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Purpose: This study’s objective is to examine credit risk management's effect on the financial performance of the Sudanese banking sector. Design/Methodology/Approach: Every bank’s financial report for a 10-year period, from 2006 to 2015 had been employed for the study. To estimate the model, the panel regression method was used. For performance indicators, ROE (Return on Equity) was used. Meanwhile, for credit risk management indicators, NPL (Non-Performing Loans) and CAR (Capital Adequacy Ratio) were utilized. Findings: The results showed that the profitability of Sudanese banks is significantly influenced by credit risk management. The evidence shows that 57% of profitability in banks is affected by the change in capital adequacy ratio and non-performing loans. The study also shows there is a positive relationship between the banks’ financial performance and capital adequacy ratio, but the correlation is not significant. Furthermore, the correlation between the banks’ financial performance and non-performing loans is significant but negative. Practical Implications: The percentage of the impact of NPL (non-performing loans) and CAR (capital adequacy ratio) on the banks’ financial performance is 57%; which means the profitability of banks is impacted by the changes in NPL and CAR. Originality/Value: This study helps filling the aperture in the empirical evidence of how credit risk management impacts the bank’s financial performance process in Sudan.
Purpose: This study’s objective is to examine the credit risk management's effect on the financial performance of the Sudanese banking sector. Design/Methodology/Approach: Every bank’s financial reports for a 10-year period, from 2006 to 2015 been employed for the study. To estimate the model, the panel regression method was used. For performance indicators, ROE (Return on Equity) was used. Meanwhile, for credit risk management indicators, NPL (Non-Performing Loans) and CAR (Capital Adequacy Ratio) were utilized. Findings: The results showed that credit risk management significantly influences the profitability of Sudanese banks. The evidence shows that 57% of profitability in banks is affected by the change in capital adequacy ratio and non-performing loans. The study also shows there is a positive relationship between the banks’ financial performance and capital adequacy ratio, but the correlation is not significant. Furthermore, the correlation between the banks’ financial performance and non-performing loans is significant but negative. Practical Implications: The percentage of the impact of NPL (non-performing loans) and CAR (capital adequacy ratio) on the banks’ financial performance is 57%; which means the profitability of banks is impacted by the changes in NPL and CAR. Originality/Value: This study helps fill the aperture in the empirical evidence of how credit risk management impacts the bank’s financial performance process in Sudan.
This study aims to suggest a measurement of intellectual capital (IC) based on its contribution to generating additional returns that result from efficient and effective use of investments in IC as compared to the investment in other assets. The study develops a derivative model composed of 17 equations to measure the value of IC through the contribution approach measured by the participation of IC in generating revenues (Eq. 16) and explains how additional investment in IC will lead to additional earnings. The study constructs a relationship between the value of the investment in IC and its effectiveness in generating revenues and profits of the firm. It also considers the size and leverage as control variables to reduce the impact of exogenous factors. To investigate the contribution of IC, the study analyzed the financial data of all 21 UAE national banks over a 5-year period (2015–2019). The model determines the optimal investment in IC that results in the maximum value of profits of a bank. The main findings of the study are a significant positive relationship between the IC contribution and investment in IC (0.498), IC contribution, and earnings (0.219); IC contribution has a significant negative relationship with the bank size (−0.238); and a significant positive relationship between the increase in earnings and an increase in investment in IC (0.171). The model adds a new body of knowledge to the literature and helps practitioners to assess the contribution of the IC and optimal investment in IC. The model measures IC based on the bank’s annual performance. In the future, research may be extended to other sectors and contexts. Keywords Intellectual capital · IC performance approach · IC derivative model ·
Purpose – This study aims at investigating banks’ compliance with the disclosure requirements of Basel III in two emerging market economies, namely, the United Arab Emirates (UAE) and India. This study also examines the impact of economic factors on the extent of disclosures. Design/methodology/approach – The authors compare the Basel disclosure practices between UAE and Indian listed banks and have used panel data regression models to investigate the compliance and level of reporting based on three market variables, namely, size, leverage, and profitability of listed banks. Findings – After examining Basel reporting for each of the three categories of independent factors, size was found to be the predominant factor influencing the Basel disclosures, followed by profitability and degree of financial leverage. It is prudent for all the banks irrespective of size to capitalize on themselves with an intent to tide over the frequent economic crises and prevent every economic crisis from becoming a full-blown financial crisis. Practical implications – The findings suggest that there is an urgent need for a high level of concerted action in the context of listed banks in the selected emerging market nations to direct more resources to ensure full compliance with Basel III. The findings inform practitioners in emerging countries of compliance and plan expanded future applications. Investors should consider the BASEL compliance level of Banks before parking their funds in the bank’s stocks. The banks having a higher degree of compliance are expected to be safer than their counterparts having lower Basel compliance. Originality/value – Many previous studies have examined the implementation of Basel III in general. This study is specific in assessing compliance with disclosure requirements as prescribed by Pillar III of the Basel norms. To the best of the authors’ knowledge, this is the first research to compare market discipline in emerging markets. Existing studies have either assessed the level of compliance in one individual or similar types of markets. However, this study made a pioneering attempt to compare two different countries in the same category (emerging markets).