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Bank risk and performance in an emerging market setting: the case of Bangladesh

Author

Listed:
  • Hossain Majumder, Md. Tofael

    (University of Science and Technology Beijing)

  • Li, Xiaojing

    (University of Science and Technology Beijing)

Abstract

Purpose – This study aims to investigate the impacts of bank capital requirements on the performance and risk of the emerging economy, i.e. Bangladeshi banking sector. Design/methodology/approach – The study applies an unbalanced panel data which comprises 30 banks yielding a total of 413 bank-year observations over the period 2000 to 2015. Findings – Using generalized methods of moments, the empirical results of this research reveal that bank capital is positively and significantly impressive on bank performance, whereas negatively and significantly impact on risk. The study also finds the inverse relationship between risk and performance in both the performance and risk equations. The results also indicate that there is a persistence of performance and risk from one year to the next year. Originality/value – This is the unique investigation on Bangladeshi bank industry that considers the simultaneous effect of bank capital requirements on risk and performance. Therefore, it is predicted that the empirical evidence of this research shows policy implications to the regulatory authority of Bangladeshi banking industry to determine relevant policies.

Suggested Citation

  • Hossain Majumder, Md. Tofael & Li, Xiaojing, 2018. "Bank risk and performance in an emerging market setting: the case of Bangladesh," Journal of Economics, Finance and Administrative Science, Universidad ESAN, vol. 23(46), pages 199-229.
    • Handle: RePEc:ris:joefas:0128
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    Cited by:

    1. Robert Gharios & Bashar Abu Khalaf, 2024. "Digital Marketing’s Effect on Middle East and North Africa (MENA) Banks’ Success: Unleashing the Economic Potential of the Internet," Sustainability, MDPI, vol. 16(18), pages 1-20, September.
    2. J. Navas & P. Dhanavanthan & D. Lazar, 2021. "Is Risk Based Capital Ratio a True Measure of the Soundness of Banks? Evidence From India," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(3), pages 92-102, May.
    3. Faiza Omer Elmahgop, 2024. "Intellectual Capital and Bank Stability in Saudi Arabia: Navigating the Dynamics in a Transforming Economy," Sustainability, MDPI, vol. 16(10), pages 1-23, May.
    4. Abayomi Oredegbe, 2020. "Canadian Banking Industry Profitability: Exploring the Relevance of Two Competing Hypotheses," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(4), pages 1-67, April.
    5. Abayomi Oredegbe, 2022. "Competition and Banking Industry Stability: How Do BRICS and G7 Compare?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 21(1), pages 7-31, March.

    More about this item

    Keywords

    Performance; Bangladesh; Capital; Bank risk; Generalized methods of moments;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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