Effects of ownership on the relationship between bank capital and financial performance: evidence from Bangladesh

Abstract

The financial performance of banks relies heavily on properly utilizing their capital. However, bank ownership can have varying effects on the relationship between financial performance and capital. This study delves into this relationship by examining the impact of ownership on financial performance and bank capital. The study analyzes data from 44 commercial banks in Bangladesh and uses a two-step system generalized method of moments to address heteroscedasticity and autocorrelation issues. Unlike previous studies, this study confirms the significant effect of ownership on the relationship between bank financial performance and bank capital. The study's main findings are: (1) an inverted U-shaped relationship exists between bank capital and financial performance, implying that increasing capital can improve and reduce financial performance. (2) Private and Islamic commercial banks perform better than state-owned and conventional banks. (3) private-owned and Islamic commercial banks with higher capital are more likely to achieve higher profitability and financial success, while state-owned and conventional commercial banks with higher capital show lower profitability and weaker financial performance. Overall, this study offers significant practical implications for academics, researchers, and regulators interested in leveraging these findings.

Keywords: {'name': 'Financial performance'}, {'name': 'Bank capital'}, {'name': 'Ownership'}, {'name': 'Two-step system GMM'}, {'name': 'Bangladesh'}

Authors & affiliations

Changjun Zheng
Affiliation not supplied

Md Mohiuddin Chowdhury
Affiliation not supplied

Md Abdul Mannan Khan
Affiliation not supplied

Anupam Das Gupta
Affiliation not supplied

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Supplied references, not a list of publications citing this article.

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