Bank Performance and the Association Between Accounting Income and the CAMEL Framework: Evidence from Kuwait

Abstract

The study examines the overall performance of Kuwaiti banks using the CAMEL framework; shows if accounting income is associated with the CAMEL framework; and compares the performance of commercial banks and Islamic banks. The results of the study indicate that Kuwaiti banks in general have high ratios of capital adequacy, earnings quality, asset quality, and management quality; conventional banks are generally performing better than Islamic banks; and accounting income is highly associated with the CAMEL framework. The later finding implies that accounting income can be used as a proxy to measure banks performance and supports the claims by accounting standards setters that accounting income number has value relevance to users of financial statements. The findings are expected to be useful to regulators and other stakeholders to make better and informed decisions.