To evaluate commercial banks performance in Malaysia by using CAMEL framework : an analysis with ROA, ROE and EVA

This paper intends to evaluate the commercial banks performance in Malaysia by using CAMEL framework with assessment through conventional accounting measures of Return on Asset (ROA) and Return on Equity (ROE) and Economic Value Added (EVA) as measurements for banking industry performance. It able t...

Full description

Saved in:
Bibliographic Details
Main Author: Choong, Keat Moon
Format: Thesis
Language:eng
eng
Published: 2018
Subjects:
Online Access:https://etd.uum.edu.my/7866/1/s821182_01.pdf
https://etd.uum.edu.my/7866/2/s821182_02.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
id my-uum-etd.7866
record_format uketd_dc
institution Universiti Utara Malaysia
collection UUM ETD
language eng
eng
advisor Mazlan, Ahmad Rizal
topic HG Finance
spellingShingle HG Finance
Choong, Keat Moon
To evaluate commercial banks performance in Malaysia by using CAMEL framework : an analysis with ROA, ROE and EVA
description This paper intends to evaluate the commercial banks performance in Malaysia by using CAMEL framework with assessment through conventional accounting measures of Return on Asset (ROA) and Return on Equity (ROE) and Economic Value Added (EVA) as measurements for banking industry performance. It able to provide overview and better understanding on bank’s financial performance as well as to identify factors which affect bank performance and hence to improve in risk management to reduce losses to the bank. This study has been conducted by using 16 commercial banks comprises of local and foreign banks for the 5 years period from 2013 to 2017. The findings of this study suggested that CAMEL variables are significant in ROA, ROE and EVA models except for liquidity which is insignificant to ROE. The study concluded that EVA model has better explanation in bank financial performance as compared to ROA and ROE.
format Thesis
qualification_name masters
qualification_level Master's degree
author Choong, Keat Moon
author_facet Choong, Keat Moon
author_sort Choong, Keat Moon
title To evaluate commercial banks performance in Malaysia by using CAMEL framework : an analysis with ROA, ROE and EVA
title_short To evaluate commercial banks performance in Malaysia by using CAMEL framework : an analysis with ROA, ROE and EVA
title_full To evaluate commercial banks performance in Malaysia by using CAMEL framework : an analysis with ROA, ROE and EVA
title_fullStr To evaluate commercial banks performance in Malaysia by using CAMEL framework : an analysis with ROA, ROE and EVA
title_full_unstemmed To evaluate commercial banks performance in Malaysia by using CAMEL framework : an analysis with ROA, ROE and EVA
title_sort to evaluate commercial banks performance in malaysia by using camel framework : an analysis with roa, roe and eva
granting_institution Universiti Utara Malaysia
granting_department Othman Yeop Abdullah Graduate School of Business
publishDate 2018
url https://etd.uum.edu.my/7866/1/s821182_01.pdf
https://etd.uum.edu.my/7866/2/s821182_02.pdf
_version_ 1747828280080203776
spelling my-uum-etd.78662021-08-09T06:31:54Z To evaluate commercial banks performance in Malaysia by using CAMEL framework : an analysis with ROA, ROE and EVA 2018 Choong, Keat Moon Mazlan, Ahmad Rizal Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HG Finance This paper intends to evaluate the commercial banks performance in Malaysia by using CAMEL framework with assessment through conventional accounting measures of Return on Asset (ROA) and Return on Equity (ROE) and Economic Value Added (EVA) as measurements for banking industry performance. It able to provide overview and better understanding on bank’s financial performance as well as to identify factors which affect bank performance and hence to improve in risk management to reduce losses to the bank. This study has been conducted by using 16 commercial banks comprises of local and foreign banks for the 5 years period from 2013 to 2017. The findings of this study suggested that CAMEL variables are significant in ROA, ROE and EVA models except for liquidity which is insignificant to ROE. The study concluded that EVA model has better explanation in bank financial performance as compared to ROA and ROE. 2018 Thesis https://etd.uum.edu.my/7866/ https://etd.uum.edu.my/7866/1/s821182_01.pdf text eng public https://etd.uum.edu.my/7866/2/s821182_02.pdf text eng public https://sierra.uum.edu.my/record=b1699298~S1 masters masters Universiti Utara Malaysia Arafat, M. Y., Warokka, A., Buchdadi, A. D. & Suherman, N.A. (2013). Banking efficiency and performance: A test of banking characteristics in an emerging market. Journal for Global Business Advancement, 6(1), 13 – 23. Almazari, A. A. (2011). Financial performance evaluation of some selected Jordanian Commercial Banks. International Research Journal of Finance and Economics, 68, 50-63. Almumani, M. A. (2014). A Comparison of financial performance of Saudi Banks (2007- 2011). Asian Journal of Research in Banking and Finance, 4(2), 200-213. Ahsan, M.K. (2016). Measuring financial performance based on CAMEL: A study on selected Islamic Banks in Bangladesh. Asian Business Review, 6(1), 47-56. Apostolos, G., John, M. & Pavlos, D. (2011). Could Lehman Brothers’ collapse be anticipated? An examination using CAMELS rating system. International Business Research, 7(2), 11-19. Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industryspecific and macroeconomic determinants of bank profitability. International Financial Markets Institutions & Money, 18 (2008), 121-136. Bhunia, A., & Khan, I. U. (2011). Liquidity management efficiency of Indian Steel Companies (a Case Study). Far East Journal of Psychology and Business, 3(3), 3-13. Bourke, P. (1989). Concentration and other determinants of bank profitability in Europe, North America and Australia. Journal of Banking & Finance, 13(1), 65-79. Bank Negara Malaysia (BNM). (2017). Retrieved from http://www.bnm.gov.my/ Bashir A. H. M. (2000). Assessing the Performance of Islamic Banks: Some Evidence from the Middle East, Paper. Badrul Munir, M. & Bustamam, U.S.A. (2017). Camel ratio on profitability banking performance (Malaysia versus Indonesia). International Journal of Management, Innovation & Entrepreneurial Research, 3(1), 30-39. Berger, A.N. & Humphrey, D.B. (1997). Efficiency of financial institutions: International survey and directions for future research. European Journal of Operational Research, 98 (2), 175-212. Dietrich, A., & Wanzenried, G. (2014). The determinants of commercial banking profitability in low-, middle-, and high-income countries. Quarterly Review of Economics and Finance, 54(3), 337–354. Djalilov, K. & Piesseb, J. (2016). Determinants of bank profitability in transition countries: What matters most? Research in International Business and Finance, 38, 69-82. Dincer, H., Gencer, G., Orhan, N., & Sahinbas, K. (2011). A performance evaluation of the Turkish banking sector after the global crisis via CAMELS ratios. Procedia - Social and Behavioral Sciences, 24, 1530-1545. Dennis G.U., Charles C.K. & Justin M.P. (1996). EVA for banks: Value creation, risk management, and profitability measurement. Journal of Applied Corporate Finance, 9(2), 94-113. Fungacova, Z. & Poghosyan, T. (2011). Determinants of bank interest margins in Russia: Does bank ownership matter? Economic Systems, 35(4), 481–495. Gup, B. E., Fraser, D.R. & Kolari, J. W. (2001). Commercial Banking : The Management of Risk (3rd Edition). New Jersey: John Wiley & Sons Inc. Githinji, D.W. (2010). Relationship between financial performance and CAMEL rating of commercial banks in Kenya. University of Nairobi, Kenya. Hutchinson, M. & Gull, F. (2004). Investment opportunity set, corporate governance practices, and firm performance. Journal of Corporate Finance, 10(1), 595-614. Ibrahim, M. (2015). A comparative study of financial performance between conventional and Islamic banking in United Arab Emirates. International Journal of Economics and Financial Issues, 5 (4), 868-874. Kumbirai, M. & Webb, R. (2010). A financial ratio analysis of commercial bank performance in South Africa. African Review of Economics and Finance, 2(1), 30-53. Klapper, L. & Love. I. (2004). Corporate governance, investor protection, and performance in emerging markets. Journal of Corporate Finance, 10(5), 703-728. Koch, T.W. and MacDonald, S.S. (2003). Bank Management (fifth edition). Ohio: Thomson South-Western. Khan, A. R. (2008). Bank management- A fund emphasis ( first edition).Dhaka: Ruby publications. Kariuki, C.W. (2008). An analysis of the information content of economic value added as a performance measure of banks in Kenya, University of Nairobi, Kenya. Kosmidou, K., Tanna, S., & Pasiouras, F. (2005). Determinants of profitability of domestic UK commercial banks: panel evidence from the period 1995-2002. In Money Macro and Finance (MMF) Research Group Conference, 45. Kosmidou, K. (2008). The determinants of banks' profits in Greece during the period of EU financial integration. Managerial Finance, 34(3), 146-159. Mashayekhi, B. & Bazazb, M. S. (2008). Corporate governance and firm performance in Iran. Journal of Contemporary Accounting and Economics, 4(2), 156–172. Mishkin, S.(2007). The Economics of Money, Banking, and Financial Markets (8th edition). USA: Pearson. Merchant, I. P. (2012). Empirical study of Islamic banks versus conventional banks of GCC. Global Journal of Management and Business Research, 12(20), 33-42. Mensah, L., Owusu-Antwi, G., Crabbe, M. & Antwi, J. (2015). Determinants of banks performance in Ghana, the Economic Value Added (EVA) approach. International Journal of Economics and Finance, 7(1), 203-215. Muhmad, S.N. & Hashim, H. A. (2015). Using the CAMEL framework in assessing bank performance in Malaysia. International Journal of Economics, Management and Accounting, 23 (1), 109-127. Molyneux, P. & Thornton, J. (1992). Determinants of European bank profitability: A note. Journal of Banking & Finance, 16(6), 1173-1178. Matthew, N.G. & Esther, L. A. (2012). A financial performance comparison of foreign vs local banks in Ghana. International Journal of Business and Social Science, 3(21), 82-87. Nuryanah, S. & Islam, S. M. N. (2011). Corporate governance and performance: Evidence from an emerging market. Malaysian Accounting Review, 10(1), 17–42. Olson, D. & Zoubi, T. A. (2011). Efficiency and bank profitability in MENA countries. Emerging Markets Review, 12, 94-110. Olweny, T. & Shipho, T. M. (2011). Effects of sectoral factors on the profitability of commercial banks in Kenya. Economics and Finance Review, 1(5), 1-30. O’Hanlon, J. & Peasnell, K. (1998). Wall Street's Contribution to Management accounting: the Stern Stewart EVA ® Financial Management System. Management Accounting Research, 9(4), 421. Peltonen, T., Piloiu, A. & Sarlin, P. (2015). Network linkages to predict bank distress. European Central Bank Working Paper Series Number 1828, 1-35. Piyu, Y. (1992). Data Envelopment Analysis & Commercial Bank Performance: A Primer with Application to Missouri Banks. Austin: IC2 Institute, University of Texas. Rose, P. S. & Hudgins S. C. (2008). Bank management and financial services (7th edition). Boston: McGraw-Hill Education. Roman, A. & Sargu, A.C. (2013). Analysing the financial soundness of the commercial banks in Romania: An approach based on the CAMEL framework. Procedia Economics and Finance, 6, 703-712. Rehman, M. Z., Khan, M. N. & Khokhar, I. (2015). Investigating liquidity-profitability relationship: evidence from companies listed in Saudi Stock Exchange (Tadawul). Journal of Applied Finance & Banking, 5(3), 159-173. Raiyani, J. & Joshi, N.K. (2011). EVA based performance measurement: A Case Study of SBI and HDFC Bank. Management Insight, 7(1), 32-43. Soteriou, A. & Stavros A. Z. (1999). Operations, quality, and profitability in the provision of banking services. Management Science, 45(9), 1221–1238. Sufian, F. (2009). Determinants of bank efficiency during unstable macroeconomic environment: Empirical evidence from Malaysia. Research in International Business and Finance, 23, 54-77. Sufian, F., & Habibullah, M. S. (2012). Globalizations and bank performance in China. Research in International Business and Finance, 26, 221-239. Teck, Y.K. (2000). A comparative study of the performance of commercial banks, Finance Companies and Merchant Banks in Malaysia, 1990- 1998. Iowa State: University. Tulsian, M. (2014). Profitability analysis (A comparative study of SAIL & TATA Steel). IOSR Journal of Economics and Finance, 3(2), 19-22. Teker, D., Teker, S., & Sonmez, M. (2011). Economic Value Added Performances of Publicly Owned Banks: Evidence from Turkey. International Research Journal of Finance and Economics, 75, 132–137. Trinugroho, I., Agusman, A., & Tarazi, A. (2014). Why have bank interest margins been so high in Indonesia since 1997/1998 financial crisis. Research in International Business and Finance, 32, 139–158. Uniform Financial Institutions Rating System. (1997). Statements of Policy. United States: Federal Deposit Insurance Corporation (FDIC). Wallace, J.S. (1997). Adopting residual income-based compensation plans: Do you get what you pay for? Journal of Accounting & Economics, 24 (3), 275. Were, M. & Wambua, J. (2014). What factors drive interest rate spread of commercial banks? Empirical evidence from Kenya. Review of Development Finance, 4(2), 73–82. Yin, H., Yang, J., & Mehran, J. (2013). An empirical study of bank efficiency in China after WTO accession. Global Finance Journal, 24, 153–170. Zikmund, W. G., Babin, B., Carr, J. C., & Griffin, M. (2013). Business Research Methods (9th ed.). SouthWestern: Cengage Learning.