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|Title:||An Investigation of the Determinants of Bank Failure and Distress of Commercial and Merchant Banks in Zimbabwe (2011-2015)|
|Publisher:||Lupane State University|
|Abstract:||The research made use of the case of failed and surviving banks to analyse the major determinants of bank failure on both commercial and merchant banks. Increase in bank failure cases under a more stable currency environment raised the need to profoundly investigate sources of bank failures in Zimbabwe. This is considered an authoritative move considering the impact that bank failures pose to external stakeholders such as investors and depositors, the Zimbabwean banking sector itself as well as the entire economy. This study investigated the determinants of bank failures in Zimbabwe under the multiple currency era. The study employed multinomial logit regression model using SPPS software version 20, on eleven banks by making use of the financial panel data for the period 2011-2015. The literature for this research was obtained from various sources. These included the internet, text books from various libraries, newspapers, audited annual reports and policy statements from the central bank. Observed results indicated that the macroeconomic environment (GDP) growth rate, has much influence on bank failure than any of bank-specific fundamentals. Among the bank-specific fundamentals, liquidity (LTD, DTA), profitability (ROA) and capitalisation (T1CR, GRR) proved to be prominent bank related determinants of bank failures. Discoveries also suggest that loan-to-deposits ratio (LTD), deposits-to-assets ratio (DTA), gross revenue ratio (GRR), return on assets (ROA), efficiency ratio (EFR), bank size and GDP growth rate variables are negatively correlated to the possibility of banks failing whereas loan-to-assets (LTA) have positive influence on bank failures. The research instrument used was secondary data. The research methodology for the collection of data involved both quantitative and qualitative techniques. When the data was collected, it was presented and analysed with the assistance of descriptive statistics technique which comprised of tables and descriptive narrations. After having presented and analysed collected data, the research progressed to draw conclusions on the study. The study presented the conclusions on the major determinants of bank failure in Zimbabwe. The study recommended that RBZ must emphasize liquidity and capital requirements since both liquidity and capital ratios were significant and had higher odds ratios. Indisputably, the researcher recommends banks to limit their operating expenses and also improve the managerial 3 efficiency so as stimulate and maintain bank safety and soundness and thus resulting in outstanding improvements in both profitability and efficiency ratios.|
|Appears in Collections:||Department of Accounting and Finance|
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