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Capital Adequacy, Cost Income Ratio and the Performance of Saudi Banks (2007-2011)

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  • Ahmad Aref Almazari

    (King Saud University-RCC)

Abstract

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.

Suggested Citation

  • Ahmad Aref Almazari, 2013. "Capital Adequacy, Cost Income Ratio and the Performance of Saudi Banks (2007-2011)," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(4), pages 284-293, October.
    • Handle: RePEc:hur:ijaraf:v:3:y:2013:i:4:p:284-293
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    References listed on IDEAS

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    Cited by:

    1. Abdulazeez Y. H. Saif-Alyousf & Asish Saha & Rohani Md-Rus, 2017. "Profitability of Saudi Commercial Banks: A Comparative Evaluation between Domestic and Foreign Banks using Capital Adequacy, Asset Quality, Management Quality, Earning Ability and Liquidity Parameters," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 477-484.
    2. Eltigani Mohamed Ali Ahmed, 2021. "Leadership and organizational distress: Review of literature," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(6), pages 01-18, September.
    3. Salami Abdulai Agbaje & Uthman Ahmad Bukola, 2018. "Bank Capital, Operating Efficiency, and Corporate Performance in Nigeria," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 6(1), pages 61-87.
    4. Nilgün ACAR-BALAYLAR & Mehmet Ozan ÖZDEMİR, 2018. "Capital Adequacy and Profitability Relationship for Foreign Deposit Banks in Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 26(36).

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