The Impact of Capital Adequacy on the Financial Performance of Banks Listed in the Saudi Stock Market

Document Type : Original Article

Authors

1 Assistant Professor of Business Administration at the Arab East College of Graduate Studies

2 Master’s researcher at the Arab East College

Abstract

The study aimed to explore the impact of capital adequacy on the financial performance of commercial banks listed in the Saudi stock market during the period from 2018 to 2022. The comprehensive sampling method was used, focusing on the commercial banks listed in the financial market. Data on the banks included in the study were collected from published financial statements. The study's results revealed a significant and positive impact of capital adequacy on the return on investment and return on equity for commercial banks in the Saudi stock market. Several recommendations were drawn from the study, including the importance for bank management to improve capital adequacy levels to achieve optimal performance. This improvement would help enhance financial performance by increasing investment returns and equity returns. Bank management should also focus on improving the capital-to-total-assets ratio, capital-to-loans ratio, and enhancing equity returns by improving the capital-to-total-assets ratio and the capital-to-debit ratio, while reducing the capital-to-risky-assets ratio.

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