Critical Thinking

1. This study aims at showing the relationship

1.      The study will use return on assets and earnings per share as dependent variables. Some of the studies according to literature review will use price earnings ratio, market price per share, return on equity and net interest margin as a dependent variable.  The study is unable to employ price earnings ratio, market price per share and net interest margin as dependent variable as these does not provide adequate results.

2.      This study aims at showing the relationship between credit risk and capital adequacy with the profitability of the Nepalese commercial banks. However, all types of dimensions and determinants have not been used. Some other factors i.e. liquidity risk, deposit rate, total loan, net income etc. have not been considered in this study.

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3.       The study includes only 9 years data (from 2007/08 to 2015/16) of 16 commercial banks have been taken for the study due to presence of outliers and unavailability of data of the commercial banks.

4.      The study assumes a level of homogeneity across banks, which may not be true, since banks in the study are of different sizes and have different objectives.

5.      The study has considered only the secondary data. The data collection conducting primary survey has not been taken into consideration. Hence, the result of the study is not broad and flexible. It is limited to the data available in the annual reports of the sample banks and financial reports published by Nepal Rastra Bank.

6.      Public banks of Nepal: Nepal bank limited and Rastriya Banijya Bank which were established before 2010 have not been considered as the sample for our study. They impose the outliers in data due to consecutive poor performances in the past years.

7.      No attempts are made to examine the reliability of the available secondary data since they are officially released by the related banks and Nepal Rastra Bank. Thus, the consistency of finding and conclusions are dependent upon the secondary data and information.

8.      This study will deals with commercial banks only. Thus, the findings may not be applicable for finance companies, development banks, and micro finances. 

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