| dc.description.abstract | Profitability is cited as a major predictor or determinant of business failure. Ratios used
to measure profitability have shown to be suitable predictors of subsequent insolvency of
firms. This study addresses the impact of operational losses on profitability.
Data from 30 commercial banks was obtained and analyzed using SPSS package. This
study shows that there was an upward trend in year 2002, downward trend in 2003,
upward trend in 2004 and a downward trend in year 2005 of operational losses ratio for
the industry. This study shows a zigzag movement. The relationship between
profitability and level of operational losses was found to be direct and negative for the
industry.
The findings reveal that the trend of operational loss level kept on varying from year to
year without a clear defined direction for most of the commercial banks. Most of the
commercial banks had an upward trend in years 2001, 2002 and 2003 followed by a
downward trend in years 2004 and 2005. The relationship between profitability and level
of operational losses was found to be direct and negative for most of the commercial
banks. Some commercial banks show a positive relationship such that increase in
operational losses will lead to increase in profitability. The relationship was found to be
significant. The category most affected is the big banks mostly government owned
commercial banks. The large foreign owned banks indicated lower significance levels as
compared to large locally owned commercial banks. The small commercial banks foreign
owned indicated a lower significance level as compared to small locally owned
commercial banks.
The result of this study is consistent with findings of other researchers on the effect of
operational losses on profitability. This study shows that the impact of operational losses
on profitability of commercial banks is significant as opposed to general believe that the
impact of operational losses on profitability of commercial banks is not significant. | en |
