The relationship between banks’ investing activities and profitability

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Date

2023

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University of the Witwatersrand, Johannesburg

Abstract

The objective of this study is to examine the relationship between the investing activities of banks and overall bank profitability. This is undertaken across 4 profitability-driven variables: (i) Profit After Tax; (ii) Return on Equity; (iii) Return on Assets; and (iv) Efficiency Ratio (Cost to Income Ratio). The research ascertains the effect on overall profit carried by investing variables which include investments in Property, Plant and Equipment, Intangible Assets and Cash flow from Investing Activities and Investments in Associates. A panel regression model was employed to analyse the relationship between profitability-driven variables and investing activities, incorporating external and internal control variables. . The study analysed a sample of banks from various developing country regions over an eight-to-ten-year period. The study found that the relationship between investing activities and overall profitability was not statistically significant. Furthermore, the study found that Gross Domestic Product (GDP), growth, inflation, and interest rates had a significant impact on profitability, supporting previous literature.

Description

A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfillment of the requirements for the degree of Master of Management in Finance and Investment Wits Business School Johannesburg 2023

Keywords

Cash flow informativeness, Net interest income, Net interest margin, Non-interest revenue, UCTD, Investing activities

Citation

Kondile, Kwezi. (2023). The relationship between banks’ investing activities and profitability [Master’s dissertation, University of the Witwatersrand, Johannesburg]. WireDSpace.

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