ABSTRACT

This study investigates the relationship between corporate performance and various accounting ratios within the banking sector. Specifically, it examines the impact of Return on Equity (ROE), Return on Assets (ROA), Net Interest Margin (NIM), and Capital Adequacy Ratio (CAR) on corporate performance. Using a regression analysis on data from selected banks, the study aims to identify which financial metrics most significantly influence overall performance.

The findings reveal a complex interplay between these ratios and corporate performance. ROE was found to have an insignificant relationship with corporate performance, suggesting that variations in equity returns do not substantially impact bank performance. Conversely, ROA exhibited a significant negative impact, indicating that higher asset returns are associated with lower corporate performance, potentially due to inefficiencies or higher risk exposure. NIM demonstrated a significant positive effect, underscoring the importance of interest-earning activities in enhancing performance. Meanwhile, CAR showed no significant impact on performance, implying that capital adequacy does not play a critical role in the observed banks’ performance.

The study concludes that while some traditional financial metrics like ROA and NIM are crucial for performance evaluation, others like ROE and CAR may be less indicative of corporate success in the banking context. Recommendations include optimizing asset utilization, enhancing interest-earning activities, maintaining robust capital buffers, and continuous professional development for financial managers and analysts. These strategies aim to improve corporate performance, ensuring competitiveness and stability within the banking sector.