.
Milton Harris,Artur Raviv (1991). The Theory of Capital Structure.
J Haubrich,P Wachtel (1993). Emerging Market Capital Flows.
Yuzo Honda (2002). The effects of the Basle accord on bank credit: the case of Japan.
Armen Hovakimian,Tim Opler,Sheridan Titman (2001). The Debt-Equity Choice.
M Jensen,W Meckling (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure.
R Merton (1990). The financial system and economic performance.
J Mitchell (1984). Women: The Longest Revolution: Essays on Feminism, Literature and Psychoanalysis.
Stewart Myers (1984). The Capital Structure Puzzle.
S Shafie,W Azmi,S Haron (2004). Adopting and measuring customer service quality in Islamic banks.
W Wangui (2012). The Effect of Capital Adequacy Requirements On-Credit Creation by Commerclal Banks in Kenya.

Download References

Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Md. Shohel Rana. 2019. \u201cThe Effect of Capital Adequacy on Return on Investment: A Study based on Commercial Banks in Bangladesh\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 19 (GJMBR Volume 19 Issue C7).

More Citation Formats

Select Citation Style:

Download Citation

GJMBR Volume 19 Issue C7

Explore Journals Explore Volume Read This Issue

Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

Not Found

Classification

GJMBR-C Classification JEL Code: F65

Submission ReceivedDecember 12, 2018
Peer Review Double Blind
Handling Editor
Accepted January 2, 2019
Published January 15, 2019

Version of record

v1.2

Issue date

December 17, 2019

Language

Experiance in AR

Explore published articles in an immersive Augmented Reality environment. Our platform converts research papers into interactive 3D books, allowing readers to view and interact with content using AR and VR compatible devices.

View in VR

Read in 3D

Your published article is automatically converted into a realistic 3D book. Flip through pages and read research papers in a more engaging and interactive format.

View in 3D

Article Matrices

Total Views: 2641

Total Downloads: 1340

2026 Trends

Our website is actively being updated, and changes may occur frequently. Please clear your browser cache if needed. For feedback or error reporting, please email [email protected]