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An in-depth analysis of financial metrics and their interrelations in shaping the performance of commercial banks in Cambodia

Author

Listed:
  • Chantha Kong

    (Build Bright University)

  • Sovanvatthana Kol

    (Build Bright University)

  • Channy Yut

    (Build Bright University)

  • Chann Kimsou

    (Build Bright University)

  • Kimlang Sen

    (Build Bright University)

  • Sotheavy Soeun

    (Build Bright University)

  • Sotheara Thoeng

    (Build Bright University)

Abstract

This study aims to systematically identify and analyze key financial metrics that influence the performance of commercial banks in Cambodia. Utilizing 2023 data from the National Bank of Cambodia across 59 banks, the research adopts an explanatory framework based on cross- sectional data analysis. The findings reveal that Loan Growth (LG) exhibits no statistical significance in relation to Return on Equity (ROE), suggesting that increases in lending do not necessarily enhance bank profitability in the Cambodian context. Conversely, Non-Performing Loans (NPL) demonstrate a marginally significant positive relationship with ROE, indicating that effective management of these loans can still yield profitability. Additionally, the Loan to Deposit Ratio (LDR) shows a significant negative impact on ROE, suggesting that higher liquidity risks associated with elevated LDR levels may hinder profitability. The study further confirms that Market Share (MS), Loan Loss Provision (LLP), Cost to Income Ratio (CIR), Effective Tax Rate (ETR), and Net Interest Margin (NIM) significantly influence ROE. These results underscore the importance of effective risk management, operational efficiency, and strategic financial planning in enhancing bank profitability. Recommendations for Cambodian commercial banks include improving risk management practices, focusing on loan portfolio quality, optimizing LDR, implementing cost efficiency measures, and enhancing tax management strategies.

Suggested Citation

  • Chantha Kong & Sovanvatthana Kol & Channy Yut & Chann Kimsou & Kimlang Sen & Sotheavy Soeun & Sotheara Thoeng, 2024. "An in-depth analysis of financial metrics and their interrelations in shaping the performance of commercial banks in Cambodia," International Journal of Business and Management (IJBM), International Emerging Scholars Society (IESS), New Zealand, vol. 3(2), pages 73-101, October.
    • Handle: RePEc:cwd:ijbmnz:v:3:y:2024:i:2:p:73-101
    DOI: 10.56879/ijbm.v3i2.50
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    References listed on IDEAS

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