Nexus of bank personnel and cost-income ratio (CIR) in Nigeria
-
DOIhttp://dx.doi.org/10.21511/bbs.12(4-1).2017.04
-
Article InfoVolume 12 2017, Issue #4, pp. 154-162
- 1108 Views
-
210 Downloads
This work is licensed under a
Creative Commons Attribution-NonCommercial 4.0 International License
This study investigates the causal relationship between bank personnel ratio and the cost-income ratio based on performance in Nigeria for the period of 2004–2015. Secondary data collected on a cross section of 15 banks during this period was analyzed using panel unit root, cointegration and Granger causality techniques. A unit root test revealed that the variables are stationary at order one. The result further shows there is an equilibrium relationship or stability in the short and long run; furthermore, there is a bidirectional causal relationship between personnel ratio and cost-income ratio. Therefore, the study recommends that the apex bank should enforce policies in the banking sector that will minimize the unit cost of operation – even though they might hire more staff. This is to enhance the stability of the banks in Nigeria and to avoid any threat to their continuity.
- Keywords
-
JEL Classification (Paper profile tab)G21
-
References34
-
Tables6
-
Figures0
-
- Table 1. Panel unit root test at first difference I (1) for the variables
- Table 2. Cointegration rank test using trace statistic
- Table 3. Cointegration rank test using maximum eigenvalue statistic
- Table 4. Johansen-Fisher panel cointegration test (CIR, BAZ, DTE)
- Table 5. VEC Granger causality/block exogeneity Wald tests
- Table 6. Pairwise Granger causality test result
-
- Akinlo, A. E. (2008). Energy consumption and economic growth: evidence from 11 Sub-Sahara African countries. Energy Economics, 30(5), 2391-2400.
- Almazari, A. A. (2013). Capital Adequacy, Cost Income Ratio and the Performance of Saudi Banks. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(4), 284-293.
- Anbar, A., & Alper, D. (2011). Bank specific and macroeconomic determinants of commercial bank profitability: Empirical evidence from Turkey. Business and Economics Research Journal, 2(2), 139-152.
- Bashir, A. H. M. (1999). Risk and profitability measures in Islamic banks: The case of two Sudanese banks. Islamic Economic Studies, 6(2), 1-24.
- Beck, T., Levine, R., & Loayza, N. (2000). Finance and the Sources of Growth. Journal of financial economics, 58(1), 261-300.
- Berger, A. N., & Mester, L. J. (1997). Efficiency and productivity change in the US commercial banking industry: A comparison of the 1980s and 1990s (No. 97-5).
- Berger, A. N., Hancock, D., & Humphrey, D. B. (1993). Bank efficiency derived from the profit function. Journal of Banking and Finance, 17(2), 317-347.
- Berger, A. N., Hasan, I., & Zhou, M. (2009). Bank ownership and efficiency in China: What will happen in the world’s largest nation? Journal of Banking & Finance, 33(1), 113-130.
- Chen, N. K. (2001). Bank net worth, asset prices and economic activity. Journal of Monetary Economics, 48(2), 415-436.
- Delis, M. D., & Papanikolaou, N. I. (2009). Determinants of bank efficiency: evidence from a semi-parametric methodology. Managerial Finance, 35(3), 260-275.
- Demsetz, R. S., & Strahan, P. E. (1997). Diversification, size, and risk at bank holding companies. Journal of money, credit, and banking, 300-313.
- El Moussawi, C., & Obeid, H. (2011). Evaluating the productive efficiency of Islamic banking in GCC: A non-parametric approach. International Management Review, 7(1), 10-20.
- Engel, R. F., & Granger, C. W. (1987). Cointegration and error correction: representation, estimation, and testing. Econometrica: journal of the Econometric Society, 251-276.
- Granger, C. W., & Newbold, P. (1974). Spurious regressions in econometrics. Journal of econometrics, 2(2), 111-120.
- Gujarati, D. N. (1995). Basic Econometrics (3rd ed.). New York: Me Graw Hill.
- Gupta K. L. (1970). Personal Saving in Developing Nations: Further Evidence. Economic record, 46(2), 243-249.
- Hassan, M. K. (2006). The X-efficiency in Islamic banks. Islamic Economic Studies, 13(2), 49-78.
- Hussain, S. (2014). The Assessment of Operational Efficiency of Commercial Banks in India Using Cost to Income Ratio Approach. International Journal of Management and Business Research, 4(3), 225-234.
- Isik, I., & Hassan, M. K. (2002). Cost & profit efficiency of the Turkish banking industry: An empirical investigation. The Financial Review, 37(2), 257-279.
- Isik, I., & Hassan, M. K. (2002). Technical, scale and allocative efficiencies of Turkish banking industry. Journal of Banking and Finance, 26(4), 719-766.
- Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration – with applications to the demand for money. Oxford Bulletin of Economics and statistics, 52(2), 169-210.
- Kaparakis, E. I., Miller, S. M., & Noulas, A. G. (1994). Short-run cost inefficiency of commercial banks: A flexible stochastic frontier approach. Journal of Money, Credit and Banking, 26(4), 875-893.
- Kumbirai, M., & Webb, R. (2010). A financial ratio analysis of commercial banks performance in South Africa. African Review of Economics and Finance, 2(1), 30-53.
- Kwan, S. H., & Eisenbeis, R. A. (1996). An Analysis of Inefficiencies in Banking: A Stochastic Cost Frontier Approach. FRBSF Economic Review, 2, 16-26.
- Morrison, A. D., & White, L. (2001). The role of capital adequacy requirements in sound banking systems. EFA 2001, Barcelona Meetings; Oxford Financial Research Centre Working Paper No. 2001-FE-04, 1-41.
- Navapan, K., & Tripe, D. (2003). An exploration of the relationship between bank capital levels and return on equity. In Proceeding of the 16th Australasian Finance and Banking Conference. (AFBC’03). Palmerston North (pp. 1-15).
- Odunga, R. M., Nyangweso, P. M., Carter, D. A., & Mwarumba, M. (2013). Credit Risk, Capital Adequacy and Operating Efficiency of Commercial Banks in Kenya. International Journal of Business and Management Invention, 2(9), 6-12.
- Odunga, R. M. (2016). Specific Performance Indicators, Market Share and Operating Efficiency for Commercial Banks in Kenya. International Journal of Finance and Accounting, 5(3), 135-145.
- Olarewaju, O. M. (2016). Capital Base and Operational Efficiency in Nigerian Deposit Money Banks (Evidence from a Two-Way Fixed Effect Approach). Global Journal of Management and Business Research, 16(1), 1-19.
- Prokopenko, J. (1987). Productivity management: A practical handbook. International Labour Organization.
- Rossi, S. P., Schwaiger, M. S., & Winkler, G. (2009). How loan portfolio diversification affects risk, efficiency and capitalization: A managerial behaviour model for Austrian banks. Journal of Banking and Finance, 33(12), 2218-2226.
- Said, A. (2012). Comparing the change in efficiency of the Western and Islamic banking systems. Journal of Money, Investment and Banking, 23(1), 149-180.
- Sharifi-Renani, H. (2007). Demand for money in Iran: An ARDL approach. Munich Personal RePEc Archive.
- Sufian, F., Majid, A., Zulkhibri, M., & Haron, R. (2007). Efficiency and bank merger in Singapore: A joint estimation of non-parametric, parametric and financial ratios analysis. MPRA Paper Series, University Library of Munich.