Industry concentration and asset quality as a determinant of financial performance: A comparative study of indigenous and foreign-owned universal banks

This study assessed the link between industry concentration and asset quality as key determinate of financial performance through the panel regression model. The study sample was comprised of 24 universal banks from 2009 to 2018. It was found that the financial performance of the indigenous banks was influenced by asset quality and moderating variables like capital adequacy, liquidity and bank size. At the same time, the level of industry concentration did not affect the financial performance of the indigenous universal banks. The results also indicated that the financial performance of foreign banks is not influenced by asset quality but rather by operational efficiency, liquidity, bank size and industry concentration. It is recommended that, since poor asset quality through non-performing loans adversely affects the financial performance of both indigenous and foreign banks, banks should increase their size through investment in technology to diversify the effect of asset quality on financial performance.