Padma Bank 2024

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Research report on

The Impact of Research and Innovation Investment on Bank’s Financial Performance: A

Study on Mutual Trust Bank Limited, Bangladesh

Submitted by

Hossain Mohammad Yeasin

20264075

A research report submitted to the Graduate School of Management in partial

fulfillment of the requirements for the degree of

Master of Business Administration

Department of Finance

BRAC University

November 2022

© 2022. BRAC University


All rights reserved.
Declaration

It is hereby declared that

1. The research report submitted is my own original work while completing degree at BRAC

University.

2. The report does not contain material previously published or written by a third party, except

where this is appropriately cited through full and accurate referencing.

3. The report does not contain material which has been accepted, or submitted, for any other

degree or diploma at a university or other institution.

4. I have acknowledged all main sources of help.

Student’s Full Name & Signature:

Hossain Mohammad Yeasin


___________________________________________
Hossain Mohammad Yeasin

20264075

Supervisor’s Full Name & Signature:

___________________________________________
Dr. Faruk Bhuiyan

Assistant Professor

Graduate School of Management

BRAC University

Page ii of 62
Letter of Transmittal

Dr. Faruk Bhuiyan

Assistant Professor

Graduate School of Management

BRAC University

66 Mohakhali, Dhaka-1212

Subject: Submission of Research Report

Dear Sir,

With due appreciation and immense delight, I am submitting my research report entitled “The
Impact of Research and Innovation Investment on Bank’s Financial Performance: A Study on
Mutual Trust Bank Limited, Bangladesh” as an essential requirement of the MBA program.

This report is really an enormous prospect for me to assemble all the relevant information
related to the study. I tried my dimension best to prepare a viable & comprehensive report and
handle the subject matter in a fitting way. I would like to thank you for your utmost guidance.
I believe this report will be a gigantic prospect for the advance study on the topic. I welcome
further evaluation on the report and request you to consider the oversights that may occur in
the resentment of my best endeavor.

I, therefore, with ample gratification would like to submit my research report. Any further
rectifications, if needed, please offer me the chance to rectify.

Sincerely yours,

Hossain Mohammad Yeasin

_______________________

Hossain Mohammad Yeasin (20264075)

Graduate School of Management

BRAC University

03rd November, 2022

Page iii of 62
Non-Disclosure Agreement

This agreement is made and entered into by and between Mutual Trust Bank and the

undersigned student at BRAC University. I realize in my internship journey I had access

permission to the information of organization’s various operations of business, data related

information and written information. I want to clarify that I will not disclose any confidential

data regarding company in my research report which may have an adverse effect on the values

and reputation of the company.

Organization Supervisor’s Full Name & Signature:

_______________________

Ashique Iqbal

Designation: VP & Group Head, Research & Development

Page iv of 62
Letter of Endorsement by the Supervisor

To whom it may concern

This is to certify that, Hossain Mohammad Yeasin; student of Master of Business

Administration, Graduate School of Management, BRAC University has successfully

completed the report entitled “The Impact of Research and Innovation Investment on Bank’s

Financial Performance: A Study on Mutual Trust Bank Limited, Bangladesh” as partial

requirement for the internship program under my supervision. I appreciate his hard work and

determination and wish his prosperity and success in future.

Internship Supervisor

_________________

Dr. Faruk Bhuiyan

Assistant Professor

Graduate School of Management

BRAC University

Page v of 62
Acknowledgement

First of all, I would like to express my gratefulness to the almighty Allah, the most generous

and merciful to every single living creature and their activities. Subsequently, I would like to

express my gratitude to my beloved parents whose interminable love, backing and favors have

constantly given me the motivation to do the best.

Moving towards in this report, the biggest support that was came from my internship supervisor

Dr. Faruk Bhuiyan & Dr. Md. Asadul Islam who directed me in a great manner. Without their

utmost supervision, suggestion and tremendous help, especially giving me adequate time

despite their tight schedule, this report could not have completed.

Next, I would like to thanks Office of Career Services & Alumni Relations (OCSAR), BRAC

University for organizing the internship program and giving me the opportunity to impose my

knowledge in practical life. Grateful to my organizational supervisor Mr. Ashique Iqbal (VP &

Group Head of R&D) and Rina Nusrin Sume (JAVP & Associate Manager) of MTBL,

Corporate Head Office for helping me to gain practical knowledge about corporate

environment. I am also thankful to Mr. Mohammad Abdus Salam (SAVP & Unit Head of

GHR) and Md. Aymanul Islam (JAVP & Associate Manager) of MTBL for giving me the

opportunity to do my internship in their prominent organization.

At the end, this research report is a result of many people's effort especially all of the researcher

and the writers whose comprehensive research papers helped me to accumulate all the relevant

information and valuable data while preparing the report. Despite my best effort to give this

report the most possible edge to perfection this may suffer from many oversights. All the

inaccuracies that might have occurred in the resentment of my best exertion hopefully would

be seen in forgiving manner.

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Executive Summary

Research and development activities start and encourage new production, raise the level of

knowledge, and introduce fresh approaches to the production and application of technology.

The current study reveals the diversified behavior of factors influencing the performance of

banks and R&D investment associations. The study applied a descriptive research design and

targeted Mutual Trust Bank Limited Bangladesh, all with data spanning five years between

2017 to 2021 with secondary data by employing a panel regression analysis model. Seven

factors affecting banks financial performance were selected and analyzed. In the study, Return

on asset and Return on equity are used as Bank performance measurement tools and Dividend

yield ratio, Dividend cover ratio, Price earning ratio, Capital gearing ratio, Research &

development intensity ratio, Firm size ratio and Leverage ratio are used as research &

innovation investment indicators. The result of panel data regression analysis showed that

Dividend yield ratio, Dividend cover ratio, Capital gearing ratio, and Leverage ratio had

negative and statistically significant impact on banks financial performance. Whereas, Price

earning ratio, Research & development intensity ratio and Firm size ratio had positive and

statistically significant impact on banks financial performance. However, Leverage ratio and

Dividend cover ratio had no statistically significant impact on banks financial performance for

the tested period. Therefore, the research and innovation investment are positively affecting

the banks financial performance.

Keywords: Research & Innovation; Investment; Financial Performance

Page vii of 62
Table of Contents

CHAPTER 1: INTRODUCTION ........................................................................................ 13

1.1 Title of the Study ........................................................................................................... 13

1.2 Background of the Study ............................................................................................... 13

1.3 Statement of the Problem ............................................................................................... 15

1.4 Research Questions ....................................................................................................... 16

1.5 Research Objectives ...................................................................................................... 16

1.5.1. Broad Objective......................................................................................................... 16

1.5.2. Specific Objectives ................................................................................................... 16

1.6 Significance of the Study ............................................................................................... 16

1.7 Scope of the Study......................................................................................................... 17

1.8 Organization of the Study …………………………………...………………...……… 17

CHAPTER 2: COMPANY OVERVIEW ............................................................................ 19

2.1 History of MTBL ........................................................................................................... 19

2.2 Organizational Overview of MTBL .............................................................................. 20

2.3 Mission of MTBL ………….......................................................................................... 20

2.4 Vision of MTBL ............................................................................................................ 21

2.5 SLOGAN ...................................................................................................................... 21

2.6 MTBL Core Values ....................................................................................................... 21

2.7 Stock Statistics of MTBL .............................................................................................. 22

2.8 Types of Banking Business ........................................................................................... 23

2.9 MTBL Products ............................................................................................................. 23

2.9.1 Deposit Products ......................................................................................................... 23

2.9.2 DPS Products ............................................................................................................. 24

2.9.3 FDR Products ............................................................................................................. 24

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2.9.4 Loan Products ............................................................................................................. 24

2.10 MTBL Card Services ................................................................................................... 24

2.11 Awards and Accolades ................................................................................................ 25

2.12 Hierarchy of Position of MTBL ……………………………….…………………….. 26

2.13 Activities of the R&D Division of MTBL …………………………………………... 27

2.14 Routine Monthly Researches ……………………………………..…………………. 28

2.15 My Works in R&D Division ………………………………………………………… 28

2.16 Newsletter Publication ………………………………………………………...……. 29

CHAPTER 3: LITERATURE REVIEW ............................................................................ 30

3.1 Introduction ................................................................................................................... 30

3.2 Research & Innovation .................................................................................................. 30

3.3 Review of Related Empirical Studies- Research and innovation with banks financial

performance .................................................................................................................. 31

3.4 Summary of Literature Review and Research Gap ........................................................ 38

3.5 Conceptual Framework ................................................................................................. 38

CHAPTER 4: RESEARCH METHODOLOGY ............................................................... 39

4.1 Introduction .................................................................................................................. 39

4.2 Research Method .......................................................................................................... 39

4.3 Research Design ........................................................................................................... 39

4.4 Research Approach ....................................................................................................... 40

4.5 Research source and Nature of data ............................................................................. 40

4.6 Method of data collection ............................................................................................. 41

4.7 Target population and Sampling frame ........................................................................ 41

4.7.1. Target Population ..................................................................................................... 41

4.7.2. Sampling Frame, Technique and Size ...................................................................... 42

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4.8 Method of Data Analysis and Statistical Tools ............................................................ 41

4.8.1 Descriptive Statistics ................................................................................................. 42

4.8.2 Linear Regression Analysis ....................................................................................... 43

4.8.3 IBM SPSS Statistics 25 ............................................................................................. 43

4.9 Definition of Variables and their measurement ........................................................... 44

4.10 Regression Model Specification.................................................................................. 45

CHAPTER 5: FINDINGS, ANALYSIS & DISCUSSION ............................................... 46

5.1 Introduction .................................................................................................................. 46

5.2 Research & Innovation Investment and Return on Asset ............................................. 47

5.2.1 Descriptive Statistics of ROA ................................................................................... 47

5.2.2 ANOVA of ROA ....................................................................................................... 48

5.2.3 Coefficients of ROA .................................................................................................. 49

5.3 Research & Innovation Investment and Return on Equity ........................................... 51

5.3.1 Descriptive Statistics of ROE .................................................................................... 51

5.3.2 ANOVA of ROE ....................................................................................................... 52

5.3.3 Coefficients of ROE .................................................................................................. 53

5.4 Revised Conceptual Framework .................................................................................. 57

CHAPTER 6: RECOMMENDATIONS & CONCLUSION ............................................ 58

6.1 Recommendation .......................................................................................................... 58

6.2 Conclusion .................................................................................................................... 59

6.3 Limitations of the study................................................................................................. 60

CHAPTER 7: REFERENCES ............................................................................................ 60

7.1 References .................................................................................................................... 60

Page x of 62
LIST OF FIGURES

Figure 1: Conceptual Framework ....................................................................................... 38

Figure 2: Revised Conceptual Framework ......................................................................... 57

LIST OF TABLES

Table 1: Definition of Dependent Variables ...................................................................... 44

Table 2: Definition of Independent Variables .................................................................... 44

Table 3: Descriptive Statistics of ROA .............................................................................. 47

Table 4: ANOVAa of ROA ................................................................................................ 48

Table 5: Coefficientsa of ROA ........................................................................................... 49

Table 6: Descriptive Statistics of ROE ............................................................................... 51

Table 7: ANOVAa of ROE ................................................................................................. 52

Table 8: Coefficientsa of ROE ............................................................................................ 53

Table 9: Impact of Research & Innovation Investment on Return on Asset ...................... 55

Table 10: Impact of Research & Innovation Investment on Return on Equity .................. 56

Page xi of 62
List of Abbreviations and Acronyms

Acronym Abbreviations

ROA Return on Asset

ROE Return on Equity

DY Dividend Yield

DC Dividend Cover

PE Price Earnings Ratio

CGR Capital Gearing Ratio

RDI Research & Development Intensity

FS Firm Size

LEV Leverage

MTB/MTBL Mutual Trust Bank/Mutual Trust Bank Limited

R&D Research & Development

R&I Research & Innovation

ANOVA Analysis of Variance

SPSS Statistical Package of Social Sciences

Page xii of 62
CHAPTER 1

INTRODUCTION

1.1 Title of the study

The Impact of Research and Innovation Investment on Bank’s Financial Performance: A Study on

Mutual Trust Bank Limited, Bangladesh.

1.2 Background of the study

Research and development activity starts and encourages new production, raises the degree of

knowledge, and introduces new methods of producing and implementing technology (Fatima et

al., 2018). Information is the key to staying on top of forecasting future business situations and

being proactive in every choice. As a result, it is important to invest in a division within the

company which collects data to give a picture of potential future hazards and opportunities is

crucial. R&D division plays a major part in delivering the greatest possible combination of

expanding measure. The key to making wise decisions that ultimately determine whether the

organization will gain or lose value is proper information presentation and exploitation.

MTBL is a private commercial bank incorporated as a Public Limited Company in 1999, under

the Companies Act 1994. Corporate Head Office at MTB Center, Gulshan Avenue, Dhaka,

Bangladesh. MTB has offices across Bangladesh in Dhaka, Chattogram, Rajshahi, Khulna,

Borishal, Sylhet, Rongpur and Mymensingh. MTB portfolio includes current network of 119

branches & 34 Sub branches, 200 Agent Banking Centers, 18 kiosks, 310 modern ATMs including

6 CRM Booths, 6 Air Lounges, over 3,220 Point of Sales (POS) machines, located in prime

commercial, urban and rural areas.

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MTB Research & Development Department established in 2009. So, the existence of this

department in MTB is more than a decade old. All the possible research-based, scientifically

derived inputs and possible avenues of development should be delivered by the R&D Department

to the Management and Board in both pro-active and re-active manners. This department will be

responsible for meeting the bank's entire research needs. Major functional areas of R&D

Department are - Financial Market & Strategy (FM&S), Product Development & Management

(PD&M), Stakeholder Insights (SI), Business Analytics (BA), Business Process Development &

Re-engineering (BPD&R), Channel Planning & Re-organizing (CP&R) and Service Quality

Assurance (SQA). MTBiz, a Quarterly Business Review magazine, has been published by the

MTB Research & Development Department since its inception. It covers the latest banking news,

banking articles, finance news, finance articles, banking statistics and more.

Bangladesh's banking industry is growing more and more competitive. To maximize their share of

this market, each bank must be on top of what they are doing. The secret to staying on top of

predicting future business circumstances and being proactive with every decision is information.

As a result, it's critical for the business to have a section that gathers data to provide a picture of

potential future risks and opportunities. The role of R&D division is to offer the most effective

fusion of expansive measures. The key to making wise decisions that ultimately determine whether

the organization will gain or lose value is proper information presentation and exploitation. To

reduce risk, R&D will be used to determine whether to offer credit or an open letter of credit in

connection with this commodity in manufacturing or international business. The leaders of the

bank's managing and executing committee must constantly be kept in the loop regarding the bank's

performance and any new developments.

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1.3 Statement of Problem

Several studies have evaluated the effect of research & innovation investment on banks financial

performance. Dave et al. (2013) found a weak positive relationship between the research &

innovation investment and the profitability of banks. However, VanderPal, (2015) found that

research & innovation investment had a positive and significant effect on banks financial

performance. Whereas Ayam, (2012) concluded that the effect of research & innovation

investment on profitability is mixed and not significant. Based on the reviewed studies, the

empirical evidence on the effect of research & innovation investment on financial performance is

mixed.

Therefore, the impact of research & innovation investment on financial performance of banks

cannot be regarded as conclusive. Thus, it can be concluded that prior studies on bank’s research

& innovation investment and financial performance still leave enormous gaps as their studies have

not reached a compromised conclusion on the issue. Therefore, this study attempted to fill this

research gap by using a distinct viewpoint to determine the impact of research & innovation

investment on the financial performance of banks; by examining how the factors that influence

banks research & innovation investment effect financial performance of banks as there is not

enough research on this subject. Moreover, the contradiction between the findings from the various

studies and the lack of focus on all deposit taking financial institutions provided a justification for

this study. So, there is a need for more knowledge about this relationship in order to help both

bankers and investors to analyze the performance.

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1.4 Research Questions

RQ1: Is there any impact of research & innovation investment on financial performance of Mutual

Trust Bank Limited?

RQ2: Is there any significant association between DY, DC, PE, CGR, RDI, FS and LEV on ROA?

RQ3: Is there any significant association between DY, DC, PE, CGR, RDI, FS and LEV on ROE?

1.5 Research Objectives

1.5.1 Broad Objective

The general objective of this study is to examine the impact of research & innovation investment

on mutual trust bank’s financial performance.

1.5.2 Specific Objective

The specific objectives of the study are:

• To examine the association of dividend yield (DY), dividend cover (DC), price earnings

ratio (PE), capital gearing ratio (CGR), research & development intensity (RDI), firm size

(FS) and leverage (LEV) with return on asset (ROA).

• To examine the association between dividend yield (DY), dividend cover (DC), price

earnings ratio (PE), capital gearing ratio (CGR), research & development intensity (RDI),

firm size (FS) and leverage (LEV) with return on equity (ROE).

1.6 Significance of the study

Bangladesh's banking industry is growing more and more competitive. To increase their share of

this market, banks must continuously improve what they do (also known as share of wallet in the

industry). Information is the key to staying on top of forecasting future business situations and
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being proactive in every choice. As a result, a division within the company that collects data to

give a picture of potential future hazards and opportunities is crucial.

Branch expansion is a crucial component of staying competitive, and an R&D division plays a

major part in delivering the greatest possible combination of expanding measures in this regard.

The key to making wise decisions that ultimately determine whether the organization will gain or

lose value is proper information presentation and exploitation.

In order to reduce risk, the manager of a bank branch will use information on a commodity's

anticipated price provided by R&D. The heads of the bank's managing and executing committee

must constantly be informed on the bank's performance and any new developments.

1.7 Scope of the study

The study's general focus, or its scope of study, will be outlined in a class or seminar. The

importance of R&D in the banking industry is described in this section's "Scope." The "borders"

of the activity's aim, knowledge, instruction, or result are defined as the scope of the activity. In

this section, the study will provide the actions, influence, evaluation, and feedback of the R&D

Division on MTBL's banking operation. Additionally, it can show the potential results that might

result in success if other banks engage in research and development operations.

1.8 Organization of the study

The influence of research and innovation investments on the bank's financial performance is the

focus of the first series of research questions in the first chapter of this study. The second set of

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questions focuses on the significance of the relationship between DY, DC, PE, CGR, RDI, FS, and

LEV and financial performance as measured by ROA. The final set of questions focuses on

whether there is a substantial relationship between DY, DC, PE, CGR, RDI, FS, and LEV and

financial success constrained by ROE. The company overview that I chose is elaborated upon in

Chapter 2. The third chapter elaborates on the effect that investments in research and innovation

have on banks' financial performance as shown by the literature. The relationship between research

and innovation investment, financial performance, and the effects of such investment on bank

performance is conceptualized in this chapter. The research's methodology is detailed in Chapter

4. Which method, research design, approach, data source and type, data collection process,

population target, data analysis method and instruments of statistics, variable definition, and

regression model specification were all considered in this study. Chapters three and four are

expanded upon in chapter five. Basically, it was regression analysis-focused. Descriptive statistics,

ANOVA, model summary, and coefficients are a few examples. In chapter six, the impact of

research and innovation on bank financial performance is summarized, concluded, and suggested.

Similar to chapter six, chapter seven lists the sources consulted for this investigation.

Page 18 of 62
CHAPTER 2

COMPANY OVERVIEW

2.1 History of MTBL

MTBL is a 3rd generation bank in the history of Bangladesh banking. The company was

incorporated as a public limited company on September 29, 1999, under the companies act 1994.

MTB was also issued certificate for commencement of business on the same day and was granted

license on October 05, 1999 by Bangladesh bank under the banking companies act 1991 and started

its banking operation on October 24, 1999. Its registration number is C38707 (665)/99 and got on

September 29, 1999. Bangladesh bank permission no. BRPD (P) 744(78)/99-3081 on October 5,

1999. The company started its operation to progressively carry out its banking businesses, such as

wholesale, retail, international trade financing, SME banking, NRB banking, Off-shore banking,

Privilege banking, etc. the company (Bank) operates through its corporate head office located at

MTB center, Gulshan 1, Dhaka, 1205. The bank carries out its international business through a

global network of over four hundred foreign correspondent banks. The banks have a current

network of 119 branches, 34 sub branches, 200 agent banking centers, 18 kiosks, 310 modern

ATMs including 6 CRM booths, 6 air lounges, over 3220 MTB POS, MTB securities, MTB

exchange UK limited and MTB capital limited. Board members of MTBL are Mr. Md. Wakiluddin

(Current Chairman), Mr. Md. Abdul Malek (Current vice Chairman), Mr. Syed Manzur Elahi

(Current Director and founding Chairman) and Mr. Syed Mahbubur Rahman (Current Managing

Director and CEO).

Page 19 of 62
2.2 Organizational Overview of MTBL

The Company (Bank) operates through its head office at Dhaka and with 119 branches in the

country. The Company/Bank carry out international business through a Global Network of Foreign

Correspondent Banks. MTBL is a member of different chambers, associations and institutions in

our country. These are given below:

1. The Institute of Bankers Bangladesh (IBB)

2. Bangladesh Association of Banks (BAB)

3. Bangladesh Foreign Exchange Dealer Association (BAFEDA)

4. Bangladesh Institute of Bank Management (BIBM)

5. Bangladesh Association of Publicly Listed Companies (BAPLC)

6. Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI)

7. International Chamber of Commerce Bangladesh Limited (ICCB)

8. Dhaka Stock Exchange (DSE)

9. Dhaka Chamber of Commerce & Industry (DCCI)

10. Federation of Bangladesh Chambers of Commerce and Industry (FBCCI)

11. American Chamber of Commerce in Bangladesh (AmCham)

12. Primary Dealers Bangladesh Limited (PDBL)

2.3 Mission of MTBL

Aspire to be the most admired financial institution in the country, recognized as a dynamic,

innovative and client focused company, which offers an array of products and services in the search

for excellence and to create an impressive economic value.

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2.4 Vision of MTBL

MTB's vision is based on the philosophy well known as MTB3V. They envision MTB to be:

• One of the best performing banks in Bangladesh

• The bank of choice

• A truly world-class bank

2.5 SLOGAN - “YOU CAN BANK ON US”

2.6 MTBL Core Values

Commitment:

Shareholders – Create sustainable economic value for their shareholders by utilizing an honest and

efficient business methodology.

Community – Committed to serve the society through employment creation, support community

projects and events and be a responsible corporate citizen.

Customers – Render state-of-the-art service to their customers by offering diversified products and

by aspiring to fulfill their banking needs to the best of their abilities.

Employees – They rely on the inherent merits of the employee and honor their relation as a part of

this renowned financial institution. They work together to celebrate and reward unique

backgrounds, viewpoints, skills and talents of everyone at the work place, no matter what their job

is.

Accountability: As a bank, they are judged solely by the successful execution of their

commitments; They expect and embrace this form of judgment. They are accountable for

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providing the highest level of service along with meeting the strict requirements of regulatory

standards and ethical business practices.

Agility: They can see things from different perspectives; they are open to change and not bound

by how they have done things in the past. They can respond rapidly and adjust their mode of

operation to meet stakeholder needs and achieve our goals.

Trust: They value mutual trust, which encompasses transparent and candid communications

among all parties.

2.7 Stock Statistics of MTBL

Market Capitalization (BDT) 15,930,000,000

Shareholders’ Equity (BDT) 19,160,910,000

Book Value Per Share (BDT) 25.34

Last Audited P/B Ratio (x) 1.67

Forward P/E 13.1

EPS (BDT) 3.66

Audited P/E (x) 9.02

Trading Currency Bangladeshi Taka

Market Category A

Market Lot 1

Credit Rating LT: AA, ST:ST-2

Last Dividend Declaration Date 43,208

AGM Date 43,251

Page 22 of 62
Total Shares 19,160,910,000

Paid Up Capital (BDT) 8,124,960,000

(Source: MTB Annual Report 2021)

2.8 Types of Banking Business:

As envisaged in the Memorandum of Association and as licensed by Bangladesh bank under the

provisions of the Banking Companies Act 1991, the Company started its banking operation and

entitled to carry out the following types of banking business:

1. Wholesale Banking

2. Retail Banking

3. Privilege Banking

4. SME Banking

5. NRB Banking

6. Card Services

7. Treasury Operations

8. International Trade Financing

2.9 MTBL Products

2.9.1 Deposit Products

1. MTB Regular Savings

2. MTB Inspire

3. MTB Ruby

4. MTB Current Account

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5. MTB Senior

6. MTB Junior

2.9.2 DPS Products

1. MTB Millionaire Plan

2. MTB Brick by Brick

3. MTB Education Plan

4. MTB Graduate

5. MTB Kotipoti

2.9.3 FDR Products

1. MTB regular fixed deposit

2. MTB double saver

3. MTB monthly benefit plan

2.9.4 Loan Products

1. MTB personal loan

2. Home loan

3. MTB Home Equity Loan

4. Auto loan

2.10 MTBL Card Services

1. MTB Debit Card

2. MTB credit Card

3. MTB VISA Co-branded Cards

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2.11 Awards and Accolades

Source: R&D Desk, MTB

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2.12 Hierarchy of Position of MTBL

Chairman

Board of Director
Executive Level
Executive Committee

Managing Director & CEO

Deputy Managing Director

Additional Managing Director

Senior Executive Vice President Mid-Level


Management
Executive Vice President

Senior Vice President

Vice President

Assistant Vice President

Senior Executive Officer


Junior Level
Executive Officer Management

Principal Officer

Senior Officer
Entry Level
Management Trainee

Junior Officer

Page 26 of 62
2.13 Activities of the Research and Development Divisions of MTBL

The following functional groups make up the bulk of the division's activities:

1. Marketing research

2. Operations research

3. Research on business policy

Each functional group is very reliant on and supportive of the others, and there is considerable

knowledge and information sharing.

1. Marketing Research

An insight into the competitive market that exists in the banking industry today is provided by

marketing research. Marketing research is the ideal option for creating new financial goods in

order to offer something fresh, inventive, and customer-focused.

i. Develop new financial products, services, and outlets for bank customer service, as well as

improve existing ones, in order to better serve customers and cater to their needs, both as

consumers and as enterprises (B2B).

ii. Create more potent marketing strategies for the products.

These are some of the primary goals of marketing research, and the R&D department employs this

technique to broaden its clientele and, ultimately, boost sales. The marketing research team must

carry out the following tasks in order to reach its ultimate objective.

2. Business Policy Research

i. A guide for new business growth opportunities

ii. Investment guidelines

iii. Management growth guidelines

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3. Operations Research (Financial markets and the economy)

i. Reviews and articles on macroeconomics

ii. A yearly business directive

iii. The bank’s strategic planning

iv. A comparison of the bank’s performance to that of other banks in its generation or category

that are also competitors.

v. Business trend analysis and forecasting

vi. Studies that adhere to the core goals of the business policy

2.14 Routine Monthly Researches

The division is in charge of directly delivering some important market data to the Managing

Director and Executive Board in addition to the three main research categories. To stay current

and at the top of the industry, you need this information. As a result, the division has created the

following organized information.

2.15 My works in R&D Division

▪ Assist the research team in primary and secondary qualitative or quantitative data

collection.

▪ Digitalization of the data and performing preliminary analysis if required.

▪ Frequent out-of-the-desk Branch and Customer Visits as well as making regular Phone

calls to the Branch Management and Customers for conducting Survey on various issues.

▪ Economic feasibility survey for opening new Branch/Sub-branch/Agent Outlet.

▪ Conduct secondary research: reviewing the literature, journals, newspapers.

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▪ Publications work/research: proofreading, design ideas, questionnaire preparation.

2.16 Newsletter Publication

The MTBiz, a newsletter produced by MTBL, is intended for use by employees working in the

banking and finance industries. MTB considers knowledge to be the primary competitive

advantage that can help it become a rising organization in a highly competitive environment, and

the publication of a newsletter is crucial to keeping every employee of the company informed. The

steps of a newsletter's publication are as follows:

i. News gathering from both domestic and foreign sources

ii. Relevant news screening

iii. Relevant information summarization

iv. Sectoral categorization and finally

v. News publication

The newsletter's news is mostly focused on the following industries:

i. Finance and banking

ii. Bangladesh’s Economy

iii. The global economy and business

iv. Energy

v. Agriculture and

vi. Telecommunications

The value of newsletters as sources of current information cannot be overstated. The MTB

employees can learn about what's happening in the financial world by reading the newsletter. The

magazine also makes an effort to pinpoint domestic and international market changes, shifts in

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government regulations, and effects on the banking industry. Additionally, it looks for emerging

markets and the possibility for company in those industries. Since knowledge is essential for a

branch manager to properly provide loans and retain them, this information gives managers an

idea of the direction the economy is moving in. MTBiz has been released in 14 volumes so far,

and they are available in https://www.mutualtrustbank.com/investor-relations/mtbiz/.

CHAPTER 3

LITERATURE REVIEW

3.1 Introduction

This chapter represents literature review of the preview’s studies done on the topic. Here we are

going to discuss the researches done by different scholars regarding the impact of research and

innovation investments on banks financial performance. Then the related empirical studies and a

conceptual framework with discussion of research variables followed by summary of literature and

finally research gaps. A total of fourteen hypotheses have been formulated with respect to the

research objectives. The framework will then be used as a guide for designing the research

methodology, which will be discussed in the next chapter.

3.2 Research and Innovation

Any corporate concern's success, effectiveness, and profitability are critically dependent on R&D.

R&D is utilized as a substitute for making money (Fatema et al., 2019). Researchers have

previously examined the connection between R&D spending and business performance. Donations

and charitable organizations were employed by business as social activities; however, such R&D

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did not improve the performance of the company. Due to the fact that R&D efforts cannot provide

results in the short term and instead offers long-term financial advantages, they had no impact on

the performance (Fatema et al., 2019). R&D is important to all parties involved in the business,

and depending on the strategy used by the company, it might affect sales. Increased value addition

and trust in the company will result in higher revenue. The success of a company's R&D strategy

depends on how interested it is in conducting research and development (Fatema et al., 2019).

3.3 Review of Related Empirical Studies – Research and Innovation with Bank’s Financial

Performance

According to Fatima et al. (2018), innovative firms grow faster than non-innovative ones. R&D

investment has a favorable effect on growth rate and is associated with better growth rates for

businesses. The most crucial innovation efforts are those that increase the firm's productivity and

sales. The company's international commercial and innovation operations are closely related. The

company's decision to enter new international markets is influenced by R&D and innovation

initiatives. It has been discovered that small businesses invest more in innovation than large

businesses. Innovation encompasses a vast array of activities, including developing, introducing,

and enhancing goods, technologies, abilities, and methods of selling and buying. Investments in

R&D differ from other types of investments. Organizations are spending money on human

resources to hire qualified personnel who will generate various kinds of innovation.

VanderPal (2015) investigate the correlation between successful R&D spending and the erratic

nature of future performance. There is a positive association between R&D and the erratic nature

of future earnings, which is consistent with the ambiguity of R&D's advantages. They also

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demonstrated that including data on the effectiveness of a company's R&D expenditures, link

between R&D efforts and future earnings is simpler to understand.

Fatima et al. (2018) examined that investment in research and development activities not only

improve firm’s performance but also made the position of firm. The investment is profitable for

businesses as it confesses them to attain and boost the performance and higher the assessment by

market. The direct relation among the research and development investment and firms’

performance takes the serval duration to earn profit. Investment in research and development

produce value but it always ambitious for investor to evaluate its impact on business.

According to Dave et al. (2013), high R&D spending is not a guarantee of high profitability unless

firms manage it correctly. This is in reference to the impact of R&D expenditure on profitability.

R&D costs have an impact on corporate profitability projections since they must be immediately

expensed. We have not explicitly evaluated the relationship between R&D investment and ROA

because the profitability in turn distorts the ROA.

The association between R&D and business success, according to Ayam (2012), can only be strong

if management uses stronger control measures of R&D expenditures within the company. The

ability of senior management to implement effective and efficient control mechanisms for

managing the R & D expenses will therefore have a significant impact on how R & D as a whole

affects a firm's performance. Therefore, a company's overall profitability from a successful R&D

program should exceed its overall R&D expenses; otherwise, it would be preferable to close the

R&D program or reassess it.

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Using a simultaneous model, Fatema et al. (2019) looked at the relationship between growth,

profitability, and the cost of R&D. It examines the firm's size and other elements that have an

impact on R&D. The outcome demonstrates the advantages of company size as well as the

beneficial interactions between profitability and profitability growth. The profit from future

research and development advantages is included in the income statement, but the loss is not.

According to Fatema et al. (2019), traditional methods of higher risk in R&D activities are not

relevant for high value products, and cost of production management is not viable without R&D

strategies.

VanderPal (2015) demonstrated a favorable relationship between R&D intensity and firm success

and highlighted the influence of R&D investments, which were two times larger than those made

in tangible assets, on market capitalization. The body of literature also contains studies that looked

at the connection between R&D and subsequent operating performance and discovered a favorable

association between the two ideas.

The impact of profit and other information on the cost of research and development is examined

by Fatema et al. in 2019. It demonstrates that operating profit produces anomalous profit due to

increasing R&D expenditures. They looked at the fact that companies invest more in research and

development because of product innovation and enhancement. It demonstrates how the market

value of new items is created through the improvement of products as a result of input behavior

and output control.

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A $1 increase in R&D spending determines a two-dollar profit boost over the course of seven

years, according to VanderPal (2015). Similar to this, operating income and both current and lag

R&D data show a favorable link. The results also showed that depending on the industry sector,

the influence of R&D on current operating outcomes varied. It is more practical to concentrate on

the relationship between R&D investment and profitability while taking future R&D increases into

consideration as opposed to current and previous levels.

Fatema et al. (2019) looked at how businesses use technical advances to generate new items at a

low cost, satisfy customer demand, and boost market competitiveness. By entering a new market,

it also increased company profit and increased earnings. By utilizing the best research and

development methodologies, it launched new and unique products. The market position of already

existing items is strengthened by investments in research and development, and new product

opportunities are created, which helps enterprises operate better.

Research and development investments have a positive, significant impact on projecting future

returns, according to an empirical study by VanderPal (2015) that assessed the impact of R&D on

stock returns for a group of European countries. Exploring how R&D efforts affect financial

stability is a challenging process since the implications of the time lag between the moment of

R&D investment incurrence and the point at which it enhances financial performance differ from

business to business.

The financial performance of a corporation is directly impacted by the accounting handling of

R&D undertakings. The net income and profitability indicators (ROA and ROE) for the specified

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period will decrease if the R&D expense materializes within the incurrence period. Given that total

assets will increase as a result of capitalizing the R&D spending as an intangible asset, deferring

R&D costs to future years as intangible assets would not negatively affect current period net

income or return on equity, but could put pressure on ROA. Research and development efforts

won't pay off financially unless specific R&D operations result in patent issue (VanderPal, G. A.,

2015).

Innovation and return on assets typically have a positive relationship. Additionally, according to

VanderPal (2015), operating cash flow and net income can be used to gauge a company's

performance. They emphasized a favorable correlation between the firm's patent quality and future

operating performances (FOP), which are computed as means. However, there is a bad correlation

between the company's patent quality and the standard deviation of FOP. High operating

performance is brought about by innovation, which also lowers the level of uncertainty.

In their study on R&D and valuation from 2019, Erdogan and Yamaldinova looked at how long

business growth and market success from R&D investments will last. Researchers supported the

constant increase association between gross revenue, R&D intensity, and sales with evidence in

the study. While study results show a correlation between R&D intensity and profitability, they

also show that R&D intensity increases the consistency of share returns.

Using information from the Indian pharmaceutical sector, Erdogan and Yamaldinova (2019)

investigated the effect of R&D efforts on business performance. Within the empirical framework

of the study, two analyses - growth accounting and production function were conducted. The

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findings of growth accounting revealed that R&D intensity significantly impacted total factor

productivity. Its findings demonstrated that international businesses in the sector were more

responsive to R&D than domestic ones. The results suggested that the Indian pharmaceutical

industry should be encouraged to pursue more innovative endeavors.

According to Erdogan, M., and Yamaldinova, A. (2019), innovation is the primary way for all

businesses to get a competitive edge in the market. This study intends to determine the impact of

company size on the impact of innovation in addition to examining the impact of SME innovation

on financial performance. Regression analysis was used to examine the data of 98 SMEs in the

Italian food machinery industry. The study's empirical results support the idea that when

innovation levels rise, financial performance rises as well. The study concluded that while

innovations created to satisfy customer wants and those created to set companies apart from rivals

were crucial, technological level had little bearing on financial performance.

Erdogan, M., and Yamaldinova, A. (2019) conducted research using data from 272 US firms to

examine the relationship between R&D spending, inventions, and product innovation, as well as

how these factors affect financial success. New product introductions are favorably correlated with

financial performance, according to study results.

Studies have shown, according to Habtewold (2021) that investing in R&D can assist businesses

acquire new technologies and goods as well as increase efficiency to better meet customer

expectations. This can help businesses adapt more quickly to changes in the market's profitability.

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Decisions about R&D investments are based on anticipated returns and the resources that

companies have at their disposal. Studies are undertaken frequently to look at how R&D spending

affects business performance. The majority of research show a beneficial impact of R&D spending

on business performance. According to Habtewold (2021), there may be a correlation between

current year R&D, prior year R&D and future performance, and current performance. However,

the association may be stronger if certain conditions are present, such as investor protection in the

nation. Additionally, they discovered that current-year R&D expenditures lower profits but may

have a positive impact on future business performance. R&D spending continues to have a positive

impact on performance to some extent. Therefore, increasing R&D expenditures beyond a

particular level has a detrimental impact on profitability. Accordingly, in their situation, R&D

spending and financial performance are connected negatively in the short run and positively in the

long run, according to the extensive mixed literature in the field.

According to a number of studies, there is a positive correlation between R&D investment and

innovation performance, albeit the effect varies depending on the firm's structure and the type of

knowledge created. R&D spending has been found to positively influence innovation performance

in certain earlier research (Habtewold, 2021). By developing and launching fresh, cutting-edge

goods and services, businesses leverage R&D spending to boost their innovation performance and

generate significant returns. Generally speaking, the literature has quite a good understanding of

the positive relationship between R&D investments and innovation performance, so businesses

that increase their R&D spending are expected to be more likely to advance positively, introduce

new products and technologies, and boost their competitiveness.

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3.4 Summary of Literature Review and Research Gap

A research gap that I faced was the limited amount of research conducted to measure the impact

of R&D expenditure on financial performance. A further gap consisted of the limited research

carried out to ascertain the impact of marketing performance, gross margins and technological

innovation on financial performance. The primary aim of this research is to bridge this gap.

3.5 Conceptual Framework

Independent Variables
Research & Innovation
Investment Indicators Dependent Variables
Financial Performance
Measurement
Dividend Yield (DE)

Dividend Cover (DC) Return on


Price Earnings Ratio (PE) Asset (ROA)

Capital Gearing Ratio (CGR)


Return on
R&D Intensity (RDI)
Equity (ROE)
Firm Size (FS)

Leverage (LEV)

Figure 1: Conceptual Framework

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CHAPTER 4

RESEARCH METHODOLOGY

4.1 Introduction

The research approach used for this study is described in this chapter. It comprises the research

methodology, research design, research strategy, research source, the study's target demographic,

and the sample techniques used. The chapter also examines the used empirical model and the

method of data collecting. Finally, the chapter describes the steps involved in data analysis and

how the results are shown.

4.2 Research Method

Research problems can be answered using a variety of quantitative approaches and procedures. It

is used to frame the descriptive approach and determine the outcome and impact by testing the

hypothesis in order to achieve the study's ultimate objective. In the sense that numbers indicate the

values and intensities of theoretical constructions and notions, quantitative procedures and

techniques tend to specialize in quantities. Finding evidence to either support or reject theory that

was defined in the earlier stages of the investigation is also related to this research methodology.

4.3 Research Design

Identifying the data collection method(s), the instruments to be used, how the instruments would

be administered, and how the information would be structured and analyzed are all part of the

research design, which is a strategy defining how information is to be obtained for an assessment

or evaluation (Assumptah & Muhari, 2017). It also discusses problems with the research design

that are related to the study's exploratory, descriptive, or causal goals. A descriptive research

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design was utilized for this study, which essentially involves gathering data on the state of

phenomena in order to describe "What exist" in relation to conditions or factors (Gardner, Dixie,

& S.C., 2004).

4.4 Research Approach

Two categories of research approaches can be distinguished:

1. A deductive method to research

2. An inductive research strategy

Deductive methodology associated with quantitative research is being used in this study. It is

conducted with a focus on creating hypotheses based on accepted theory, and after that, it develops

a research plan to test the hypotheses (Wilson, J. 2014). The Deductive approach, which refers to

drawing conclusions from premises, is the one that this strategy best complements. The key

distinction between deductive and inductive techniques is the applicability of the hypothesis to the

study. While the inductive approach aids in the development of new theories, the deductive

approach evaluates the accuracy of existing hypotheses or assumptions.

4.5 Research Source & Nature of Data

Secondary data used in this study has been extracted from the annual reports of MTB which has

been obtained from the official web sites published by the MTBL, Bangladesh for a period of 5

years from 2017 to 2021. Five years annual report of MTBL (2017-2021) have been used as

secondary source of data.

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4.6 Methods of Data Collection

The data obtained from banks financial statement used to determine bank specific variables that

determine research investment and profitability of the bank. In order to increase the credibility and

reliability of the research the study used audited financial statements (balance sheet, income

statement and cash flow statement) sourced from MTB. Selecting appropriate and acceptable data

gathering instrument help the researchers to combine the strengths and amend some of the

inadequacies of any source of data to minimize investment of irrelevant conclusion. Thus, our

sample consists of MTBL, Bangladesh. Data must be accessible from the years 2017 to 2021,

which is the study period. Initially, all of the MTB's annual reports were downloaded from the

websites of the respective banks. Information was then manually searched from each annual report,

and finally, the ratios that were produced by computing the various variables related to research

and innovation investment and performance measurement in the annual reports of the banks served

as the empirical inputs for testing hypotheses. Return on Assets (ROA) and Return on Equity

(ROE) are used to illustrate the banks' performance in this instance (ROE). The dependent

variables will be these three. The independent variables that will measure research and innovation

investment are Dividend yield ratio (DY), Dividend cover ratio (DC), Price earnings ratio (PE),

Capital gearing ratio (CGR), R&D intensity ratio (RDI), Firm size (FS) and Leverage ratio (LEV).

4.7 Target Population and Sampling Frame

4.7.1 Target Population

The term "population" refers to the entire group of components, people, or organizations about

which judgments and inferences are drawn (Cooper & Schindler, 2011). According to Mugenda

& Mugenda (2008), the target population is the group of people for whom a researcher hopes to

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generalize the findings of his investigation. Therefore, the MTB population between 2017 and

2021 is the study's target population.

4.7.2. Sampling Frame, Techniques and Size

A sampling frame, according to Cooper and Schindler (2011), is a list of components from which

a sample is really taken. A list of population components that frequently diverge somewhat from

the specified target population was used to choose the sample. Since MTB have been running the

banking service in Bangladesh for more than 20 years, they make a convenient sample for this

study. It is included in this study because it has been running for 20 years and has operations in

many different Bangladeshi regions, allowing for a fair representation of the country's banking

sector. To improve the sample size, we have used this bank's five-year data. Thus, a 5*1 matrix

sample frame with 5 observations will be used.

4.8 Method of Data Analysis & Statistical Tools

The statistical methods used to examine the data and determine the various correlations between

the variables are listed below:

4.8.1 Descriptive Statistics

Simple descriptions of variables are covered in the descriptive analysis section. Each variable's

mean, maximum, minimum, and standard deviation are included. So, over the course of the sample

period, descriptive statistics of the variables (both dependent and independent) were computed.

This is consistent with Malhotra's (2007) assertion that employing descriptive statistics techniques

aids the researcher in visualizing the current situation and makes pertinent information available.

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4.8.2 Linear Regression Analysis

By applying a linear equation to the collected data, it makes an attempt to model the relationship

between two or more variables. When X is the independent variable and Y is the dependent

variable, the equation for a linear regression line is Y= a + bX. At a 5% level of significance, linear

regression was employed to estimate the statistical association. The size of the relationship

between the independent and dependent variables is determined by the correlation coefficient (R).

A regression model's coefficient of determination (R-square), which measures the proportion of

variation in the dependent variable that can be accounted for by changes in the independent

variables, and P-value were used to assess the model's fit and the overall significance of the

relationship. Finally, the structural models are run to test the hypotheses. Using IBM SPSS version

25, the data is examined.

4.8.3 IBM SPSS Statistics 25

The Statistical Package for Social Sciences (SPSS) is a software program that is used for logically

batching and non-logically analyzing statistical data. It offers a number of statistical calculations,

including linear regression analysis, descriptive statistics, correlation, bivariate statistics, and

numerical outcome prediction, among others. In this study, data are computed using IBM SPSS

version 25 to produce a result for assessing the association between research & innovation

investment and corresponding banks selected as samples of financial performance.

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4.9 Definition of variables and their measurement Table

Table 1: Definition of Dependent Variables

Dependent Definition Acronym Measurement

Variables

Return on Asset The ratio of net income to ROA Annual Net Income /

total asset of the company. Average Total Assets

Return on Equity The ratio of net income to ROE Annual Net Income /

total equity of the company Shareholder’s Equity

Source: Author

Table 2: Definition of Independent Variables

Independent

Variables Definition Acronym Measurement

A percentage of current share price. DY Gross Dividend Per

Dividend Yield Share / Market Price

Per Share

Number of times a company could Net Profit or Loss

pay dividends to its common Attributable to


Dividend Cover DC
shareholders using its net income Ordinary Shareholders

over a specified fiscal period. / Net Dividend on

Ordinary Share

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Price Earnings Company’s share price to PE Market Price /

Ratio company’s earnings per share Earnings Per Share

Capital Gearing The ratio of debt a company has CGR Prior charge capital /

Ratio relative to equities. Total capital

Research and development (R&D)

expenses are direct expenditures


RDI R&D Expense /
R&D Intensity relating to a company's efforts to

develop, design, and enhance its Total Sales

products, services, technologies, or

processes.

Firm Size Scale or volume of operation FS Natural log of assets

turned out by a single firm

Leverage Amount of debt a company will be Total Debt / Total

using to finance its business Assets


LEV
operations.

Source: Author

4.10 Regression Model Specification

The study uses a general linear model of regression to establish the relationship between the

independent and the dependent variables. The model has been fixed by considering the variables

used in previous studies. The model is as follows:

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Model 1: ROA = β0 +β1DY + β2DC + β3PE + β4CGR + β5RDI + β6FS+ β7LEV + €

Model 2: ROE = β0 +β1DY + β2DC + β3PE + β4CGR + β5RDI + β6FS+ β7LEV + €

Where, β = constant term,

Β1 – β7 = coefficient of independent variants

€ = regression error term

ROA = Return on Asset

ROE = Return on Equity

DY = Dividend yield ratio

DC = Dividend cover Ratio

PE = Price earnings ratio

CGR = Capital gearing Ratio

RDI = Research & Development Intensity Ratio

FS = Firm size ratio

LEV = Leverage Ratio

CHAPTER 5

FINDINGS, ANALYSIS & DISCUSSION

5.1 Introduction

The data analysis described in this chapter will be followed by a discussion of the research results.

The research goal that served as the study's guidance is related to the findings. Several statistical

analyses, including descriptive statistics, linear regression analysis—which includes model

summary, ANOVA, coefficient, etc. and others are performed on the data using IBM SPSS

Statistics version 25.

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5.2 Research & Innovation Investment and Return on Asset

5.2.1 Descriptive Statistics of ROA

Table 3 and Table 6 below provide descriptive statistics for independent and dependent variables.

Return on asset (ROA) and Return on equity are the dependent variables (ROE). While the

independent variables are Dividend yield ratio (DY), Dividend cover ratio (DC), Price earnings

ratio (PE), Capital gearing ratio (CGR), R&D intensity ratio (RDI), Firm size (FS) and Leverage

ratio (LEV).

Table 3: Descriptive Statistics of ROA using regression model

Descriptive Statistics

Std.

N Minimum Maximum Mean Deviation

ROA 5 .0094 .0140 .012600 .0018588

RDI 5 .0016 .0055 .003120 .0015189

FS 5 110 119 114.20 4.266

LEV 5 -.0027 .0281 .011340 .0135108

DY 5 -.1700 .0200 -.070000 .0809321

DC 5 .1402 .4896 .287400 .1433511

PE 5 4.7525 18.8770 10.211240 5.7440333

CGR 5 7.6762 8.3041 7.928340 .2498049

Valid N 5

(listwise)

For the variable utilized in this investigation, descriptive data are shown in Table 1. As can be seen

in the above table, there are a total of 5 samples. Return on Asset (ROA) has a mean value of
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0.012600, a range of 0.0094 to 0.0140, and a standard deviation of 0.0018588. The research and

development intensity ratio (RDI), with lowest and maximum values of 0.0016 and 0.0055, is

0.003120 on average. The median firm size (FS), which ranges from 110 to 119, is 114.20. The

average leverage ratio (LEV), with minimum and maximum values of -0.0027 and 0.0281, is

0.011340. Dividend yield ratio (DY) lowest and maximum values are -0.1700 and 0.0200,

respectively, with a mean value of -0.0700. Dividend capital ratio (DC) ranges from a minimum

of 0.1402 to a maximum of 0.4896, with a mean value of 0.2874. The price earnings ratio (PE) has

a mean value of 10.2112, a minimum value of 4.7525, and a high value of 18.8770. Last but not

least, capital gearing ratio (CGR). The minimum and highest points are 7.6762 and 8.3041,

respectively, with a mean of 7.9283.

5.2.2 ANOVA of ROA

Table 4: ANOVA of ROA using regression model

ANOVAa

Sum of

Model Squares df Mean Square F Sig.

1 Regression 5.123 4 0.513 4.132 .000b

Residual 6.244 0 0.114

Total 11.367 4

a. Dependent Variable: ROA

b. Predictors: (Constant), DY, PE, RDI, CGR, FS, LEV, DC

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The ANOVA test of the model's fitness is displayed in the table above. The data fits the model

well, as evidenced by the F statistic of 4.132 and significance level of 0.000, which suggests that

the model's specified variables are reliable predictors of performance.

5.2.3 Coefficients of ROA

Table 5: Coefficients of ROA using regression model

Coefficientsa

Unstandardized Standardized

Coefficients Coefficients

Model 1 B Std. Error Beta t Sig.

1(Constant) 1.068 .022 1.244 .104

FS .001 .021 .391 2.121 .000

LEV -.116 .009 -.841 -.214 .670

DC .022 .001 .029 2.320 .000

CGR -.009 .000 -1.252 -2.099 .039

DY -.005 .012 -.501 -3.423 .098

PE 0.337 .026 .394 .381 .130

RDI 0.135 .021 .087 2.114 .051

a. Dependent Variable: ROA

The tests were run at a 95% confidence level, therefore for all of the aforementioned tests to be

significant, the p-value had to be less than or equal to 0.05. When all other independent variables

are maintained constant, unstandardized coefficients show how much the dependent variable

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fluctuates with an independent variable. The beta coefficients for the 7 independent variables are

listed in Table 4. The individual variables' individual prediction strengths are shown by the beta

coefficients. The beta constant is negative, as can be seen from the table above. Leverage ratio

(LEV), capital gearing ratio (CGR), and dividend yield ratio (DY) all exhibit negative beta

coefficients, indicating that the dependent variable return on asset is inversely related to these

independent factors (ROA). This suggests that a unit change in the leverage ratio, capital gearing

ratio, and dividend yield ratio will, respectively, cause a 0.116, 0.009, and 0.005 change in

performance.

Conversely, the positive beta coefficients and statistical significance of the Dividend Cover Ratio

(DC), Firm Size (FS), Price Earnings Ratio (PE), and Research & Development Intensity Ratio

(RDI) indicate a positive association between the dependent variable, return on asset (ROA).

According to this, a unit change in the Dividend Cover Ratio, Firm Size, Price Earnings Ratio, and

Research & Development Intensity Ratio causes a proportional change in Performance of 0.022,

0.001, 0.337, and 0.135, respectively.

The independent variables Firm size (FS), Price Earnings Ratio (PE), Research & Development

Intensity Ratio (RDI), and Capital Gearing Ratio (CGR) have a substantial impact on the

dependent variable Return on Asset, according to the study's findings (ROA).

Consequently, the first regression model is:

ROA = 1.068 - 0.001 (FS) - 0.022 (DC) +0.009 (CGR) - 0.337 (PE) + 0.135 (RDI) + €

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5.3 Research & Innovation Investment and Return on Equity

5.3.1 Descriptive Statistics of ROE

Table 6: Descriptive statistics of ROE using regression model

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

ROE 5 .05 .06 .0617 .002571

RDI 5 .00 .00 .0031 .00151

FS 5 110 119 114.20 4.266

LEV 5 -.00 .02 .0113 .01351

DY 5 -.17 .02 -.0700 .08093

DC 5 .14 .48 .2874 .14335

PE 5 4.75 18.87 10.2112 5.74403

CGR 5 7.67 8.30 7.9283 .24980

Valid N 5

(listwise)

Some descriptive data for the variable used in this investigation are shown in Table 1. As can be

seen in the above table, there were a total of 5 samples used to calculate the Return on Equity

(ROE), which had a mean of 0.0617 and a range of 0.0583 to 0.0641 with a standard deviation of

0.0026. The research and development intensity ratio (RDI), with lowest and maximum values of

0.0016 and 0.0055, is 0.003120 on average. The median firm size (FS), which ranges from 110 to

119, is 114.20. The average leverage ratio (LEV), with minimum and maximum values of -0.0027

and 0.0281, is 0.011340. Dividend yield ratio (DY) lowest and maximum values are -0.1700 and

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0.0200, respectively, with a mean value of -0.0700. Dividend capital ratio (DC) ranges from a

minimum of 0.1402 to a maximum of 0.4896, with a mean value of 0.2874. The price earnings

ratio (PE) has a mean value of 10.2112, a minimum value of 4.7525, and a high value of 18.8770.

Last but not least, capital gearing ratio (CGR). The minimum and highest points are 7.6762 and

8.3041, respectively, with a mean of 7.9283.

5.3.2 ANOVA of ROE

Table 7: ANOVA of ROE using regression model

ANOVAa

Sum of

Model 2 Squares df Mean Square F Sig.

Regression 210.322 4 24.043 2.231 .000b

Residual 630.465 0 7.010

Total 840.787 4

a. Dependent Variable: ROE

b. Predictors: (Constant), DY, PE, RDI, CGR, FS, LEV, DC

The ANOVA test of the model's fitness is displayed in the table above. The data fits the model

well, as evidenced by the F statistic of 2.231 and significance level of 0.000, which suggests that

the model's specified variables are reliable predictors of performance.

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5.3.3 Coefficients of ROE

Table 08: Coefficients of ROE using regression model

Coefficientsa

Unstandardized Standardized

Coefficients Coefficients

Model 2 B Std. Error Beta t Sig.

(Constant) 1.007 .022 1.244 .104

FS .001 .021 1.244 2.121 .000

LEV -.121 .009 -.637 -.214 .698

DC -.002 .081 -.138 -2.320 .089

CGR -.004 .000 -.374 -2.099 .039

DY -.100 .012 -.501 -3.423 .002

PE .337 .026 .394 .381 .130

RDI .135 .021 .087 2.114 .421

a. Dependent Variable: ROE

The tests were run at a 95% confidence level, therefore for all of the aforementioned tests to be

significant, the p-value had to be less than or equal to 0.05. When all other independent variables

are maintained constant, unstandardized coefficients show how much the dependent variable

fluctuates with an independent variable. The beta coefficients for the seven independent variables

are shown in Table 8. The individual variables' individual prediction strengths are shown by the

beta coefficients. The beta constant is negative, as can be seen from the table above. An inverse

association between the independent variables leverage ratio (LEV), capital gearing ratio (CGR),

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dividend cover (DC), and dividend yield ratio (DY) is indicated by the independent variables'

negative beta coefficients (ROE). This shows that a unit change in leverage, capital gearing,

dividend cover, and yield ratios causes an inverse change in performance of 0.121, 0.004, 0.02,

and 0.100, respectively.

However, the price-earnings ratio (PE), research-and-development intensity ratio (RDI), and firm

size (FS) all exhibit positive beta coefficients and are statistically significant, indicating that the

dependent variable return on equity and these variables are positively correlated (ROE). According

to this, a unit change in the Price-Earnings Ratio, the Research and Development Intensity Ratio,

and the Firm Size causes a proportional change in performance of 0.337, 0.135, and 0.001

accordingly.

According to the study's findings, the dependent variable return on equity is significantly impacted

by the independent variables price earnings ratio (PE), research and development intensity ratio

(RDI), and firm size (FS) (ROE).

The second regression model then takes the form:

ROE = 1.007 - 0.337 (PE) - 0.135 (RDI) – 0.001 (FS) + €

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Table 09: Impact of research and innovation investment on return on asset

Explanatory Variables T-test at 5% level Decision

of significance

p<0.05

Dividend yield Ratio (DY) p=0.098 Not Supported

Dividend cover ratio (DC) p=0.000 Supported

Price earnings ratio p=0.130 Not Supported

(PE)

Capital gearing ratio (CGR) p=0.039 Supported

Research & development p=0.051 Supported

intensity ratio (RDI)

Firm size ratio (FS) p=0.000 Supported

Leverage ratio (LEV) p=0.670 Not Supported

Source: Author

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Table 10: Impact of research & innovation investment on return on equity

Explanatory Variables T-test at 5% level Decision

of significance

p<0.05

Dividend yield Ratio (DY) p=0.002 Supported

Dividend cover ratio (DC) p=0.089 Not Supported

Price earnings ratio p=0.130 Not Supported

(PE)

Capital gearing ratio (CGR) p=0.039 Supported

Research & development p=0.421 Not Supported

intensity ratio (RDI)

Firm size ratio (FS) p=0.000 Supported

Leverage ratio (LEV) p=0.698 Not Supported

Source: Author

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5.4 Revised Conceptual Framework

According to the study, firm size, dividend cover ratio, research and development intensity ratio,

and capital gearing ratio all have a substantial impact on a bank's financial performance as

measured by return on assets (ROA) However, when expressed in terms of return on equity,

dividend yield ratio, price earnings ratio and leverage ratio all have a major impact on the financial

performance of the bank (ROE). As a result, the findings indicate that research and innovation

investment have an impact on the bank's financial performance. The conclusions arrived at are

summarized in the updated conceptual framework below.

Research &
Innovation Investment

Dividend cover ratio

Research & development intensity ratio


Return on
Firm size ratio Asset

Capital gearing ratio Financial


Performance

Price earnings ratio

Dividend yield ratio Return on


Equity
Leverage ratio

Figure 2: Revised Conceptual Framework

Source: Researchers own design

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For any compliance or necessity, the R&D Division is connected to other Divisions. Management

decisions and R&D have a very close link. The management gives earnest consideration to the

R&D feedback. R&D receives manuals for all upcoming goods and services to test their viability.

R&D conducts analysis, creates reports in accordance with the specifications, and presents the

information to the user in a suitable manner. R&D also does a variety of support service tasks in

addition to research activities. This division periodically assesses the bank's organizational status

in light of economic and financial indicators as well as personnel conduct.

CHAPTER 6

RECOMMENDATIONS & CONCLUSION

6.1 Recommendation

I've noted a few of the R&D Division's most important projects that actually aid senior

management in making competitively and successfully informed decisions. These initiatives are

only timely undertaken to provide customers with unique products and services. The Managing

Director of MTBL oversees the R&D Division primarily. By adhering to its corporate head office

strategy, the Division primarily works for unanticipated demands and better services for its

customers. And I discovered that there is a strong connection between R&D activities and banking

operations. The management is occasionally assisted by the R&D department's comments in

understanding changes in market forces and in making timely decisions to maintain an advantage.

The actions listed below can be followed in order to accomplish this.

I. The banking sector primarily deals with money and how it behaves. Even while the R&D

section is allowed to look into various parts of banking operations, the financial aspect is

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largely lacking in this. This region is actually under the direction of Financial

Administration (FAD).

II. Reliance on outside market research firms should be reduced because their work is highly

sophisticated and competitively sensitive. More experts should be hired as a result.

III. R&D occasionally becomes bogged down with tasks from other departments. The flow and

routine tasks are hindered at that time. Therefore, management should prioritize R&D

projects.

IV. It is suggested that R&D projects be prioritized because they need extensive investigation

and the use of dependable tools and data.

V. The R&D Division cannot operate effectively with the current staffing levels.

6.2 Conclusion

There is no Research & Development Division in the other modern and fiercely competitive banks

in Bangladesh. The founder of the R&D Division in this case is MTBL. Other banks have now

formed this division as well in order to go forward. My time spent working in the research and

development division was productive because I gained a great deal from it. Following my

internship at MTBL, I have developed competence mostly in the following areas:

1. Analytical expertise

2. Banking knowledge

3. Research methodology

4. Expertise in different types of research tools and techniques.

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R&D investments play an important role as they display future growth opportunities in company

performance. This study examined the impact of R&D expenditures on the financial performance

of the MTB with the obtained in the 2017-2021 period. The findings of the study proved the

existence of relationship between R&D expenditures and financial performance. However, the

effect of R&D expenditures was found to be higher in ROE than ROA. It was also found that while

firm size increases overall profitability, leverage reduces its profitability.

6.3 Limitations of the study

 Due to secrecy, the bank did not disclose much information about the many initiatives it

completed. In certain ways, it was therefore impossible to obtain the R&D Division's

honest feedback, which might be seen as the opposite.

 The conclusion is based on an analysis of the R&D Division performance of a single bank.

Therefore, this sample size is too small to accurately reflect how R&D would affect

banking operations.

 As the entire report was created while working a full-time job in the concerned

organization, time was a very critical issue.

CHAPTER 7

7.1 REFERENCES:

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of Accounting and Finance, 15(7).

Fatima, S., Fatima, S., & Fatima, N. (2019). Effect of R & D Investment on Performance of

Banking Sector in Pakistan. Journal of Economic Info, 5(1), 1-6.

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Hall, B. H. (2002). The Financing of Research and Development. University of California at

Berkeley, National Bureau of Economic Research, U.S.A., and the Institute of Fiscal

Studies, London.

Erdogan, M., & Yamaltdinova, A. (2019). A Panel Study of the Impact of R&D on Financial

Performance: Evidence from an Emerging Market. 3rd World Conference on Technology,

Innovation and Entrepreneurship (WOCTINE), Bishkek, Kyrgyzstan.

Dave, P., Wadhwa V., Aggarwal S., & Seetharaman A. (2013). The Impact of Research and

Development on the Financial Sustainability of Information Technology (IT) Companies

Listed on the S&P 500 Index. Journal of Sustainable Development, 6(11).

Ayam, R. T. (2012). Investigating the need for research and development expenditure as a factor

of enhancing the performance of firms. Master’s Thesis, Umea University-Sweden,

Sweden.

Du E. (2022). Impact of bank research and development on total factor productivity and

performance evaluation by RBF network. The Journal of Supercomputing, 12070–12092.

Alam, S. M. S., Chowdhury, M. A. M. & Razak, D. B. A. (2021). Research evolution in banking

performance: a bibliometric analysis. Future Business Journal, 7(1).

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Performance of Cultural and Creative Enterprises? The Moderating Effect of Actual

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https://www.mutualtrustbank.com/investor-relations/annual-report/ 20 Oct, 2022.

MTBiz: In-house Newsletter for Mutual Trust Bank Limited [online] Available at

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