Abstract
IV ABSTRACT THE PERFORMANCE, EFFICIENCY AND STRATEGY AIMS OF JOINT VENTURES IN THE BANKING SECTOR LIBYAN CASE (1980-89) The Libyan economy, which had been based exclusively on oil income since oil was discovered in the early 1960s, was too vulnerable, and during the 1970s a policy of income diversification became a necessity. The establishment of the Libyan Arab Foreign Bank (LAFB) was felt to be one of the solutions to this problem, in that investing abroad was considered safe and would at the same time yield reasonable gains. Soon after, LAFB' s joint ventures abroad were gradually established, covering three continents. A number of years later, when the country was facing serious economic problems, particularly because of a dramatic oil market recession which began in the mid 1980s, it became important to make an accurate evaluation of the performance and efficiency of LAFB and its joint ventures abroad, and to verify the aims of their strategy and the factors that could affect their activities.V In undertaking this task the present study considers the ten-year period from 1980 to 1989 and applies a ratio analysis technique which represents the backbone of the research. We consider this technique to be a valuable tool in that the large quantity of financial data we have collected can be presented in a meaningful form, with the accepted and desirable features of simplicity and comparability. We have calculated and analyzed some profitability ratios, efficiency ratios, capital and cash ratios, as well as other ratios. In the case of LAFB we have compared these ratios with those of other international peer banks; in the case of LAFB' s joint ventures (in Europe, Africa and Asia), their related ratios were compared with one another. Since ratio analysis is quantitative and static in nature, it has been integrated with questionnaires which supplement our data with qualitative information about those factors that might be behind the ratio analysis results. The Kolmogorov-Smirnov test was applied to the answers received to determine whether or not there were particular preferences and, therefore, to enable us to generalize our results. Our analyses indicate that the performance and efficiency of LAFB are in general inferior to those of other international peer banks, and we can attribute this to management factors, economic factors, and political and cooperational factors. As for LAFB1 s joint ventures, we recorded numerous differences between them in the case of certain profitability and efficiency ratios. In particular, we can say that the European joint ventures are more profitable than the others, but not always preferable when some otherVI ratios are considered. Also in this case there is the influence of certain competitive and environmental factors, such as management and economic factors, the efficiency of financial markets, and political and cooperational factors. The strategy aims of LAFB to invest abroad in the banking sector in general, as our study has pointed out, are economic as well as political and cooperational. Such strategy, however, is not identical in the various continents were LAFB1 s joint ventures have been established. In Europe and Asia, for example, the economic goals are very influential, whereas the political and cooperational goals predominate in Africa.
