PhD Research Proposal

[Pages:3]PhD Research Proposal

Abstract Theprimaryaim ofthisthesisproposalistoiden fyandassuchbeconversantwith

thenatureoftheopera onalrisksthatarecommoninthebankingsector.Thispaperhas majorlyfocused on thebanksofJordan and analyzed how theyapplied reliable measurestoensurethattheysolvetherisksinthebankingsystem successfully.The methodsusedinthecalcula onimplementtheneedtounderstandthenatureofthe opera onalriskandthemethodappliedinthecalcula onofthecapitalrequirementsof theopera onalrisks.Inaddion,thispaperhasadoptedthesoundpraccesforthe managementoftheopera onalcosts.Inthisadoptedthesoundpraccesforthe managementoftheopera onalcosts.Inthisregard,theabilityofthebanksinJordanto implementtherequirementsofBasel3thatarerelatedtotheopera onalcostsandthe difficulesthatarefacedbythebanksforthepurposeofcalcula ngthecapital requirementsfortheopera onalcosts.

Introduc on Inacountry,thefinancialsystem isacrucialfunconthatenhancestheeconomic

developmentoftheindividualna on(AbuzayedandBana156).Inthisregard,any companyfinancialperformanceisregardedastheabilityofaspecificcompanyto generatenewresourcesthroughitsregularopera onsthataremeasuredforaspecific periodof me.Asuccessfulopera oninacompanyisdeterminedbythenetincome andthecashusedintheiropera onsassuchthesuccessdeterminantsarecategorized intothetradionalandmarket-basedmeasures.

AccordingtoAl-Smadi,MohammadandSaadAl-Wabel(8),sincetheearly1990s, therehasbeenariseinthenumberofrisksimpac ngthebankingsecbankingsector suchasthecreditrisk,interestraterisk,liquidityrisk,marketriskandtheforeign exchangerisks.Othersincludethesolvencyriskthatisthemostcommoninmostofthe banks.Thisresearchisdevotedtoevalua ngthecurrenteffectsofthemanagementof the highlightedrisksonthefinancialperformancesoftheJordaniancommercialbanksinthe periodof2005-2013.Inaddion,thispapershallmajorlyfocusonthecreditrisk managementinthebanksanditsabilitytoregulatetheprofitabilityofthebanks.

Literature Review Thisseconfocusesonthetheore calandempiricalliteratureontheimpactsofthe

creditriskmanagementtothefinancialperformancesandrelatesittotheJordanian commercialbanks.Generally,Duffie,Darrell,andKenneth(23)statethatriskisdefined asthefactorsthatleadtotheactualreturnsbeinglessthantheexpectedreturns.Inthis regard,theriskistheprobabilityoflosingonaninvestmentandtheoverallinterests accruedontheinvestments.Inlighttothis,Varo oandSimone(135)explainthatthe creditriskiscategorizedastheriskthataborrowerislikelytodefaultandassuchdoes nothonortheobliga onsoftheservicedebt.

AccordingtoKolapoetal.(33),creditriskreferstotheprofitabilityassociatedwiththe lossasaresultofthedifferentcasesoffailureoftheborrowertose lethepayments

PhD Research Proposal

onanytypeofthedebtstheyoweothers. On theotherhand,Brio,Claudio and Haibin Zhu (237)opinethatcreditrisk

managementisaprocessthatinvolvesmiga onofthelossesthroughacommon understandingoftheadequacyofthebank'scapitalandloanlossreservesavailableat anygiven me.Thisprocesshasbeenachallengetomostofthebankinginstu ons, andtheyhavebeenle grapplingwitheffortstomaintaintheircreditrisks(Eling, Marn,andHatoSchmeiser36).Inthisregard,casesofthecreditrisksareassociated withthepossibiliesthattheborrowerswilldefaulttheborrowedcashandfailtopay. AccordingtoR?theliandTobias(123),thiseventuallyleadstothelossofprincipaland interests,disrup onofthecashflowsandanincreasedcolleconofthecosts.Credit riskisoneofthemajorrisksthatnega velyimpactsonthebanksopera onsbasedon thenatureoftheirdiverseac vies(He,Zhiguo,andWeiXiong394).However,through aneffec vemanagementprocessofthecreditrisksbythebanks,itispossibleto supporttheviabilityandprofitabilityoftheirindividualbusinessandalsocontributeto thesystemicstabilityandcontributetoanefficientalloca onofthecapitalinthe economy(AbuzayedandBana157).

Currently,accordingtoAl-Smadi,MohammadandSaadAl-Wabel(10),numerous researchershavefocusedontheeffectsofthecreditriskmanagementtothefinancial performancesoftheorganiza on.Inaddion,theresearchhasfocusedontheeffectof thecreditriskmanagementofthefinancialperformancesoftheorganiza onandhow theirmanagementcanbeeffec veinreduc onofthepossibilityofthefailuresand restriconoftheuncertain esoftheachievementofthefinancialperformances. FredrickandOgilo(16)explainthatmajorityoftheresearchworksarehoweverin commonaccordthatthereisadirectrela onshipbetweentheeffecvecreditrisk managementandtheprofitsaccruedbythebanks.However,Duffie,Darrell,and Kenneth(23)statethatsomeoftheresearchworksareincommonagreementthat thereexistsnorela onshipbetweenthecreditriskmanagementandthebusiness profitability.

TheMethodology Thisresearchproposalfocusesoncarryingoutacandidinvesga onontheeffectsof thecreditmanagementontheperformancesofthebanksfinancially.Inlighttothis,the researchfocusesontheJordaniancommercialbanksandhowtheyeffec velycarryout theprocessofcreditriskmanagementeffec vely.Inordertoachievethis,datawillbe sourcedfromtheannualreportsavailableinthedatabasesoftheJordaniancommercial banksandfocusontheyears2005-2013.Inaddion,forthepurposeofesma ngthe effectsofthecreditriskmanagementindicators,thepanelregressionmodelwas effecvelyemployedandadoptedinthisstudy(Varo oandSimone138).Inthis research,someoftheindicatorsthatweremajorlyfocuseduponincludethecapital adequacyra o,creditinterestsandfaciliesra on,faciliesra oandthelossofthe faciliesingross.Othersconsideredincludetheleveragera o,theNon-performing loansthatallfocusedonthebanksfinancialperformances.

PhD Research Proposal

Conclusion Themain objec veofthispaperwasto inves gatetheeffectsofthecreditrisk managementtowardsthe banksfinancialperformances.The processisachieved throughaniden fica onofthecreditriskmanagementandfinancialperformance indicators.Inaddion,thisresearchproposalhasfocusedoniden fyingtheempirical evidence ofthe rate in which the process ofrisk managementimpacts on the performanceofthebanksandtheeffortsthatcanbeadoptedbyanorganiza onin improvingtheirfinancialra osthatratetheirperformances.Thereis,however,a con nuingdiscussionsrela ngtothenatureandthedegreeoftheavailablepraccal creditriskmanagementefmanagementeffectsontheprofitabilityofthefirms.Inthis research,thedifferentra osthatdonotaffecttheprofitsoftheJordaniancommercial banksaremeasuredthroughtheuseoftheROE.Itisworthno ngthatthecreditrisk managementindicatorsthatareconsideredinthisresearcharesignificantvariables whichdirectlyimpactsontheJordaniancommercialbanks.Assuch,itisimpera vefor theJordaniancommercialbanksshouldconsiderimprovingthenon-performingloans, enhancingtheavailabilityofthefacilieslossandnetfaciliesandtheleveragera os. Allthesefactorsarecrucialinthedetermina onofthecreditriskmanagementefforts and processes.

References Abuzayed,Bana."Workingcapitalmanagementandfirms'performanceinemergingmarkets:thecaseofJordan."Interna onal JournalofManagerialFinance8.2(2012):155-179. Al-Smadi,MohammadO.,andSaadA.Al-Wabel."Theimpactofe-bankingontheperformanceofJordanianbanks."Journalof internetbankingandcommerce16.2(2011):1-10. Brio,Claudio,andHaibinZhu."Capitalregula on,risk-takingandmonetarypolicy:amissinglinkinthetransmissionmechanism?." JournalofFinancialStability8.4(2012):236-251. Corne ,MarciaMillon,etal."Liquidityriskmanagementandcreditsupplyinthefinancialcrisis."JournalofFinancialEconomics 101.2Corne ,Ma(2011):297-312. Duffie,Darrell,and KennethJ.Singleton.CreditRisk:Pricing,Measurement,and Management:Pricing,Measurement,and Management.PrincetonUniversityPress,2012. Eling,Marn,andHatoSchmeiser."Insuranceandthecreditcrisis:Impactandtenconsequencesforriskmanagementand supervision." TheGenevaPapersonRiskandInsurance-IssuesandPrac ce35.1(2010):9-34. Fredrick,Ogilo."TheImpactofCreditRiskManagementonFinancialPerformanceofCommercialBanksinKenya."DBAAfrica ManagementReview3.1(2012):22-37. He,Zhiguo,andWeiXiong."Rolloverriskandcreditrisk."TheJournalofFinance67.2(2012):391-430. Kolapo,T.Funso,R.KoladeAyeni,andM.OjoOke."Creditriskandcommercialbanks'performanceinNigeria:Apanelmodel approach." Australianjournalofbusinessandmanagementresearch2.2(2012):31-38. R?theli,TobiasF."Causesofthefinancialcrisis:Riskmispercep on,policymistakes,andbanks'boundedra onality."TheJournalof Socio-Economics39.2(2010):119-126. Varo o,Simone."Liquidityrisk,creditrisk,marketriskandbankcapital."Interna onalJournalofManagerialFinance7.2(2011): 134-152.

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