Impact of trade settlement delays on the financial performance of listed brokers in Bangladesh

Abstract

This internship report focuses on analyzing and examining the impact trade settlement delay has when it comes to the financial performance of listed brokerage houses in Bangladesh. This report mainly uses a quantitative approach by using the dataset of 10 years of 10 brokerage houses in Bangladesh to understand how settlement delays affect cost efficiency, profitability, and borrowing behavior of the brokerage houses. Since the data regarding settlement delays was not publicly available, measures like liquidity stress, borrowing spikes, and delay-induced cost indicators were used as proxies in order to capture the mechanisms of delayed settlements. Through analyzing the results of the study, it can be said that trade settlement delays are a structural risk factor for the listed brokerage houses of Bangladesh. This especially applies to brokerage firms with weak liquidity or inefficiency in asset utilization. Brokerage houses that are exposed to higher liquidity stress tend to show lower asset and equity returns, a higher costto- income ratio, and increased dependency on short-term borrowing. These effects on the brokerage houses seem to increase even more when there are periods with higher trading activities, which amplify the financial vulnerability of these firms. The study concludes that improving settlement is critical for enhancing firm resilience.