Capital Adequacy, Cost Income Ratio and the Performance of Saudi Banks (2007-2011)
This paper examines the relationship between Capital adequacy and profitability. Necessary data were gathered from the financial statements of nine Saudi banks listed in the stock exchange market over the period of 2007-2011. The results of analyzing the data based on the implementation of linear regression technique reveals that there is a meaningful relationship between capital adequacy, cost-income ratio and bank size with profitability. Profitability represented in this study by the return on assets and return on equity has a negative relationship with capital adequacy. It was also found that Saudi banks efficiency as measured by the cost-income ratio is negatively related to bank profitability. The essence of capital adequacy enhances bank profitability and help in reducing the expected costs of financial distress, including bankruptcy.
Volume (Year): 3 (2013)
Issue (Month): 4 (October)
|Contact details of provider:|| Web page: http://hrmars.com/index.php/pages/detail/Accounting-Finance-Journal|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Allen Berger, 1994.
"The Relationship Between Capital and Earnings in Banking,"
Center for Financial Institutions Working Papers
94-17, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Berger, Allen N, 1995. "The Relationship between Capital and Earnings in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 432-56, May.
- Allen N. Berger, 1994. "The relationship between capital and earnings in banking," Finance and Economics Discussion Series 94-2, Board of Governors of the Federal Reserve System (U.S.).
- Molyneux, Philip & Thornton, John, 1992. "Determinants of European bank profitability: A note," Journal of Banking & Finance, Elsevier, vol. 16(6), pages 1173-1178, December.
- Panayiotis P. Athanasoglou & Matthaios D. Delis & Christos K. Staikouras, 2006.
"Determinants of Bank Profitability in the South Eastern European Region,"
47, Bank of Greece.
- Athanasoglou, Panayiotis & Delis, Manthos & Staikouras, Christos, 2006. "Determinants Of Bank Profitability In The South Eastern European Region," MPRA Paper 10274, University Library of Munich, Germany.
- Fadzlan Sufian & Royfaizal Razali Chong, 2008. "Determinants of Bank Profitability in a Developing Economy: Empirical Evidence from the Philipinnes," Asian Academy of Management Journal of Accounting and Finance, Penerbit Universiti Sains Malaysia, vol. 4(2), pages 91-112.
- Ho, Shirley J. & Hsu, Su-Chu, 2010. "Leverage, performance and capital adequacy ratio in Taiwan's banking industry," Japan and the World Economy, Elsevier, vol. 22(4), pages 264-272, December.
- Saibal Ghosh & D. M. Nachane & Aditya Narain & Satyananda Sahoo, 2003. "Capital requirements and bank behaviour: an empirical analysis of Indian public sector banks," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(2), pages 145-156.
When requesting a correction, please mention this item's handle: RePEc:hur:ijaraf:v:3:y:2013:i:4:p:284-293. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hassan Danial Aslam)
If references are entirely missing, you can add them using this form.