Traffic Jam in Dhaka City

Only available on StudyMode
  • Topic: Bank, Risk in finance, Commercial bank
  • Pages : 92 (4445 words )
  • Download(s) : 263
  • Published : April 22, 2013
Open Document
Text Preview

EXAMINATION
OF
PROFITABILITY
IN
THE CONTEXT OF
BANGLADESH BANKING
INDUSTRY
Nadim Jahangir', Shubhankar Shill2
and
Md.
Amlan
Jahid
Haque3
Abstract
Loans
are
the
riskiest asset
of a
bank,
but these loans
play
a
pivotal role
in
banks'
profitability.
Banks
'profitability
depends
on
the
results
of
some
parameters and
among
them
Bank
b
Return on Equity, Market Size, Market
Concentration Index,
and Bank
RiskMeasure
are
widely
used and
the
same
are investigated
in
the
Bangladesh Banking Industry
in
this study
for
a
period
of the last six years.
The
data comes from
the annual
reports
of
individual banks
listed
in
Dhaka Stock
Exchange (DSE)
and from
the Bangladesh
bankb
published
statistics book
(Scheduled Banks Statistics). Correlation
matrix
and
stepwise
regression
have
been used
for
the
purpose
of
data analysis.
The analysisfinds
that
market concentration and bank
b
risk
do
little
to
explain bank
b
return
on
equity, whereas
bankb
market
size is the
only
variable
providing an
explanation
for
banks
return on
equity
in
the
context
of
Bangladesh.
Introduction
The
tmhtional
measure
ofprofitabilitythrough
stockholder's equity
is
quite different
in
banking
industry
ffom
any other sector
ofbusiness,
where
loan-to-deposit ratio works
as
a
very good
indicator
ofbanks'
profitabiJity
as
it depicts the
status
of
asset-liabilitymanagement
ofbanks.
But
banks' risk
is
not only associated
with
this
asset-
liability management but also related to growth
opportunity.
Smooth
growth
insures higher
future
returns
to
holders
and
there lies
the
profitability
which means
not
only current profits but
future
returns
as
well.
So,
market
size
and
market
concentration index along
with
return
to
equity
and loan-to-deposit ratio
seize
the attention
of
analyzing
the
banks'
profitability.
The banking
industry
of
Bangladesh
is
a
mixed
one
comprising
nationalized, private
and
foreign
commercial banks. Many efforts have
been
made
to
explain
the
performance
of
these banks.
Understanding
the
performance
ofbanks
requires
knowledge about
the
profitability and
the
relationshps
between variables like
market
size,
bank's risk
and
bank's
market
size
with
profitability. Indeed,
the
performance
evaluation
of
commercial
banks
is
especially important
today
because
of
the fierce competition. The banking
(1)
Dr.
Nadim Jahangir (Associate Professor) holds
a
Ph.D.
in Management from Australian Catholic
University and now is teachmg in the Independent University of Bangladesh. (2)
Shubhankar Shill (Lecturer) holds
a
Master degree in Finance from Dhaka University (Bangladesh)
and now is teaching in the School of Business, Independent University of Bangladesh. (3)
Md.
Arnlan
Jahid
Haque
(Lecturer) holds
a
Master degree in Management from Rajshahi University
(Bangladesh) and now is teaching in the School
of
Business, Independent University of Bangladesh.
36
ABAC
Journal
Vol.
27,
No.
2
(May
-
August,
2007,
pp.36
-
46)
Examination
of
PI
.ofitability
in
the
Context
ofBangladesh
Banking
Indusqr
industry is
experiencing
major
transition
for the
last two
decades.
It
is
becoming imperative for
banks
to
endure
the
pressure arising
from
both
internal
and
external factors
and
prove
to
be
profitable. Until early 1985, Bangladesh had
a
highlyrepressed financial sector (Chowhdury,
2002).
Banks and
other
financial
institutions were
fully
owned
by the government.
In
the
early part
of
1980, Bangladesh entered into
the
IMF
and
World
Bank adjustment
programs
and
the process
of
privatization
and
liberalization
gained
momentum
under
the
influence
ofthe
World
Bank
and the
IMF.
tracking img