IDEAS home Printed from https://ideas.repec.org/a/sae/padigm/v20y2016i2p131-142.html
   My bibliography  Save this article

Exploring the Linkage between Profits and Asset–Liability Management

Author

Listed:
  • Chanchal Chatterjee
  • Paromita Dutta

Abstract

The article uses panel data regression on a sample of 26 public sector and 20 private sector banks operating in India over the period 2004–2005 to 2012–2013 in order to empirically examine the relationship between profits and asset–liability (A–L) composition of Indian banks. The sample was initially split into public sector and private sector banks. Earning before tax (EBT) of public sector banks appear to be generated by all the assets under the asset portfolio while, in private sector banks, the EBT seems to be produced by loans and advances and deposits and placings to banks. From liabilities’ perspective, the ‘short-term funding’ appears to be the cheapest for both the bank groups. The sample was then split into high-profit and low-profit banks. The results show that, compared to the high-profit banks, low-profit banks experience higher rate of return on loans and advances, investments and fixed assets. The study does not find that high-profit banks always enjoy relatively cheaper cost of funding than low-profit banks.

Suggested Citation

  • Chanchal Chatterjee & Paromita Dutta, 2016. "Exploring the Linkage between Profits and Asset–Liability Management," Paradigm, , vol. 20(2), pages 131-142, December.
    • Handle: RePEc:sae:padigm:v:20:y:2016:i:2:p:131-142
    DOI: 10.1177/0971890716670707
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0971890716670707
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0971890716670707?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    2. Minh To, Huong & Tripe, David, 2002. "Factors influencing the performance of foreign-owned banks in New Zealand," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(4-5), pages 341-357.
    3. Angbazo, Lazarus, 1997. "Commercial bank net interest margins, default risk, interest-rate risk, and off-balance sheet banking," Journal of Banking & Finance, Elsevier, vol. 21(1), pages 55-87, January.
    4. Hannan, Timothy H & Hanweck, Gerald A, 1988. "Bank Insolvency Risk and the Market for Large Certificates of Deposit," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 203-211, May.
    5. Vasiliou, Dimitrios, 1996. "Linking profits to Greek bank production management," International Journal of Production Economics, Elsevier, vol. 43(1), pages 67-73, May.
    6. Mukesh Chaudhry & Arjun Chatrath & Ravindra Kamath, 1995. "Determinants of Bank Profitability," American Journal of Business, Emerald Group Publishing, vol. 10(1), pages 41-46.
    7. Saibal Ghosh, 2011. "A simple index of banking fragility: application to Indian data," Journal of Risk Finance, Emerald Group Publishing, vol. 12(2), pages 112-120, March.
    8. Shrieves, Ronald E. & Dahl, Drew, 1992. "The relationship between risk and capital in commercial banks," Journal of Banking & Finance, Elsevier, vol. 16(2), pages 439-457, April.
    9. Fadzlan Sufian & Muzafar Shah Habibullah, 2009. "Determinants of bank profitability in a developing economy: Empirical evidence from Bangladesh," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 10(3), pages 207-217, April.
    10. Kyriaki Kosmidou & Fotios Pasiouras & Jordan Floropoulos, 2004. "Linking profits to asset-liability management of domestic and foreign banks in the UK," Applied Financial Economics, Taylor & Francis Journals, vol. 14(18), pages 1319-1324.
    11. Fadzlan Sufian, 2009. "Factors Influencing Bank Profitability in a Developing Economy," Global Business Review, International Management Institute, vol. 10(2), pages 225-241, July.
    Full references (including those not matched with items on IDEAS)

    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. Trofimov, Ivan D. & Md. Aris, Nazaria & Ying Ying, Jovena Kho, 2018. "Determinants of Commercial Banks' Profitability in Malaysia," MPRA Paper 85598, University Library of Munich, Germany.
    2. TOMULEASA, Ioana-Iuliana & COCRIŞ, Vasile, 2014. "Measuring The Financial Performance Of The European Systemically Important Banks," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 18(4), pages 31-51.
    3. Faluk Shair & Na Sun & Sun Shaorong & Firdos Atta & Muhammad Hussain, 2019. "Impacts of risk and competition on the profitability of banks: Empirical evidence from Pakistan," PLOS ONE, Public Library of Science, vol. 14(11), pages 1-27, November.
    4. Saeed Sazzad Jeris, 2021. "Factors Influencing Bank Profitability in a Developing Economy: Panel Evidence From Bangladesh," International Journal of Asian Business and Information Management (IJABIM), IGI Global, vol. 12(3), pages 333-346, July.
    5. Hakimi Abdelaziz & Boussaada Rim & Hamdi Helmi, 2022. "The Interactional Relationships Between Credit Risk, Liquidity Risk and Bank Profitability in MENA Region," Global Business Review, International Management Institute, vol. 23(3), pages 561-583, June.
    6. Valipour Pasha , Mohammad & Arshadi , Ali, 2015. "Degree of Leverage Ratio Analysis in the Iranian Banking Network," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 10(2), pages 91-111, January.
    7. Sanderson Abel & Pierre Le Roux, 2016. "Determinants of Banking Sector Profitability in Zimbabwe," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 845-854.
    8. Bijoy Rakshit, 2021. "Evaluating Profitability and Marketability Efficiency: A Case of Indian Commercial Banks," Global Business Review, International Management Institute, vol. 22(4), pages 977-995, August.
    9. Saona, Paolo, 2016. "Intra- and extra-bank determinants of Latin American Banks' profitability," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 197-214.
    10. Williams, Barry, 2014. "Bank risk and national governance in Asia," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 10-26.
    11. Muhammad Saifuddin Khan, 2018. "The Role of Liquidity in Financial Intermediation," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2018.
    12. Chen, Sheng-Hung & Liao, Chien-Chang, 2011. "Are foreign banks more profitable than domestic banks? Home- and host-country effects of banking market structure, governance, and supervision," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 819-839, April.
    13. Sun, Poi Hun & Mohamad, Shamsher & Ariff, M., 2017. "Determinants driving bank performance: A comparison of two types of banks in the OIC," Pacific-Basin Finance Journal, Elsevier, vol. 42(C), pages 193-203.
    14. Alexandra Horobet & Magdalena Radulescu & Lucian Belascu & Sandra Maria Dita, 2021. "Determinants of Bank Profitability in CEE Countries: Evidence from GMM Panel Data Estimates," JRFM, MDPI, vol. 14(7), pages 1-23, July.
    15. 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.
    16. Ayaydin, Hasan & Karaaslan, İbrahim, 2014. "Stock Market Development, Bank Concentration, Ownership Structure, and Bank Performance: Evidence from Turkey," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(1), pages 49-67.
    17. Daniel Mokatsanyane & Paul-Francois Muzindutsi & Diana Viljoen, 2017. "Credit Risk and Securitisation in the South African Banking Sector," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(2), pages 102-121, April.
    18. Haq, Mamiza & Heaney, Richard, 2012. "Factors determining European bank risk," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 696-718.
    19. Song l KAK LL ACARAVCI & Ahmet Ertugrul ALIM, 2013. "Turkish Banking Sector's Profitability Factors," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 27-41.
    20. repec:spt:apfiba:v::y:2018:i::f:8_2_3 is not listed on IDEAS
    21. Chien-Chiang Lee & Meng-Fen Hsieh, 2013. "Beyond Bank Competition and Profitability: Can Moral Hazard Tell Us More?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 44(1), pages 87-109, August.

    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:sae:padigm:v:20:y:2016:i:2:p:131-142. 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: SAGE Publications (email available below). General contact details of provider: .

    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.