The Impact of Capital Adequacy and Cost-Income Ratio on Performance of Nepalese Commercial Banks

International Journal of Economics and Management Studies

© 2019 by SSRG - IJEMS Journal

Volume 6 Issue 7

Year of Publication : 2019

Authors : Ms. Smita Chalise

10.14445/23939125/IJEMS-V6I7P112

How to Cite?

Ms. Smita Chalise, "The Impact of Capital Adequacy and Cost-Income Ratio on Performance of Nepalese Commercial Banks," SSRG International Journal of Economics and Management Studies, vol. 6,  no. 7, pp. 78-83, 2019. Crossref, https://doi.org/10.14445/23939125/IJEMS-V6I7P112

Abstract:

This paper examines the impactof capital adequacy and cost-income ratio on performance of Nepalese commercial banks. The descriptive research designs have been adopted for the study. The study is conducted using panel data of 10 commercial banks operated in Nepali economy with 100 observations for the period 2007/8 to 2016/17. The dependent variables isreturn on asset which measure bank performance while the independent variables are bank size, Debt-equity ratio, cost-income ratio, Equity ratio, Total capital adequacy. For the purpose of this study, the secondary data have been used. Fixed Effect Model (FEM) of panel data analysis is used as a major tool of analysisthe regression results revealed that Cost-income ratio has negative significant impact on banks performance and total capital adequacy has negative insignificant impact with bankperformance(ROA) whereas debt-equity ratio and bank size has positive insignificant impact with bank performance and equity ratio haspositive significant impact on bank performance which indicates that higher equity ratio the higher would be bank performance. This study concludes that there is negative impact of cost-income and capital adequacy on bank performance.

Keywords:

Capital adequacy, commercial banks, cost-income ratio, Return on assets (ROA)

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