Statement of Hypothesis: Efficiency and profitability of banking firms are commonly not

1000 WordsApr 23, 20194 Pages
Statement of Hypothesis: Efficiency and profitability of banking firms are commonly not consistent over time. Reasonably in Canadian banks both are anticipated to upsurge in recent years compared to preceding years, to keep the pace with the rise in competition tides. Therefore, the main hypothesis to be tested in the dissertation is the consistency between efficiency and profitability of banks in Canada. Significance of Topic: Primarily, profitability and efficiency by themselves are fancy phrases that grasped the attention and the concern of many. These terms in particular were addressed in many fields not just in business but in engineering sectors as well. Measuring and analyzing these areas are vital by all means. Berger et al.…show more content…
Given the present absence of related data, but the swelling amount of gathered data, further investigations in future is required. Methodology: Efficiency and Profitability of Canadian banks were previously studied at the branch and the institutional levels. Since in general it is extremely difficult to access branches banking data, thus, the institutional level will be inspected once again, mainly for its easiness. Assessing the performance of Canadian banks will be throughout years 2008 and 2013 on the largest banks ranked in terms of assets by applying the non-parametric mathematical programming approach; the DEA approach and two of the most popular standard financial ratios; the return on assets (ROA) and the return on equity (ROE). Output-oriented approach will be adopted as many researchers obtained efficiency estimates under input-oriented approach. This is probably due to the conjecture that managers have more power on inputs than outputs. For the selection of inputs and outputs the intermediation approach will be followed as it is favored among other approaches for assessing the bank as whole. Relevant data will be extracted from the world banking information database named "Bankscope". Bankscope is easily accessible to obtain the needed data directly from the financial statements of banks. ROE and ROA are measures of profitability that are popularized the most among others due
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