The Role of Financial Ratios in Predicting Return on Equity of Commercial Banks

Authors

  • Shiva Raj Poudel Faculty of Global College International, Mid-Western University
  • Subhadra Dahal Freelancer Researcher
  • Rishikesh Panthi Faculty of Kasthamandap College of Public Affairs Management, Purbanchal University

DOI:

https://doi.org/10.3126/pravaha.v28i1.57971

Keywords:

financial ratios, return on equity, deposit to assets ratio, investment to total assets ratio, capital adequacy ratio, net interest to assets ratio, investment to assets ratio

Abstract

The explanatory power of the bank specific financial ratios on return on equity of the joint venture commercial banks operated in Nepal has been examined by using the database of 15 years from 2005/06 to 2019/20. The descriptive and correlational research design have been adopted for the study. The explanatory financial ratios used for the study includes capital adequacy, non-performing loan to total loan, net interest to total assets ratio, deposit to total assets ratio, and investment to total assets ratio. Statistical tools such as descriptive statistics, correlation analysis, and the regression analysis have been used as the major tools of data analysis. The results revealed that capital adequacy ratio, net interest to assets ratio and investment to assets ratio have the significant positive impact on commercial banks profitability. In contrast, non-preforming loan to total loan has the significant negative impact on banks' profitability whereas, deposit to total assets ratio has no significant impact on commercial banks' profitability.

Downloads

Download data is not yet available.
Abstract
47
PDF
178

Downloads

Published

2022-12-31

How to Cite

Shiva Raj Poudel, Subhadra Dahal, & Rishikesh Panthi. (2022). The Role of Financial Ratios in Predicting Return on Equity of Commercial Banks. Pravaha, 28(1), 53–62. https://doi.org/10.3126/pravaha.v28i1.57971

Issue

Section

Articles