An in-depth analysis of financial metrics and their interrelations in shaping the performance of commercial banks in Cambodia

Chantha Kong; Sovanvatthana Kol; Channy Yut; Chann Kimsou; Kimlang Sen; Sotheavy Soeun; Sotheara Thoeng

doi:10.56879/ijbm.v3i2.50

Authors

Chantha Kong Build Bright University, Cambodia
Sovanvatthana Kol Build Bright University, Cambodia
Channy Yut Build Bright University, Cambodia
Chann Kimsou Build Bright University, Cambodia
Kimlang Sen Build Bright University, Cambodia
Sotheavy Soeun Build Bright University, Cambodia
Sotheara Thoeng Build Bright University, Cambodia

DOI:

https://doi.org/10.56879/ijbm.v3i2.50

Keywords:

Commercial Banks, Financial Metrics, Return on Equity (ROE), Non-Performing Loans (NPLs), Loan to Deposit Ratio (LDR), Cost to Income Ratio (CIR), Effective Tax Rate (ETR), Net Interest Margin (NIM), Loan Growth (LG), Market Share (MS)

Abstract

This study aims to systematically identify and analyze key financial metrics that influence the performance of commercial banks in Cambodia. Utilizing 2023 data from the National Bank of Cambodia across 59 banks, the research adopts an explanatory framework based on cross- sectional data analysis. The findings reveal that Loan Growth (LG) exhibits no statistical significance in relation to Return on Equity (ROE), suggesting that increases in lending do not necessarily enhance bank profitability in the Cambodian context. Conversely, Non-Performing Loans (NPL) demonstrate a marginally significant positive relationship with ROE, indicating that effective management of these loans can still yield profitability. Additionally, the Loan to Deposit Ratio (LDR) shows a significant negative impact on ROE, suggesting that higher liquidity risks associated with elevated LDR levels may hinder profitability. The study further confirms that Market Share (MS), Loan Loss Provision (LLP), Cost to Income Ratio (CIR), Effective Tax Rate (ETR), and Net Interest Margin (NIM) significantly influence ROE. These results underscore the importance of effective risk management, operational efficiency, and strategic financial planning in enhancing bank profitability. Recommendations for Cambodian commercial banks include improving risk management practices, focusing on loan portfolio quality, optimizing LDR, implementing cost efficiency measures, and enhancing tax management strategies.

Author Biographies

Chantha Kong, Build Bright University, Cambodia

Chantha Kong

Sovanvatthana Kol, Build Bright University, Cambodia

Kol Sovanvatthana is an Assistant Professor in the fields of IT and Business Management at Build Bright University. He specializes in integrating technology with business practices, contributing significantly to both academic research and practical applications in these areas.

Channy Yut, Build Bright University, Cambodia

Yut Channy is a student at Build Bright University, specializing in Accounting and Finance. She is focused on gaining expertise in financial analysis and accounting principles, aiming to contribute to the field through her academic pursuits and research.

Chann Kimsou, Build Bright University, Cambodia

Chann Kimsour is a student at Build Bright University, specializing in Accounting and Finance. She is focused on gaining expertise in financial analysis and accounting principles, aiming to contribute to the field through her academic pursuits and research.

Kimlang Sen, Build Bright University, Cambodia

Sen Kimlang is a student at Build Bright University, specializing in Accounting and Finance. She is focused on gaining expertise in financial analysis and accounting principles, aiming to contribute to the field through her academic pursuits and research.

Sotheavy Soeun, Build Bright University, Cambodia

Soeun Sotheavy is a student at Build Bright University, specializing in Accounting and Finance. She is focused on gaining expertise in financial analysis and accounting principles, aiming to contribute to the field through her academic pursuits and research.

Sotheara Thoeng, Build Bright University, Cambodia

Thoeng Sotheara is a student at Build Bright University, specializing in Accounting and Finance. She is focused on gaining expertise in financial analysis and accounting principles, aiming to contribute to the field through her academic pursuits and research.