Padma Bank 2024
Padma Bank 2024
Padma Bank 2024
Submitted by
20264075
Department of Finance
BRAC University
November 2022
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
3. The report does not contain material which has been accepted, or submitted, for any other
20264075
___________________________________________
Dr. Faruk Bhuiyan
Assistant Professor
BRAC University
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Letter of Transmittal
Assistant Professor
BRAC University
66 Mohakhali, Dhaka-1212
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,
_______________________
BRAC University
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Non-Disclosure Agreement
This agreement is made and entered into by and between Mutual Trust Bank and the
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
_______________________
Ashique Iqbal
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Letter of Endorsement by the Supervisor
completed the report entitled “The Impact of Research and Innovation Investment on Bank’s
requirement for the internship program under my supervision. I appreciate his hard work and
Internship Supervisor
_________________
Assistant Professor
BRAC University
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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
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
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
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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
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Table of Contents
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2.9.4 Loan Products ............................................................................................................. 24
3.3 Review of Related Empirical Studies- Research and innovation with banks financial
performance .................................................................................................................. 31
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4.8 Method of Data Analysis and Statistical Tools ............................................................ 41
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LIST OF FIGURES
LIST OF TABLES
Table 10: Impact of Research & Innovation Investment on Return on Equity .................. 56
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List of Abbreviations and Acronyms
Acronym Abbreviations
DY Dividend Yield
DC Dividend Cover
FS Firm Size
LEV Leverage
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CHAPTER 1
INTRODUCTION
The Impact of Research and Innovation Investment on Bank’s Financial Performance: A Study on
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
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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
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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
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1.4 Research Questions
RQ1: Is there any impact of research & innovation investment on financial performance of Mutual
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?
The general objective of this study is to examine the impact of research & innovation investment
• 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
• 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).
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
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
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.
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
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
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.
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CHAPTER 2
COMPANY OVERVIEW
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
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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
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
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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:
Commitment:
Shareholders – Create sustainable economic value for their shareholders by utilizing an honest and
Community – Committed to serve the society through employment creation, support community
Customers – Render state-of-the-art service to their customers by offering diversified products and
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
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
Trust: They value mutual trust, which encompasses transparent and candid communications
Market Category A
Market Lot 1
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Total Shares 19,160,910,000
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
1. Wholesale Banking
2. Retail Banking
3. Privilege Banking
4. SME Banking
5. NRB Banking
6. Card Services
7. Treasury Operations
2. MTB Inspire
3. MTB Ruby
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5. MTB Senior
6. MTB Junior
4. MTB Graduate
5. MTB Kotipoti
2. Home loan
4. Auto loan
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2.11 Awards and Accolades
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2.12 Hierarchy of Position of MTBL
Chairman
Board of Director
Executive Level
Executive Committee
Vice President
Principal Officer
Senior Officer
Entry Level
Management Trainee
Junior Officer
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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
Each functional group is very reliant on and supportive of the others, and there is considerable
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
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
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.
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3. Operations Research (Financial markets and the economy)
iv. A comparison of the bank’s performance to that of other banks in its generation or category
vi. Studies that adhere to the core goals of the business policy
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
▪ Assist the research team in primary and secondary qualitative or quantitative data
collection.
▪ 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.
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▪ Publications work/research: proofreading, design ideas, questionnaire preparation.
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
v. News publication
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,
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
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
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
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
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
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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
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
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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
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
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.
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
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
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
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
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
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
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
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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.
Independent Variables
Research & Innovation
Investment Indicators Dependent Variables
Financial Performance
Measurement
Dividend Yield (DE)
Leverage (LEV)
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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
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.
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,
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
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
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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).
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
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
The statistical methods used to examine the data and determine the various correlations between
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).
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
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
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4.9 Definition of variables and their measurement Table
Variables
Return on Asset The ratio of net income to ROA Annual Net Income /
Return on Equity The ratio of net income to ROE Annual Net Income /
Source: Author
Independent
Per Share
Ordinary Share
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Price Earnings Company’s share price to PE Market Price /
Capital Gearing The ratio of debt a company has CGR Prior charge capital /
processes.
Source: Author
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
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Model 1: ROA = β0 +β1DY + β2DC + β3PE + β4CGR + β5RDI + β6FS+ β7LEV + €
CHAPTER 5
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
summary, ANOVA, coefficient, etc. and others are performed on the data using IBM SPSS
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5.2 Research & Innovation Investment and Return on Asset
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).
Descriptive Statistics
Std.
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,
ANOVAa
Sum of
Total 11.367 4
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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
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients
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,
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
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
Descriptive Statistics
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
ANOVAa
Sum of
Total 840.787 4
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
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5.3.3 Coefficients of ROE
Coefficientsa
Unstandardized Standardized
Coefficients Coefficients
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,
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
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Table 09: Impact of research and innovation investment on return on asset
of significance
p<0.05
(PE)
Source: Author
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Table 10: Impact of research & innovation investment on return on equity
of significance
p<0.05
(PE)
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
Research &
Innovation Investment
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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
CHAPTER 6
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
understanding changes in market forces and in making timely decisions to maintain an advantage.
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
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
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
1. Analytical expertise
2. Banking knowledge
3. Research methodology
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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
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
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
CHAPTER 7
7.1 REFERENCES:
VanderPal, G. A. (2015). Impact of R&D Expenses and Corporate Financial Performance. Journal
Fatima, S., Fatima, S., & Fatima, N. (2019). Effect of R & D Investment on Performance of
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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
Dave, P., Wadhwa V., Aggarwal S., & Seetharaman A. (2013). The Impact of Research and
Ayam, R. T. (2012). Investigating the need for research and development expenditure as a factor
Sweden.
Du E. (2022). Impact of bank research and development on total factor productivity and
Zang, Z., Zhu, Q., & Guerrero, H. M. (2019). How Does R&D Investment Affect the Financial
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Retrieved from Mutual Trust Bank Limited (MTB) [online] http://www.mutualtrustbank.com/,
MTBiz: In-house Newsletter for Mutual Trust Bank Limited [online] Available at
Gardner, M. J., Dixie, L. M., & S.C., E. (2004). Managing Financial Institutions. An assets liability
approach. New York: The Dryden Press, A division of Harcourt Wilson, J. (2014).
Essentials of business research: A guide to doing your research project. Sage College.
Cooper, R.D. & Schindler, P.S. (2011). Business Research Methods. New Delhi: Tata McGraw-
Hill.
Malhotra, N (2007). Marketing Research: An applied Orientation, 5th ed., PHI, New Delhi.
Molla, I. (2021). R&D and bank performance nexus: evidence from dynamic panel threshold
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