A correlational study between the net operating cash flows and profitability of selected commercial banks in the tiger cub economies from 2011-2015

• Main Authors: Chua, Christine Kelly Y., Dela Cruz, Claire Klemaine F., Sy, Jamaica Dianne G., Tan, John Christopher O.
• Format: text
• Language: English
• Published: Animo Repository 2016
• Subjects: Cash flow; Bank management; Banks and banking; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/5754
• Institution: De La Salle University

In a global economy shaken by the financial crisis of 2008, depositors, investors, and bank managers alike have become more aware, skeptical, and alert of their respective stakes in banks. The latter two rely on operational and financial statements regarding the performances of banks. They look into the balance sheet and the income statement but they almost never look into the statement of cash flows. In Sweden after the financial crisis, commercial banks had negative operating cash flows yet the managers and investors were not alarmed. In a non-financial institution, it would raise alarm bells so, why does this not hinder the bank's performance? Some even argue that it would be better for a bank to have a negative cash flow because it is an indication that many people are getting its products (which are financial services). So, does operating cash flows have a bearing on a commercial bank's financial performance? In this paper, the researchers study the correlation of operational cash flow and profitability. Net operating cash flows is the independent variable while profitability is dependent variable. Furthermore, profitability will be divided into three aspects namely net interest margin (NIM), return on average assets (ROAA), and return on average equity (ROAE). These data came from various databases such as Bank Scope, OSIRIS, and Wall Street Journal which will be examined through a two- phase methodology descriptive statistics and Spearmans rank order correlation. Under these two methods, individual, inter-country, and overall levels of analysis will be made to compare the strength of the correlation. The results in this paper have varying results. The individual analysis showed that most countries and years showed a positive, insignificant correlation save for Malaysia in the years 2013-2015 and the Philippines for the years 2011-2012 where they exhibited insignificant negative correlations and Indonesia and Thailand for the years 2013-2015 where there was a positive, significant correlation. In addition to this, the overall analysis showed mostly positive, insignificant results except for the profitability measure ROAE which exhibited a positive, significant correlation.