The effectiveness of legal protection for juveniles in Algerian correctional institutions

The primary purpose of bank management is to maximise shareholder returns, which exemplifies the bank's success (Adeusi, Akeke, Adebisi, & Oladunjoye, 2014). Accomplishing one's goals often involves taking on more risk. There are several risks that the bank is vulnerable to, including interest rate and market risks; credit risk; balance risk; technology and operational risks; currency risk; country and bankruptcy risk; and so on and so forth (Adeusi et al., 2014). Underperformance of the bank serves as a driving force behind risk management.

Risk management issues in the banking industry are more detrimental to economic development than they are to banks themselves (Adeusi et al., 2014). Evidence suggests that previous deviations in the return on deposit had a significant effect on not only trade price fluctuations but the corporate value of stocks as well, which means that banks can be a contributor to panics in times of crisis.

According to previous research, uncertainty dynamism is an important factor to consider when deciding on the best approach to use (Badshah et al. 2019; Nowak & Wojtowicz 2015; Vukosavljevi et al. 2016). Moderators might have been found in some studies that supported findings indicating weak or inconsistent relationships between the independent and dependent variables. In these studies, the inclusion of moderators verified that relationship between the two independent variables. This approach may be used to explain the interaction between the independent variables and dependent variables. For this reason, this article explores how uncertainty dynamics relate to risk management and success.

In Libya, studies into the impact of risk management in general, or credit risk management in particular, have not been conducted. As a result, the goal of this study is to fill in that knowledge vacuum by assessing the link between risk management and financial performance and the moderating influence of uncertainty dynamism on risk management (risk identification and risk analysis).

Financialperformance and credit riskmanagement ofcommercialbanks

The ultimate goal of a bank is to accept deposits and provide credit, for which financial institutions are inherently subject to credit risk. Credit risk is the main risk to which banks are being exposed, and their success highly depends on their ability to consider and manage the risk's impact on the company. When the value of the debtor (or the counterparty)'s financial instruments or derivatives changes, so will the value of their debt instruments.

It seems that credit risk has mixed effects on bank performance from both practical and academic studies. Credit risk and selling bank performance have gone in opposite directions according to a few surveys, while others demonstrated a positive result. In contrast, a research found no association between bank profits and credit risk. Financial performance is normally decided by credit risk rather than other factors, according to many reports.

Non-performing loans were studied in four Swedish banks between 2000 and 2008, according to the findings of Hosna et al. (2012). Loan nonperformance and capital adequacy ratios were shown to be negatively correlated with ROE, however the size of the correlation varies amongst banks. Since then, Kithinji (2010) has categorized industry sectors into financial and non-financial groups based on loan-to-asset ratios. The group with half of all banks and half of all non-performing loans was the financial group and tended to be profitable but also had relatively high levels of bad debt. Based on the findings, commercial banks' revenues are not meaningfully impacted by the volume of non-performing loans and the total value of loans. There are more aspects that impact a bank's performance that need to be studied further in order to get a more complete picture. Due to its importance as a source of financial uncertainty, credit risk was a focus of this investigation.

Using data from five distinct Nigerian banks over a 15-year period (1997–2011), Marshal and Onyekachi (2014) performed an empirical research to determine how credit risk and bank performance evolved in Nigeria. Time series and cross-sectional bank accounts data were used to construct panel data regression models. There was a linear relationship between the LogNPL ratio and bank performance indicated by the results (LogROA). Predicted results did not match those achieved, suggesting that the banks assessed had a low rate of nonperforming loans. There was also a link between the bank's performance and its loan-to-deposit ratio (LogLA) (LogROA). Banks' performance improves as a result of rising interest income from loan and credit activity. The following hypothesis is posited as a result of this conversation.

Hypothesis 1: Credit risk management and bank financial performance have a significant relationship.

Moderating Effect ofthe Variable Uncertainty Dynamism

According to fit, independent factors have an effect on dependent variables only to the degree to which a moderating variable is present. Risk management and financial performance are linked in this research with a moderating effect of the dynamism (R. M. Baron & Kenny, 1986; Gligor, 2017). To understand a firm's dynamic capabilities and market attitude, one must look at how well the company is able to adapt its resources and talents to the ever-changing business landscape (Andreeva & Chayka, 2006;

According to multiple studies, credit risk does not seem to have a significant impact on a bank's profitability. Some studies found a negative association between credit risk and bank productivity, others found a positive association. The research that found no correlation between credit risk and bank profitability is on the opposite end of the spectrum. Some studies looked at risk in general as a criterion of bank productivity, credit risk was the most common risk factor that could affect bank profitability.

So, the next part explains how to test these assumptions in the following paragraphs:

H2: Dynamism in the environment modifies the link between management of credit risk and financial performance.

Methods

A standard rating questionnaire was prepared and given to members of the sample population. Hand-delivered questions were only sent if they didn't get an answer, Participants were given a chance to finish the survey prior to it was collected, allowing sufficient time for thorough study, therefore the bulk of surveys were distributed and collected physically. Based on a review of relevant literature, questions were formulated to get a deeper understanding of the study's objectives. The questionnaire was sent to the chairperson of four professors on the faculty of the University of Misurata, besides two former officials with experience in Libya's banking industry, in addition to two officers of the Central Bank of Libya. Questions were utilised to uncover measurement errors, to clear up ambiguous situations, and to examine nonverbal behaviour in this pilot research. Before finishing the study, the questions were reworked if required. The study's validity was tested by looking at things like face features and content. Reliability analysis was used to establish good generalizability across the test items for each construct. Participants had the option to leave the research at any moment, and their participation was entirely voluntary. From Stk Ilkay M., and Aslan E., We developed a 5-point scale from 1 (strong disagreement) to 5 (strong agreement) (2012). Dynamics uncertainty can be measured using four different scales (Mar Fuentes-Fuentes et al., 2004).

This survey's high response rate was made possible by the use of pre-coded questions. In social science research, they used Likert scales to gauge participants' perceptions, beliefs, views, and attitudes (DeVellis, 2003). Area, age, gender, department, and productivity level were all factors that were surveyed by participants and were analysed using structural equation modelling and partial least squares (PLS) techniques.

Major Libyan banks in the center part of the states were the study's focus of demographics. The board of directors and members of risk committees, senior managers, and department heads of Libyan banks in the western region were possible subgroups of this committee. Credit risk management and financial performance were the main criteria used to select these subgroups. Participants completed standardised questionnaires to provide their thoughts and insights on the financial performance of universal banks in light of the influence of bank risk management in this paper's experimental design and size. For the protection of personal information, all survey responses were anonymous. Survey results were stationed in a safe among them all in a locked box. To conduct the surveys, they contracted with a professional for questionnaire response. For those who needed clarification on a particular subject, research assistants were informed of the situation.

Results

The questionnaire was distributed to 280 respondents chosen at random. 234 of the 200 surveys were returned. The ultimate number of usable questionnaires was 216 which deemed enough for data analysis. According to the demographic statistics, 93 percent of respondents were males and 6.6 percent were females. A minority of respondents were aged 50 or older, with a percentage of 37. Meanwhile, 38.9 percent of respondents were between the ages of 30 and 39. According to the respondents' occupations, they were classified as department heads (30.1 per cent). External auditors are then consulted (23.1 per cent). The majority of respondents (51.9%) held a master's degree, followed by those with a diploma (24.5%). In terms of experience, the majority of respondents had between 10 and 20 years of experience, (38.9%). Additionally, 87.7% of the samples were from respondents who worked for public and 12.3% from those who worked for private banks.

Validity in Convergence

Convergent validity refers to the degree to which several items used to test the same concept in study are consistent (Ramayah, Lee, & In, 2011). Convergent validity is generally defined by the principal loadings, average variance extracted (AVE), and composite reliability of the measures utilised in this research (CR). Three components (CRI2; EU5; FP4) were omitted from the main and cross loading analyses using a 0.50 cut-off value. as per Chin (1998b) and Hair et al (2013a).

The reliability of the measuring items used in this research was evaluated using composite reliability. Composite reliability is more suited for PLS-SEM than Cronbach's alpha in comparing the reliability of indicators (Hair et al., 2011). Nunnally and Bernstein (1994), Hair et al. (1995) said that the composite reliability should be more than 0.70. (2011). Internal consistency is a measure of composite dependability, which is related to a block's homogeneity (Barroso et al., 2010). In this study, each endogenous variable had a composite reliability better than 0.70. Given these variables, we may conclude that both measurements have consistency and are reliable. As a result, Table 1 includes the results of the analysis.

Table 1 : Construct validity and reliability

Variable	Factor	Loading	AVE	CR
Management of Credit risk	Risk identifying	0.829	0.667	0.855
	Analysis of risk	0.934
	Monitoring of Risk	0.665
Management of Credit risk	CR1	0.886	0.709	0.957
	CR2	0.088
	CR3	0.849
	CR4	0.909
	CR5	0.870
	CR6	0.874
	CR7	0.920
	CR8	0.906
	CR9	0.875
	CR10	0.896
Uncertainty Dynamism	DU1	0.780	0.602	0.945
	DU2	0.765
	DU3	0.729
	DU4	0.755
	DU6	0.818
	DU7	0.787
	DU8	0.792
	DU9	0.815
	DU10	0.728
	DU11	0.775
	DU12	0.778
Financial Bank Performance	FBP1	0.816	0.618	0.904
	FBP2	0.839
	FBP3	0.735
	FBP5	0.668
	FBP6	0.825
	FBP7	0.793

CR= Credit risk DU = Uncertainty Dynamism, FBP = Financial Bank performance

Analyzing the model

The coefficients of the explanatory variables in the PLS structural model show the connection between variables, as depicted in the chart (Hair et al., 2013a). The standardised beta coefficients for regular least squares regression can be used to determine all route coefficients. There is a range of values for path coefficient estimates from -1 to +1. Positive path coefficient estimates indicate a strong positive association, while negative values indicate a strong negative one (Hair et al., 2013a).

Direct Outcomes

The direct effects of factors on each other were studied based on the study's assumptions, and the results were summarised in Table 2.

Table 2: Direct analysis

Hypothesis		Original Sample	SD	T Stats (|O/SD)	P Value	Decision
H1	CR->FBP	0.174	0.068	2.494	0.014	Supported

CR= Credit Risk, FBP = Financial Bank performance

The correlation between credit risk management and financial performance is significant (b = 0.174, p = 0.014).

The moderating impact ofDU

The findings reveal that a low degree of environmental dynamism has an effect on the link between credit risk management and financial performance (= -0.092, p<0.01), implying that a higher level of environmental unpredictability reduces financial performance. Satisfaction's R2 score is enhanced from 0.634 to 0.683. As a result, it is reasonable to conclude that H2 was accepted, but in a negative manner.

Table 3 : Results of moderator variable

Hypothesis		Original Sample	Sample Mean	Standard Deviation	T Statistics	P Value	Decision
H2	Moderating Effect of UE between CR and FBP	-0.092	-0.092	0.042	2.186	0.026	Supported

CR = Credit Risk. DU = Uncertainty Dynamism, FP = Financial performance

Predictive Relevance (Q2)

Table 4: Prediction Relevance (Q²)

	SSO	SSE	Q² (=1-SSE/SSO)
FP	1,295	987.32	0.237

Credit risk management appears to have a significant relationship with financial performance (=0.174, p = 0.014).

Discussion

If a company has fulfilled or exceeded financial objectives, they are said to have achieved financial success. Based on little experience, Libyan banks' financial performance looks to be adequate. Based on a standard definition of financial success, this result is congruent with findings from earlier research (Mohammad, Prajanti, & Setyadharma, 2020). The descriptive analysis reveals a satisfactory level of financial performance, with an average score of 3.6. Risk identification, risk analysis, and risk monitoring were all examined by the researchers in their study of the association between financial performance and risk management aspects. The management of credit risk seems to have a positive relationship with financial performance. Good credit risk management's impact on financial performance, both qualitative and quantitative, is still up for debate. Prior research on credit risk management have shown how much the performance of an institution's finances may affect that institution (Adekunle, Alalade, Agbatogun, & Abimbola, 2015; Taiwo et al., 2017).

Studies of bank managers' evaluations of financial performance found a strong link between credit risk management and financial success. This confirms the findings of previous studies, such as (Alshatti, 2015; Bastomi, Salim, & Aisjah, 2017;

According to previous studies on risk management and external environmental dynamism, organisations face significant hurdles when implementing an active strategy in a changing environment. A significant degree of environmental uncertainty needs a more proactive technique, such as particular credit risk management, in this scenario (Clemens, Bamford, & Douglas, 2008;

However, the characteristics of Libyan banks may be a plausible explanation for this insignificant result. Nonparametric tests were utilised in this study instead of the PLS software's parametric testing, which may have contributed to the findings. There may be another reason for this result, which is that managers' strategic position toward credit risk is unlikely to be quickly altered by their perceptions of a dynamic environment or changes in the environment. Uncertainty was measured using descriptive data, which indicated a consistent level of environment for the responder. Credit risk management strategies seem to have been overlooked by the managers of responding organisations in a stable environment despite the fact that these managers are capable of forecasting their stakeholders' expectations for a natural or steady environment.

Report finishes with a list of policy suggestions for the country's management and investors. Libyan banks' financial performance seems to be influenced by credit risk management. For this reason, banks must ensure that they have enough liquidity in each product area and keep it at an optimum level in order to reduce their cash holdings. Additionally, banks may want to target large corporations that are willing to keep a big amount of cash on hand in their accounts for a long period.

To guarantee the study's efficacy, certain methodological limits were taken into consideration. Even though the research technique was tailored to the study's aims and concentrated on the study's most significant aspects, this research has its limits. Several people expressed their displeasure with the process of completing the survey. The study was hampered by the uncertain political climate in Libya, as well as the fear of the issue's sensitivity.

Second, this research depends on self-reporting by Libyan banks executives and middle managers. The problem of common method variance was inescapable since the questionnaire was constructed in such a manner that individual banking managers might approach it. In research, common method variance is an issue when response variability overlaps due to data collection from one source. To rule out this possibility, the Harman-single factor test with unrotated factor analysis was used. The common method variance posed a limitation since it did not account for the majority of the variation in this inquiry.

Using data from the study, the authors provide the following suggestions for reducing credit risk and maximising financial advantages. Risk identification, risk analysis, and risk monitoring are critical components of credit risk management in Libyan commercial banks. An effective risk management system must have a good credit-giving mechanism, a professional credit administration system, as well as proper credit risk controls to ensure that the system is efficient. In order to minimise their exposure to credit risk, banks should have comprehensive credit risk management systems, including extensive credit assessments prior to lending to customers. Credit risk management was also examined in this research. Bank financial performance is influenced by 55.5 percent unresearched factors, and 44.5 percent studied ones. As a result, future studies may look at other aspects that impact a bank's financial success.

A bank's financial performance is dependent on risk management, hence banks should prioritise risk management. Banks must set aside more funds for default rate reduction while maintaining an acceptable level of capital to reduce loan risk and maximise performance.

When looking at banking concerns, it is essential to take into account external contextual elements (such as the environment's dynamic behaviour). The dynamic environment that affects risk management in Libyan commercial banks is the most important factor in understanding the poor financial and non-financial performance of Libyan banks.

Conclusion

Credit risk management, this study concluded, is a significant predictor of financial performance in the Libyan banking system. Additionally, environmental dynamism was discovered to have an effect on the relationship between credit risk management and bank performance, showing that financial performance can be easily attained despite environmental dynamism's interference. It is certain that if the Libyan banking industry takes into account the study's conclusions, it will perform well and, more significantly, will achieve greater financial performance.

Limitation

The political volatility and the sensitivity of the present situation in Libya made the study particularly challenging. Second, the findings of this research were based on information supplied by the Libyan banking industry's top and intermediate management. Because the questionnaire was meant to be completed by individual bank managers, the problem of common technique variation was inevitable.