Journal of Business & Financial Affairs

ISSN: 2167-0234

Open Access

The RAROC as an Alternative Model of Analyzing the Lebanese Banks’ Performance and Capital Allocation


Viviane Y. Naimy

This paper attempts to depict the required equations for applying the RAROC paradigm for the Lebanese banks as it is currently the only practicable solution to capital budgeting problems. We used the RAROC as a proxy for value creation assessment. Our empirical study showed an outstanding economic profit for the home loans line of business; earnings exceeded the required return on capital by 5.2% compared to a hurdle rate of 8.5%. This line of business has positively contributed to the overall value of these banks. We were unable however to measure the diversification benefit of this line of business.


Share this article

Google Scholar citation report
Citations: 1726

Journal of Business & Financial Affairs received 1726 citations as per Google Scholar report

Journal of Business & Financial Affairs peer review process verified at publons

Indexed In

arrow_upward arrow_upward