Shiftability theory

Abstract: Banks and other financial intermediaries play the important role in channeling funds from savers to borrowers. The traditional role of a bank is lending and loans make up the bulk of their assets. The various areas of financial management have been studies in relation to bank performance and growth usually depicted by profitability. Financial institutions (particularly deposit money banks) have faced difficulties over the years for a multitude of reasons and the major cause of serious banking problems continues to be directly related to lax credit standard for borrowers and counterparties, poor portfolio risk management, or lack of attention to changes in economic or other circumstances that can lead to a deterioration in the credit standing of a bank‟s counterparties (Ibe,2012). With unstable economic environments, bank earnings are fast overtaken by inflation and borrowers find it difficult to repay loans as real incomes fall. Insider loans abuses and over concentration in certain portfolio increasingly give rise to credit risk (Chen and Pan, 2012).The Nigerian Banking industry for the past decades had witnessed series of banking distress and subsequent failures. Banks that had been doing well suddenly announced large losses due to credit exposures that turned sour, interest rate position taken or derivate exposures that may or may not have been assumed to hedge balance sheet risk. In response to this, there is indeed urgent need for banks in Nigeria to devote enough attention to the management of financial risks in the Nigerian Banking Industry (NDIC Report 2016). Bank failures in Nigeria and other emerging economics have been attributed to ABSTRACT

Abstract: The study sought to determine the effects of micro and macro-economic factors on bank liquidity in Kenya; the specific objectives are; to determine the effects of macroeconomic factors on bank liquidity; to determine the effects of microeconomic factors on banks liquidity and to determine the combined effect of macroeconomic and microeconomic factors on banks liquidity. The study utilized Commercial Loan theory; The Shiftability Theory and the Anticipated Income Theory of Liquidity. The population of the study consisted of 37 commercial banks in Kenya as of 2016. A census study of all banks that had been in operation for 5 years, were included in the study. Multiple regression analysis was applied to the data to examine the effect of level of customer’s deposits, loan growth, capital adequacy, profitability and other effects macroeconomic factors on bank liquidity in Kenya. The results of multiple regressions suggest that the selected independent variables explain more than 10.8% changes in the net profit. By analyzing the other statistical results of multiple regressions we found that the results are very much consistent with the simple regression. All the results are not statistically significant and overall the study provides an idea that macro and micro factors are not the basic determinants of profitability in the banking sector. So it can be inferred that this promising and potential sector in Kenya can flourish very fast and enhance profitability by improving its liquidity position and operating efficiency. The government as a bank regulator through the CBK should adopt policies that ensure increased bank performance. Strict conditions of minimum liquidity and capital should continue being emphasized on to ensure none of the banks has lower of the two. Increased bank performance leads to general economic growth.

Abstract: This study aims to empirically test the effect of liquidity and adequacy on bank performance through interest rate risk and credit risk. Capital adequacy and liquidity are variables that can affect the ups and downs of opinion, where the bank’s performance in this study is the dependent variable. Good credit distribution can minimize the occurrence of defaults. This study uses banking companies in Indonesia that are listed on the Indonesian stock exchange, with a total number of 43 banking companies, this study however, uses only 30 companies ranging from years 2014 to 2019, primarily due to the availability of the limited data. The data analysis techniques used in this study is PLS-SEM with the WarpPLS application. The research results show that capital adequacy and liquidity has a positive effect on bank performance, interest rate risk and credit risk can mediate capital adequacy on bank performance, interest rate risk can mediate liquidity on bank performance, and interest rate risk has a positive effect on bank performance. However, credit risk can’t mediate liquidity on bank performance and credit risk does not have a positive effect on bank performance. This is in line with the commercial loan theory, shiftability theory and the doctrine of anticipated income, which explains how best to give credit, both in longer and the shorter term.