EFFECT OF ASSET QUALITY AND OTHER DETERMINANTS ON PERFORMANCE OF LISTED AND UNLISTED BANKS IN MALAWI

Eston Eston Chimkono

PhD Business Administration (Finance) candidate

Department of Business Administration

Jomo Kenyatta University of Agriculture and Technology
P.O. Box 62,000 – 00200 Nairobi, Kenya

Willy Muturi (PhD)

Senior Lecturer,

Department of Business Administration

Jomo Kenyatta University of Agriculture and Technology
P.O. Box 62,000 – 00200 Nairobi, Kenya

Agnes Njeru (PhD)

Lecturer,

Department of Business Administration

Jomo Kenyatta University of Agriculture and Technology
P.O. Box 62,000 – 00200 Nairobi, Kenya

CITATION: Chimkono, E.E. Muturi, W. Njeru, A. (2016). Effect of Asset Quality and Other Determinants on Performance of Listed and Unlisted Banks in Malawi. International Journal of Finance and Economics. Vol 5 (1), 116-141.

ABSTRACT

The objective of the study was to investigate the effect of the determinants of asset quality and other determinants on the financial performance of listed and unlisted banks in the Malawian banking sector. The study covered a seven-year period from 2008 to 2014 and used secondary data. The study used mixed research design correlational research techniques. Ordinary Least Squares was used for the quantitative analysis. The study found that non-performing loan ratio and cost efficiency ratios had a significant effect on the performance of both listed and unlisted banks. However, the cash reserve ratio variable was negatively related to performance in regard to listed banks, but had a positive relationship with respect to unlisted banks; but was significant in both cases. The average lending rate had a significant effect on performance of listed banks whilst it was insignificant for the unlisted banks. The paper also provides policy recommendations.

Keywords: Return on assets, asset quality, non-performing loan, listed bank, generalized least squares.

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