| Summary: | 碩士 === 世新大學 === 財務金融學研究所(含碩專班) === 100 === This analysis is based on the data of Capital Adequacy Ratio and Business Performance Indicator Year of 30 commercial banks, either listed, Over the Counter or public company. The objective of this study is to analyze the relationship, impact and explanatory power of Capital Adequacy Ratio to business performance. The tools applied include Granger Causality Test, Vector Auto-Regression (VAR) Model, Impulse-Response Analysis and Forecast Error Variance Decomposition. Due to the broad and huge impact of the financial bubble caused by the 2008 financial crisis, the data is divided info Pre-financial crisis, Post-financial crisis and during financial crisis for this study.
The result of the study shows that before financial crisis, Capital Adequacy Ratio has a positive impact on the profitability indicators of return on assets, return on equity, operating profit margin and income before tax; after financial crisis, CAR has a positive impact on deposit ratio and operating profit margin; but it has a "first reduced, then increased" impact on rate of overdue loans, return on assets, return on equity and income before tax.
With Forecast Error Variance Decomposition, after financial crisis, the explanatory power of Capital Adequacy Ratio to business performance forecast error variance increased to 4.85% to 30.55%, comparing to 0.8% - 3.2% of pre-financial crisis.
It is concluded that Capital Adequacy Ratio has more obvious impact to business performance in the post-financial crisis era. When the economy is stable, the higher the Capital Adequacy Ratio, the operation is more robust and risk control is more effective, thus a better performance and profitability. Therefore, to increase profitability while with strict control of risk, banking industry can utilize the deposits ratio to enhance the efficient use of funds for better capital planning to strengthen the capital structure and to meet the requirements of financial supervisions, and manage overdue loan ratio for a stringent control of asset quality.
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