Determinants of growth strategies and the effects of such growth strategies on the financial performance of the selected publicly listed private expanded commercial banks in the Philippines from 1989 to 1998

• Main Authors: Keng, Anne Margaret S., Sarmiento, Christine Joy B., Igoy, Karlo Manuel S.
• Format: text
• Language: English
• Published: Animo Repository 2000
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/17461
• Institution: De La Salle University

This paper is about the Determinants of the Growth Strategies and the Effects of Such Strategies on the Financial Performance of the Selected Publicly Listed Private Expanded Commercial Banks in the Philippines from 1989 to 1998. The objectives of this paper is to determine the factors influencing the growth strategy choice and its relationship with the growth strategies (branching, merger and acquisition) the effect of the growth strategies on the financial performance and the relationship of the determinants with the growth strategies. To meet the needs of such we utilized the following variables: (1) MBHC - multibank holding company, (2) INCGROW - income growth or net profit, (3) MKTCONC - market concentration or total deposits to industry deposit average, (4) NONPERFM - non performing loans to total assets, and (5) PHYCAP - physical capital to total assets. The null hypothesis is that the independent variables do not influence the choice of growth strategy as well as it is not significantly related to such. Another null hypothesis is that growth strategies such as branching, merging and/ or acquiring have no significant effect on the financial performance. The last null hypothesis is that the financial performance of the banks are not correlated with the independent variables. For the sample size, the researchers used a purposive sampling - publicly listed private expanded commercial banks from 1989 to 1998. Thus, limiting the paper to the following banks: Allied, RCBC, BPI, FEBTC, Equitable, PCIB, Metrobank and Solidbank. A probit, multinomial logistic model, CAMEL(S) Rating and a correlation analysis was made. The probit and multinomial logistic models revealed that the variables are insignificant, and thus accepting the first two null hypothesis. Due to such, the researchers conducted a t-test. The t-test revealed that the independent variables have a significant relationship with the growth strategies. However, it varies from time to time (positive or negative). This maybe due to economies of scale. The analysis of effects using the CAMEL(S) Rating revealed that the growth strategies have a positive effect on the financial performance of the banks except in their earnings record. Lastly, the correlation analysis revealed that the determinants have a strong relationship for a particular category of the financial performance thus rejecting the null hypothesis. The researchers recommend the following improvement on the study by increasing the sample size and using other statistical tools another study such as a cross-sectional study on the impact of bank size and branch network or a comparative study on the branching and restructuring activities of banks and its effects on the financial performance for the banks to (1) infuse additional capital, (2) insure competitiveness, (3) review their credit policies, and (4) review their portfolio.