Financial Performance And Economicsimpact On Capital Adequacy Ratio
Capital adequacy is very crucial in determining the level of risk absorption in banking institution. This issue has been discussed widely as it is an important yardstick to portray the whole picture of banking performance. Therefore this study investigates the financial performance and economic impact on capital adequacy ratio of regional bank in Japan. Five variables represent economic performance are unemployment rate, inflation rate, real exchange rate, money supply and gross domestic product, while financial performance of regional banks consists 6 variables namely deposit to asset ratio , return on asset, return on equity, total asset, total deposit and total loans. 64 regional banks were tested and covered the period of 10 years from 2005 to 2014. Secondary data were composed from World Bank data and individual financial statement of regional banks. Panel regression analysis was deployed In order to measure the relationship between capital adequacy and each variable.
Keywords- capital adequacy ratio, financial ratio, financial performance.