A Study of Relationship of Main Financial Ratio with Capital Adequacy Standard and Management performance Standard for the Credit Department of Farmers' Association
Date Issued
2010
Date
2010
Author(s)
Chen, Chun-Hung
Abstract
The socio-economic environment in Taiwan was still agricultural 40 year ago. The agricultural finance had several hundred years of history in Taiwan. Due to changes in the socio-economic environment in recent decades, the agricultural production has been declining, agricultural output has been dropping, and the agricultural-financial institution, Credit Department of Farmers'' Association, is facing a critical time of a matter of life and death. As the consensus between the government and community was made, the Agricultural Finance Law completed the legislative procedures in 2003. It has been executed starting from January 30, 2004. Ever since the operation and management of the Credit Department of Farmers'' Association has opened its new era.
This research used the statistical analysis methods such as correlation analysis, regression analysis, canonical correlation analysis, path analysis, and cluster analysis to study the correlation among the various financial data from Credit Department of Farmers'' Association. This research shows that there are 12 major financial ratios that have a remarkable correlation between capital adequacy and the association’s operating performance. By analyzing how key financial ratios impacted capital adequacy and operating performance using canonical correlation analysis model, I found that the interception of the first and second canonical correlation could explain the relevance up to 92.9%. By analyzing the main variables using the evaluation criteria of capital adequacy and operating performance, I found that Non-performing loan ratio has the strongest correlation with capital adequacy. In addition, average profit per employee has become a comprehensive characterization variable of operating performance.
Based on the findings of this research, I proposed to amend the Agricultural Finance Law and its related derived laws (i.e. to revise the classification standard of variation management and to reevaluate the appraisal standard of capital adequacy.) I also suggested a follow-up research on the technique of classification (level) and non-performing loan ratio of the Credit Department of Farmers'' Association.
Subjects
Credit Department of Farmers’ Association
Financial Ratio
Operating Performance
Average Profit Per Employee
Non-performing Loan Ratio
SDGs
Type
thesis
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