IDEAS home Printed from https://ideas.repec.org/a/nap/nijefr/2020p92-101.html
   My bibliography  Save this article

Impact Of Exchange Rate Fluctuations On Financial Performance Of State-Owned Commercial Banks In Bangladesh: An Empirical Study

Author

Listed:
  • Md. Shakhaowat Hossin

    (Department of Finance and Banking, Begum Rokeya University, Rangpur, Bangladesh)

  • Md. Fazlu Mondol

    (Department of Finance and Banking, Begum Rokeya University, Rangpur, Bangladesh)

Abstract

The study aimed at investigating the effects of exchange rate fluctuations on financial performance of financial institutions in Bangladesh. The study reviewed theoretical and empirical studies on exchange rate and financial performance. Secondary data was collected from the banks’ consolidated financial statements as well as World Bank database website. The study is carried out by using the measures of central tendency as descriptive statistics to describe the data. This study also adopted correlation analysis to explain the association between Return on Assets (ROA), inflation rates, interest rates spread, and exchange rates. A multiple linear regression model has been employed. Return on assets was the dependent variables and exchange fluctuations variables as the independent variables.  The study found that exchange rate fluctuations and financial performance had a weak negative association. The study observed that the inflation rates have been increasing yearly over the entire study period. The relationship however between inflation and returns on assets was positive and hence it positively impacted performance. The study demonstrated that interest rates especially lending rates have been increasing over time whereas the same observation was not eminent in deposit rates by banks. The results of the study therefore concludes that the interest rates spread has been increasing in the recent years since borrowing had become expensive thus profitable whereas deposits rates were very small. The Central Bank of Bangladesh should adequately put measures to safeguard the value of the domestic currency.

Suggested Citation

  • Md. Shakhaowat Hossin & Md. Fazlu Mondol, 2020. "Impact Of Exchange Rate Fluctuations On Financial Performance Of State-Owned Commercial Banks In Bangladesh: An Empirical Study," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 5(9), pages 92-101, September.
    • Handle: RePEc:nap:nijefr:2020:p:92-101
    as

    Download full text from publisher

    File URL: https://www.napublisher.org/pdf-files/NIJEFR-5(9)-92-101.pdf
    Download Restriction: no
    File URL: https://www.napublisher.org/?ic=journal&journal=5&month=09-2020&issue=9&volume=5
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
    2. Goddard, John & Molyneux, Phil & Wilson, John O S, 2004. "Dynamics of Growth and Profitability in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 1069-1090, December.
    3. Pasiouras, Fotios & Kosmidou, Kyriaki, 2007. "Factors influencing the profitability of domestic and foreign commercial banks in the European Union," Research in International Business and Finance, Elsevier, vol. 21(2), pages 222-237, June.
    4. OWOEYE, Taiwo & OGUNMAKIN, Adeduro Adesola, 2013. "Exchange Rate Volatility and Bank Performance in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(2), pages 178-185, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Debby Wulandari & Agus Harjito, 2021. "The effect of interest rates, exchange rates and capital structure on banking profitability of BUMN and Private Go Public in Indonesia," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(3), pages 338-351, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olszak, Małgorzata & Kowalska, Iwona, 2023. "Do competition and market structure affect sensitivity of bank profitability to the business cycle?," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    2. Fadzlan Sufian & Muzafar Shah Habibullah, 2010. "Bank-specific, Industry-specific and Macroeconomic Determinants of Bank Efficiency," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 4(4), pages 427-461, November.
    3. Yanikkaya, Halit & Gumus, Nihat & Pabuccu, Yasar Ugur, 2018. "How profitability differs between conventional and Islamic banks: A dynamic panel data approach," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 99-111.
    4. Pankaj Sinha & Sakshi Sharma, 2016. "Determinants of bank profits and its persistence in Indian Banks: a study in a dynamic panel data framework," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 7(1), pages 35-46, March.
    5. Robin, Iftekhar & Salim, Ruhul & Bloch, Harry, 2018. "Financial performance of commercial banks in the post-reform era: Further evidence from Bangladesh," Economic Analysis and Policy, Elsevier, vol. 58(C), pages 43-54.
    6. Fadzlan Sufian & Muhamed Zulkhibri, 2015. "The Nexus between Economic Freedom and Islamic Bank Profitability in the MENA Banking Sectors," Global Business Review, International Management Institute, vol. 16(5_suppl), pages 58-81, October.
    7. Sufian, Fadzlan & Habibullah, Muzafar Shah, 2010. "Does economic freedom fosters banks’ performance? Panel evidence from Malaysia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 6(2), pages 77-91.
    8. Bouzgarrou, Houssam & Jouida, Sameh & Louhichi, Waël, 2018. "Bank profitability during and before the financial crisis: Domestic versus foreign banks," Research in International Business and Finance, Elsevier, vol. 44(C), pages 26-39.
    9. Fadzlan Sufian & Muzafar Habibullah, 2009. "Bank specific and macroeconomic determinants of bank profitability: Empirical evidence from the China banking sector," Frontiers of Economics in China, Springer;Higher Education Press, vol. 4(2), pages 274-291, June.
    10. Muhammad Haris & HongXing Yao & Gulzara Tariq & Ali Malik & Hafiz Mustansar Javaid, 2019. "Intellectual Capital Performance and Profitability of Banks: Evidence from Pakistan," JRFM, MDPI, vol. 12(2), pages 1-26, April.
    11. Majid Karimzadeh & S. Jawed Akhtar & Behzad Karimzadeh, 2013. "Determinants of Profitability of Banking Sector in India," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 20(2), pages 211-219, October.
    12. H. Pham L. & T. Nguyen T. & Н. Пхам Л. & Т. Нгуен Т., 2017. "Оценка Текущей Эффективности Вьетнамских Микрофинансовых Организаций И Выводы О Путях Их Развития // Assessing The Operating Efficiency For The Vietnam Microfinance Institutions And Implication For Th," Review of Business and Economics Studies // Review of Business and Economics Studies, Финансовый Университет // Financial University, vol. 5(1), pages 54-59.
    13. Mamatzakis, Emmanuel & Bermpei, Theodora, 2014. "What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 102-117.
    14. Djalilov, Khurshid & Piesse, Jenifer, 2016. "Determinants of bank profitability in transition countries: What matters most?," Research in International Business and Finance, Elsevier, vol. 38(C), pages 69-82.
    15. Laila Al-Harthy & Revenio Jalagat, Jr. & Karima Sayari, 2021. "Determinants of bank profitability during oil price decline: Evidence from selected banks in Oman," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(8), pages 200-217, December.
    16. Boutheina HASHEM & Hiyam SUJUD, 2019. "Financial Performance of Banks in Lebanon: Conventional vs Islamic," International Business Research, Canadian Center of Science and Education, vol. 12(2), pages 40-51, February.
    17. Martins, António Miguel & Correia, Pedro & Gouveia, Ricardo, 2023. "Russia-Ukraine conflict: The effect on European banks’ stock market returns," Journal of Multinational Financial Management, Elsevier, vol. 67(C).
    18. Mimouni, Karim & Smaoui, Houcem & Temimi, Akram & Al-Azzam, Moh'd, 2019. "The impact of Sukuk on the performance of conventional and Islamic banks," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 42-54.
    19. Paraskevi Katsiampa & Paul B. McGuinness & Jean-Philippe Serbera & Kun Zhao, 2022. "The financial and prudential performance of Chinese banks and Fintech lenders in the era of digitalization," Review of Quantitative Finance and Accounting, Springer, vol. 58(4), pages 1451-1503, May.
    20. Tan, Yong, 2016. "The impacts of risk and competition on bank profitability in China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 85-110.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nap:nijefr:2020:p:92-101. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Managing Editor (email available below). General contact details of provider: https://www.napublisher.org/?ic=journal&journal=5&info=aims .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.