The Impact of Capital Adequacy on Financial Performance

Applied Study on the Banks Listed on Damascus Securities Exchange

Abstract

The research aimed to study the effect of capital adequacy and financial performance using a sample of 11 banks listed in the Damascus Securities Exchange, over the period 2010-2021. The required data were obtained from the annual reports published the financial statements of the banks under study. Data were analyzed using E-Views. The research used financial performance as the dependent variable and measured it through return on assets as measured by dividing net income by total assets. While the capital adequacy was measured by three ratios: total equity to total risk-weighted assets, capital to total loans ratio, and total loans to total assets.

     The results showed that there is a positive effect of capital adequacy measured by total equity to risk weighted assets on financial performance measured by return on assets, while the results showed a negative effect of capital adequacy measured by both the capital to total loans ratio and the total loans to total assets ratio on financial performance measured by return on assets.