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The purpose of this paper is to investigate the determinants of intellectual capital performance in the UK banks over the period 1999‐2005.
Abstract
Purpose
The purpose of this paper is to investigate the determinants of intellectual capital performance in the UK banks over the period 1999‐2005.
Design/methodology/approach
Multiple regression analysis is used to test the relationship between the intellectual capital performance as a dependent variable and certain independent variables.
Findings
Results indicate that the standard variables, bank profitability and bank risk, are important. The results also show that investment in information technology (IT) systems, bank efficiency, barriers to entry and efficiency of investment in intellectual capital variables, which have not been considered in previous studies, have a significant impact on intellectual capital performance.
Research limitations/implications
More evidence is needed on the determinants of intellectual capital performance before any generalisation of the results can be made. In addition, the empirical tests were conducted only on the Major British Banks Group over the period 1999‐2005 and hence the results of the study cannot be assumed to extend beyond this group of banks or to different study periods.
Practical implications
The study might help the banking regulators in addressing the factors affecting intellectual capital performance to take actions towards developing their performance and in turn maximise their value creation.
Originality/value
This paper adds to the literature on the determinants of intellectual capital performance in banks. In particular, it tests the theories that investment in IT systems, bank efficiency, barriers to entry and efficiency of investment in intellectual capital have impact on intellectual capital performance.
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Francesco Paolone, Matteo Pozzoli, Meghna Chhabra and Assunta Di Vaio
This study aims to investigate the effects of board cultural diversity (BCD) and board gender diversity (BGD) of the board of directors on environmental, social and governance…
Abstract
Purpose
This study aims to investigate the effects of board cultural diversity (BCD) and board gender diversity (BGD) of the board of directors on environmental, social and governance (ESG) performance in the European banking sector using resource-based view (RBV) theory. In addition, this study analyses the linkages between BCD and BGD and knowledge sharing on the board of directors to improve ESG performance.
Design/methodology/approach
This study selected a sample of European-listed banks covering the period 2021. ESG and diversity variables were collected from Refinitiv Eikon and analysed using the ordinary least squares model. This study was conducted in the European context regulated by Directive 95/2014/EU, which requires sustainability disclosure. The original population was represented by 250 banks; after missing data were excluded, the final sample comprised 96 European-listed banks.
Findings
The findings highlight the positive linkages between BGD, BCD and ESG scores in the European banking sector. In addition, the findings highlight that diversity contributes to knowledge sharing by improving ESG performance in a regulated sector. Nonetheless, the combined effect of BGD and BCD negatively impacts ESG performance.
Originality/value
To the best of the authors’ knowledge, this is the first study to measure and analyse a regulated sector, such as banking, and the relationship between cultural and gender diversity for sharing knowledge under the RBV theory lens in the ESG framework.
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This study aims to examine the effect of ownership structure on financial performance of commercial banks in Kenya.
Abstract
Purpose
This study aims to examine the effect of ownership structure on financial performance of commercial banks in Kenya.
Design/methodology/approach
The data were collected from audited financial statements of 39 commercial banks in Kenya for the period 2009–2020.
Findings
Regression results found evidence of ownership structure explaining commercial banks’ financial performance. The results found a negative association between state ownership and net interest margin, a negative association between management ownership and net interest margin and a negative association between institutional ownership and return on assets.
Practical implications
Based on the findings, commercial bank management should therefore devise ownership structure policies that are geared toward boosting their financial performance both in the short run and the long run. Second, this study recommends a minority shareholding of the state in commercial banks to deter political interference, protect investors’ wealth from erosion and allow the majority shareholders to adopt a strong corporate governance mechanism for higher financial performance. Banks with a high percentage of state ownership should consider partial privatization to improve corporate governance practices. Third, banks should adopt a managerial ownership policy limiting the proportion of equity stock held by executives to limit their powers in strategic decision-making. Fourth, this study proposes a percentage limit on the equity stock of an institutional investor to eliminate bureaucracy in strategic decision-making and protect investors’ wealth.
Originality/value
The study finding is meant to inform regulation and operation policies in the banking sector and contribute to the literature on ownership structure, especially in the banking sector.
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Masah Alomari and Ibrahim Aladi
Financial inclusion is considered one of the strategic tools for sustainable development and one of the types of corporate social responsibility disclosures. This study aims to…
Abstract
Purpose
Financial inclusion is considered one of the strategic tools for sustainable development and one of the types of corporate social responsibility disclosures. This study aims to focus on the association between the disclosure of financial inclusion activities and Syrian banking companies’ performance.
Design/methodology/approach
Different regression models were suggested to examine the hypotheses leading to a better understanding of the relationship between financial inclusion and Syrian banking performance for the period 2005 to 2020 using the STATA 17.
Findings
The results showed a positive association between financial inclusion disclosure and Syrian bank performance, with low participation in financial inclusion activities (8%).
Research limitations/implications
The study recommends that the Central Bank of Syria work on developing an index of financial inclusion for the Syrian environment, with the issuance of legislation and laws that obligate all listed banks to disclose their financial inclusion activities as a part of their social responsibility.
Originality/value
This study incorporates the relationship between the disclosure of financial inclusion activities and the performance of Syrian banking companies, which has been neglected by most studies on financial inclusion. Therefore, this study sheds light on this positive relationship, which could have important repercussions in reviving the deteriorating Syrian economy following the crisis it went through, which, in turn, led to Syria’s high inflation affecting the poor and vulnerable disproportionately.
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Candida Bussoli, Danilo Conte and Marco Barone
This study intends to test the relationship between banks’ board diversity, detected with age and gender characteristics, and banks’ social performance. The resource dependence…
Abstract
Purpose
This study intends to test the relationship between banks’ board diversity, detected with age and gender characteristics, and banks’ social performance. The resource dependence theory posits that board diversity is a strategic tool able to enrich the board of directors by expanding skills and the number of links with stakeholders, which have a strategic role in achieving a competitive advantage and sustainable goals, especially in the banking sector.
Design/methodology/approach
The research hypotheses are tested using a sample of 46 European banks observed from 2009 to 2017. The gender and age diversity data of bank board members are hand-collected from banks’ social reports.
Findings
The empirical results show that bank social performance is positively influenced by board gender and age diversity. Thus, the human capital determined by a higher bank’s board diversity constitutes an essential resource for adopting more sustainable business models.
Originality/value
This paper analyses the association between board diversity and social performance, providing empirical evidence for the European banking sector in the period after the 2008 global financial crisis. The banking literature provides scarce evidence on the topic; however, the empirical results claim the strategic importance of the appointment of directors to the banks’ boards to balance corporate strategy with social and environmental issues generating a positive impact on sustainable growth.
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Jasim Al-Ajmi, Shahrokh Saudagaran, Gagan Kukreja and Sayed Fadel
The purpose of this study is twofold. The first is to examine the impact of environmental disclosure on banks’ performance, while the second is to investigate the moderating role…
Abstract
Purpose
The purpose of this study is twofold. The first is to examine the impact of environmental disclosure on banks’ performance, while the second is to investigate the moderating role of a country’s economic activities and institutional quality on the relationship between environmental activities disclosure and banks’ operational, financial and market performance.
Design/methodology/approach
The sample includes 246 banks from emerging markets from 2008 to 2020, comprising 1,899 bank-year observations. The independent regressors are environmental disclosure, two moderators and two sets of control (bank and country) variables. The dependent variables are return on assets, return on equity and Tobin’s Q. This study adopts ordinary least squares, panel fixed effect and instrumental variables generalized method of moments to estimate the parameters of the models.
Findings
This study reveals a negative relationship between environmental disclosure and bank performance, lending credence to the agency and neoclassical theories. The moderator regressors show positive influence on banks performance. The results indicate that it is difficult to make a business case for environmental commitment.
Practical implications
There is a need for effective monitoring by shareholders to ensure that funds allocated for environmental activities are spent wisely.
Originality/value
This study provides new evidence on the ways in which economic and institutional quality influence the environmental practices of banks in emerging and frontier markets.
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Elisa Menicucci and Guido Paolucci
This study aims to investigate the impact of environmental performance, social responsibility and corporate governance (ESG) on bank performance (BP) in the Italian banking…
Abstract
Purpose
This study aims to investigate the impact of environmental performance, social responsibility and corporate governance (ESG) on bank performance (BP) in the Italian banking sector. It analyzes the relationships between 10 dimensions of ESG pillars and BP indicators during the period 2016–2020.
Design/methodology/approach
This study examines a sample of 105 Italian banks and develops three econometric models to verify the effect of ESG initiatives on BP indicators. The independent variables are the ESG dimensions collected from the Refinitiv database, whereas the explanatory variables are performance indicators measured through accounting and market variables.
Findings
The findings show that ESG policies negatively affect operational and market performance in the banking sector, suggesting that Italian banks have not fully embraced strong sustainability procedures. However, the relationships between ESG dimensions are mixed if measured individually. The results show a significant positive impact of emission and waste reductions on financial and operating performance, but regarding social aspects, it is proved that better product responsibility decreases accounting performance.
Research limitations/implications
This study offers an in-depth examination of ESG practices in relation to current and future performance. In particular, the findings provide practitioners and academics with an actual set of predictors in the ESG area to improve BP.
Originality/value
To the best of the authors’ knowledge, this is the only study that has investigated the impact of ESG issues on BP in Italy. Few prior studies have used all dimensions of ESG policies at a disaggregated level to investigate their effect on various performance indicators.
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Wajeeha Aslam and Syed Tehseen Jawaid
The increased concerns for the environment have led organizations, businesses and nations to act environmentally friendly. This has also pressurized the banking sector to adopt…
Abstract
Purpose
The increased concerns for the environment have led organizations, businesses and nations to act environmentally friendly. This has also pressurized the banking sector to adopt green practices. However, there is a dearth of studies related to green banking (G-banking) adoption practices (GBAP) on banking performance. Hence, by considering the resource-based view theory, this study aims to examine the impact of GBAP on banking performance, i.e. financial, operational and environmental performance.
Design/methodology/approach
The data was acquired from banking personnel in Pakistan using a five-point Likert scale questionnaire and a non-probability purposive selection technique. In total, 400 responses were gathered, on which data screening was performed to detect and delete outliers. On a useful sample of 360, partial least square-structural equation modeling was used to validate the hypotheses.
Findings
The findings revealed that GBAP positively affects the environmental, operational and financial performance of the banks. The findings further revealed that GBAP largely affects environmental performance followed by operational performance and financial performance, respectively.
Practical implications
The study findings offer various insights to the policymakers and the banking sector to better implement G-banking practices in improving banking performance.
Originality/value
To the best of the authors’ knowledge, this is one of the first studies to look at the effect of GBAP on key performance outcomes, i.e. financial and operational performance. This study also verifies the use of resource-based perspective theory in the context of G-banking.
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Rim Boussaada, Abdelaziz Hakimi and Majdi Karmani
This research investigated whether corporate social responsibility (CSR) can alleviate the negative effect of non-performing loans (NPLs) on bank performance.
Abstract
Purpose
This research investigated whether corporate social responsibility (CSR) can alleviate the negative effect of non-performing loans (NPLs) on bank performance.
Design/methodology/approach
The research employed a sample of European banks over the 2008–2017 period. To resolve endogeneity and heterogeneity problems, the system generalized method of moments (SGMM) model was employed.
Findings
First, bank NPLs were negatively and significantly associated with bank performance as measured by the Q-Tobin ratio and the return on assets (ROA). Second, CSR scores exerted a negative and significant effect on the level of NPLs. Finally, the results indicated that bank performance could benefit from the interactional effect of CSR and NPLs.
Research limitations/implications
This study fills the gap in the debate over the mediating role of CSR in the NPLs – bank performance interrelation. In addition, our SGMM analysis yielded more robust and efficient results while resolving endogeneity and heterogeneity problems concerning CSR and bank performance or risk in corporate finance.
Practical implications
CSR practices can play an essential mediating role in the NPLs–bank performance relationship. CSR activities in the European context may reduce the level of NPLs and increase bank performance.
Originality/value
To the best of the authors’ knowledge, studies of the implications of CSR activities on the banking sector are very limited. Indeed, this paper shows that CSR mediates the relationship between CSR practices and NPLs. The results suggest that bank performance could benefit from the interactional effect of CSR and NPLs.
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Nirali Jagjivanbhai Kantharia and Jivan Biradar
Every shock, starting from the banking sector reform in 1992 to the global crisis due to Covid-19 pandemic, affects the performance of banks. The shocks and transformations…
Abstract
Purpose
Every shock, starting from the banking sector reform in 1992 to the global crisis due to Covid-19 pandemic, affects the performance of banks. The shocks and transformations jeopardise the bank’s performance. This study cover period of 30 years starting from 1992. So, the reason behind taking only public sector banks is that after 1991–92 many banking sector reforms took place, and many new private sector banks and foreign sector banks entered into competition due to the liberalization, privatization, globalization (LPG) policy. So, it has been difficult for public sector bank to manage their performance in a competitive market. So, the purpose of this study is to find out influencing factors of bank performance especially public sector bank, because, it has been vital to identify factors influencing their performance.
Design/methodology/approach
The current study explores the determinant of the performance of public sector banks in India. Currently, in India, 12 banks are public sector banks, which capture 59.8% market share in the banking industry. After 1994 new licences were issued by Reserve Bank of India for many banks, and foreign sector banks entered the market as an effect of LPG policy, and market competition is one of the significant determinants of the performance of banks. Thus, the panel regression model is used to analyse the impact of various determinants on the performance of public sector banks (from 1992 to 2021). Return on equity and return on assets are used as indicators of performance, whereas influencing factors are divided into two parts, bank-specific factors, which include bank size, asset quality (AQ), liquidity, credit deposit ratio (CDR), capital adequacy, debt-equity ratio, employee’s productivity and macroeconomic factors which include inflation rate, tax rate and gross domestic product (GDP).
Findings
Results of the study show that bank size is not an essential factor for measuring bank performance because it is insignificant with both indicators of performance. AQ, liquidity ratio and CDR are significant in both models with negative impact. Macroeconomic factors like GDP are insignificant with both indicators with positive relations and tax rates are significant with a positive relationship. The inflation rate is significant but affects negatively to performance.
Research limitations/implications
This study only focuses on public sector banks. So, the results for private and foreign sector banks might differ. Considering the larger market share compared to other sector banks, the authors are focusing on public sector banks only. Foreign banks and cooperative banks are not included current analysis because of huge numbers and different working environments.
Originality/value
Determining influencing factors of bank performance is crucial because it will help the bank take various policy implications and formulation. Since independence measuring bank performance are important area.
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