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Determining the Priorities of CAMELS Dimensions Based on Bank Performance

In: Global Approaches in Financial Economics, Banking, and Finance

Author

Listed:
  • Mehmet Pekkaya

    (Bülent Ecevit University)

  • Figen Erol Demir

    (Bülent Ecevit University)

Abstract

Banks’ performances are important not only for the stability/growth of the firms and economic situation of a country; it is also important for the stability/growth of the world economy. The aim of this study is to determine the priorities of CAMELS dimensions with respect to bank performance via AHP method and to present the results as an information to researchers, investors and decision-makers. Furthermore, this study shows the feasibility of many statistical hypothesis tests by separately generated priority series from expert’s views based on performance and bankruptcy risk of banks. CAMELS, used for bank performance appraisal, is a financial ratio analysis comparing the ratios of banks with the industries. Along with evaluating the determined priorities of CAMELS dimensions based on performance of banks, the differences of the views between the priorities based on risk of bankruptcy and performance of banks, the view differences according to the demographic characteristics of the experts, etc., are also examined. According to analysis, “Asset” (24.75%) is the most important dimension of CAMELS, and then “Earnings” (19.16%), “Liquidity” (18.54%) and “Management” (17.68%) are thought as following important dimensions with respect to bank performance. Dimensions of “Sensitivity to market risk” (11.11%) and “Capital” (10.03%) are observed as weak dimensions.

Suggested Citation

  • Mehmet Pekkaya & Figen Erol Demir, 2018. "Determining the Priorities of CAMELS Dimensions Based on Bank Performance," Contributions to Economics, in: Hasan Dincer & Ümit Hacioglu & Serhat Yüksel (ed.), Global Approaches in Financial Economics, Banking, and Finance, chapter 0, pages 445-463, Springer.
    • Handle: RePEc:spr:conchp:978-3-319-78494-6_21
    DOI: 10.1007/978-3-319-78494-6_21
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