Impact Of Risk Management On Profitability Of Banks

TABLE OF CONTENT

Title Page ﾿ i

CHAPTER ONE:  INTRODUCTION

1.1 Background to the Study ﾿ 1

1.2 Statement of the Problem ﾿ 2

1.3 Objectives of the Study ﾿ 3

1.4 Research Questions ﾿ 3

1.5 Research hypothesis ﾿ 4

1.6 Significance of the Study ﾿ 4

1.7 Scope of the Study ﾿ 5

1.8 Limitation of the Study ﾿ 5

1.9 Definition of Terms ﾿ 5

CHAPTER TWO: REVIEW OF RELATED LITERTURE

2.1 Conceptual Framework ﾿ 7

2.1.1 The Concept of Credit ﾿ 7

2.1.2 Credit Evaluation ﾿ 8

2.1.2.1 Character ﾿ 8

2.1.2.2 Capacity ﾿ 9

2.1.2.3 Capital ﾿ 9

2.1.2.4 Condition ﾿ 9

2.1.2.5 Collateral ﾿ 9

2.1.3 The Concept of Risk ﾿ 10

2.1.4 Credit Risk ﾿ 11

2.1.5 Credit Risk Management ﾿ 12

2.1.6 Credit Risk Management Strategies ﾿ 14

2.1.6.1 Selection ﾿ 14

2.1.6.2 Limitation ﾿ 14

2.1.6.3 Diversification ﾿ 15

2.1.6.4 Credit Enhancement ﾿ 15

2.1.6.5 Compliance to Basel Accord ﾿ 15

2.1.7 Credit Risk Measurement ﾿ 15

2.1.7.1 Default Ratio (DR) ﾿ 16

2.1.7.2 Cost Per Loan Advance Ratio (CLA) ﾿ 16

2.1.8 Profitability ﾿ 16

2.1.9 Internal Determinants of Banks’ Profitability ﾿ 17

2.1.9.1 Loan Quality ﾿ 18

2.1.9.2 Income ﾿ 19

2.1.9.3 Deposits ﾿ 19

2.1.9.4 Capital Ratio ﾿ 20

2.1.9.5 Liquidity Ratio ﾿ 21

2.1.10 External Determinants of Profitability of Bank ﾿ 22

2.1.10.1 GDP ﾿ 22

2.1.10.2 Interest Rate ﾿ 23

2.1.10.3 Exchange Rate ﾿ 24

2.2 Theoretical Review ﾿ 24

2.2.1 Govermentality Theory ﾿ 24

2.2.2 Cultural Theory ﾿ 26

2.2.3 Risk Society ﾿ 27

2.3 Empirical Review ﾿ 28

CHAPTER THREE:  RESEARCH METHODOLOGY

3.1 Research Design ﾿ 34

3.2 Area of the Study ﾿ 34

3.3 Nature and Sources of Data ﾿ 34

3.4 Method of Data Analysis ﾿ 35

3.5 Model Specification ﾿ 35

3.6 Technique for Analysis ﾿ 36

3.7 Description of Research Variables ﾿ 36

3.7.1 Dependent Variable ﾿ 36

3.7.2 Independent Variables ﾿ 37 

CHAPTER FOUR: PRESENTATION OF DATA, ANALYSIS AND DISCUSSION

4.1 Presentation of Data ﾿ 38

4.2 Data Analysis and Discussion of Findings ﾿ 39

4.2.1 Descriptive Statistics ﾿ 39

4.2.2 Regression Analysis ﾿ 40

4.2.3 Test of Hypothesis ﾿ 41

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings ﾿ 43

5.2 Conclusion ﾿ 43

5.3 Recommendations ﾿ 43

REFERENCES ﾿ 45

APPENDIX ﾿ 48