Using the Z-score to analyze the Financial Stability of Conventional Commercial Banks in Bangladesh

Abstract

This paper aims to measure and identify the determinants of financial stability of conventional commercial banks of Bangladesh listed on the Dhaka Stock Exchange. In the first step, the researcher calculates an accounting-based Z-score to measure the financial stability of the 23 sample banks over the period 2013-2022. In the second phase of the study, panel data regression analysis is conducted to identify the bank-specific determinants of financial stability. The exogenous variables include return on asset, income diversity, bank size, non-performing loan liquidity, capital adequacy, and management efficiency. The endogenous variable is the financial stability measured by z-score. The study provides empirical evidence of the bank-specific factors affecting the solvency of conventional commercial banks in Bangladesh.