Search results

1 – 10 of over 39000
Click here to view access options
Article
Publication date: 4 November 2021

Syed Moudud-Ul-Huq, Tanmay Biswas, Md. Abdul Halim, Miroslav Mateev, Imran Yousaf and Mohammad Zoynul Abedin

This study aims to show the relationship between competition, financial stability and ownership structure of banks in the Middle East and North African (MENA) countries.

Abstract

Purpose

This study aims to show the relationship between competition, financial stability and ownership structure of banks in the Middle East and North African (MENA) countries.

Design/methodology/approach

This study uses the generalized method of moments (GMM) estimators to generate research results. This study uses an unbalanced panel dynamic data set. It covers the period 2011 to 2017 in MENA banks.

Findings

This study implies that there is a significant and positive relationship between market power and the financial stability of banks in MENA countries. It explains a competitive market focus on credit risk, which turns them risky. From the bank’s ownership view, Islamic banks are in a less risky position which means Islamic banks are more stable than other ownership structures. On the other hand, government specialized institute displays their poor financial stability and risky from other ownership structures. Unfortunately, there is no significant impact of ownership structure on competition unless Islamic banks prove that they (Islamic banks) perform better in market power.

Practical implications

The empirical findings of this study suggest that MENA banks should improve the process of managing and monitoring the non-performing loan (loan segment business). It reduces the level of credit risk, which leads to achieving more profit. It also recommends that loan quality should improve immediately in this region for declining financial disruption. Based on the ownership structure, policymakers and stakeholders should adjust their risk and financial stability. Notably, the stakeholders can focus on Islamic banks in this region as this type of ownership structure showing superiority over other ownership structures.

Originality/value

This study is based on the latest data set and produced outcomes by using a GMM estimator. It also uses multiple measures of competition and risk variables to get robust results. Moreover, to the best of the knowledge, this study is the pioneer to examine the competition, risk (financial stability) and ownership structure of banks in the MENA countries.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8394

Keywords

Click here to view access options
Article
Publication date: 8 October 2021

Yong Tan, Vincent Charles, Doha Belimam and Shabbir Dastgir

This study investigates the interrelationships between efficiency, competition and risk in the Chinese banking industry.

Abstract

Purpose

This study investigates the interrelationships between efficiency, competition and risk in the Chinese banking industry.

Design/methodology/approach

Parametric stochastic frontier analysis is used to estimate bank efficiency; the Lerner index is used as the competition indicator; accounting ratios and a translog function are used to measure different types of risk and finally, the three-stage least square estimator is used to investigate the interrelationships.

Findings

The results of this study show that the impact of competition on different types of risk is significant and positive, while there is a significant and positive impact of credit risk, liquidity risk and capital risk on bank competition. In addition, the findings demonstrate that the interrelationships between efficiency and competition are significant and negative. The authors do not find any robust interrelationships between different types of risk and different types of efficiency; the authors find that diversification and higher levels of profitability reduce bank credit risk. The results suggest that a higher developed banking sector reduces the level of bank competition in China.

Originality/value

This is the first piece of research that comprehensively investigates the interrelationships between different types of risk, competition and different efficiencies in China.

Details

Asian Review of Accounting, vol. 29 no. 4
Type: Research Article
ISSN: 1321-7348

Keywords

Open Access
Article
Publication date: 29 September 2021

Nicholas Addai Boamah, Augustine Boakye-Dankwa and Emmanuel Opoku

The study examines the dynamic association between competition, risk-taking, performance and income diversification of frontier and emerging economy (FEE) banks. It…

Abstract

Purpose

The study examines the dynamic association between competition, risk-taking, performance and income diversification of frontier and emerging economy (FEE) banks. It additionally, explores the effect of banking sector depth and economic performance on the level of competition, performance and risk-taking behavior of banks in these economies.

Design/methodology/approach

The paper adopts a panel vector auto-regressive technique and collects data across ninety (90) FEEs.

Findings

The paper finds that competition increases with improvement in the depth of the banking sector, a surge in risk-taking behavior and the adoption of focused strategy by banks. Similarly, income diversification activities are driven by competition, banking sector depth, the state of the economy and bank performance. Additionally, risk-taking behavior, banking sector depth and the state of the economy are relevant in describing bank performance. Also, risk-taking behavior is influenced by bank performance, banking sector depth and economic growth.

Originality/value

The evidence indicates that although competition improves banking sector health, excessive competition and non-competitive banking environment constrain banks’ performance and stability.

Details

Asian Journal of Economics and Banking, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2615-9821

Keywords

Click here to view access options
Article
Publication date: 24 May 2021

Mohsin Ali, Mudeer Ahmed Khattak and Nafis Alam

The study of credit risk has been of the utmost importance when it comes to measuring the soundness and stability of the banking system. Due to the growing importance of…

Abstract

Purpose

The study of credit risk has been of the utmost importance when it comes to measuring the soundness and stability of the banking system. Due to the growing importance of Islamic banking system, a fierce competition between Islamic and conventional banks have started to emerge which in turn is impacting credit riskiness of both banking system.

Design/methodology/approach

Using the system GMM technique on 283 conventional banks and 60 Islamic banks for the period of 2006–2017, this paper explores the important impact of size and competition on the credit risk in 15 dual banking economies.

Findings

The authors found that as bank competition increases credit risk seems to be reduced. On the size effect, the authors found that big Islamic banks are less risky than big conventional banks whereas small Islamic banks are riskier than small conventional banks. The results are robust for different panel data estimation models and sub-samples of different size groups. The findings of this paper provide important insights into the competition-credit risk nexus in the dual banking system.

Originality/value

The paper is specifically focused on credit risk in dual banking environment and tries to fill the gap in the literature by studying (1) do the Islamic and conventional banks exhibit a different level of credit risk; (2) does competition in the banking system impact the credit risk of Islamic and conventional banks and finally (3) do the big and small banks exhibit similar levels of credit risk.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Click here to view access options
Article
Publication date: 29 April 2021

Madhav Regmi and Allen M. Featherstone

The number of US commercial banks has declined by about 50% over the last two decades. This change could lead to a potential decline in competition and a potential…

Abstract

Purpose

The number of US commercial banks has declined by about 50% over the last two decades. This change could lead to a potential decline in competition and a potential increase in market power in the agricultural banking market. The focus of this study is to examine whether the risk of failure and the performance of agricultural banks has been affected by bank consolidations.

Design/methodology/approach

The impact of bank competition on performance and financial stability of agricultural banks is studied using a Lerner index as a measure of market power. A Z-score is constructed to measure bank stability. Similarly, the return on assets (net income to total assets ratio), return on equity (net income to the total equity ratio), agricultural loan ratio and agricultural loan volume are used as performance measures for agricultural banks. Two-way fixed effect regression models are estimated to measure the impact of competition on financial stability and performance.

Findings

Results indicate that bank competition has a U-shaped effect on the probability of default and an inverted U-shaped effect on volume and proportion of agricultural lending. There also exists evidence of a positive but non-linear effect of bank market power on the profitability of agricultural banks.

Originality/value

There is limited literature on the impact of bank competition on financial stability and performance of US agricultural banks. Agricultural banks hold more than 40% of US farm debt. A decrease in the number of banks or the level of competition in agricultural banking may cause an adverse effect on relationship lending. The key findings imply that bank regulatory strategies should focus on enhancing (reducing) competition in more (less) concentrated banking markets to improve the financial health and performance of agricultural banks.

Details

Agricultural Finance Review, vol. 82 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

Click here to view access options
Article
Publication date: 26 January 2021

Yufeng Xia and Peisen Liu

Bank financing is an important external financing source for firm research and development (R&D) investment. This study aims to use an exponential quadratic specification…

Abstract

Purpose

Bank financing is an important external financing source for firm research and development (R&D) investment. This study aims to use an exponential quadratic specification to investigate the effect of bank competition on firm R&D investment and its underlying mechanisms. Moreover, this study checks bank competition’s heterogeneous effects on firm R&D investment.

Design/methodology/approach

Based on data of Chinese manufacturing firms and bank branches, this study uses the Tobit estimator, instrumental variable method and Heckman two-step approach to test the relationship between bank competition and firm R&D investment.

Findings

The results show robustness evidence of an inverted-U relationship between bank competition and firm R&D investment. Specifically, increases in bank competition promote firm R&D investment until bank competition reaches the turning point and reduce firm R&D investment after crossing the turning point. Financing costs and financial constraints can explain the inverted-U relationship between bank competition and firm R&D investment. Heterogeneity examinations reveal that R&D investment is more sensitive to bank competition in non-state-owned enterprises, small firms and high-tech firms.

Originality/value

This study contributes to the literature on the relationship between bank competition and firm innovation. The authors investigate the heterogeneity of R&D investment influenced by bank competition and depict the economic effects brought by bank competition. This study sheds light on the real effects of bank competition and the determinants of firm R&D investment in transition economies. The conclusions provide empirical evidence for reducing credit discrimination and improving capital allocation efficiency in developing countries.

Details

Chinese Management Studies, vol. 15 no. 3
Type: Research Article
ISSN: 1750-614X

Keywords

Click here to view access options
Article
Publication date: 12 October 2020

Claudio Oliveira De Moraes, José Americo Pereira Antunes and Márcio Silva Coutinho

This paper analyzes the effect of the banking market (concentration and competition) on financial development.

Abstract

Purpose

This paper analyzes the effect of the banking market (concentration and competition) on financial development.

Design/methodology/approach

In order to estimate the effects of banking concentration and competition on financial development, we conducted an empirical analysis using the System Generalized Method of Moments (S-GMM) through a dynamic panel data model.

Findings

The main results suggest that concentration and competition affect financial development. In particular, an increase in bank concentration may inhibit the country's financial development, due to the lack of competition. Our results do not confirm the controversy between concentration and competition, suggesting that concerning financial development, concentration is the reverse of competition.

Practical implications

The results of this study add a new perspective on banking market power: a financial system concentrated or uncompetitive constrains financial development.

Originality/value

The literature that combines the investigation of the effects of banking market structure (concentration) and banking market conduct (competition) on financial development is scarce. Although a concentrated banking sector can reduce competition through barriers to new entrants (which could expand financial services offer), it is also true that a concentrated banking sector can be competitive. In order to avoid the controversy, our paper chooses to look into a comprehensive approach considering independent measures of bank concentration and bank competition, which together refer to the banking framework.

Details

Journal of Economic Studies, vol. 48 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Open Access
Article
Publication date: 10 June 2020

Javier Solano, Segundo Camino-Mogro and Grace Armijos-Bravo

Banks are institutions that inject money in the economy and help to boost it when there are problems in some markets, especially in productive sectors. In this way…

Downloads
1106

Abstract

Purpose

Banks are institutions that inject money in the economy and help to boost it when there are problems in some markets, especially in productive sectors. In this way, analysing the competition in this sector is an important tool for policymakers as non-competitive behaviour could affect the financial system and economy. The purpose of this paper is to measure the degree of competition in the Ecuadorian private banking sector divided by size, from 2000 to 2015, using panel data collected by the official regulator institution.

Design/methodology/approach

The authors applied the model proposed by Panzar and Rosse (1987) and its H-statistic using a reduced price and revenue equation estimated by pooled ordinary least squares, fixed effects, random effects, feasible generalised fixed effects and panel correction standard errors (PCSE).

Findings

The authors show that given the presence of some problems in data such as heteroskedasticity and autocorrelation, the most appropriate technique is PCSE. The authors also found robust evidence supporting that large banks compete in a monopolistic market, small and medium-sized banks operate in monopolistic competition, and Ecuadorian small, medium-sized and large banks stay in long-run equilibrium.

Originality/value

This paper contributes to the actual literature of competition degree in two ways. First, different from traditional papers, we do not control by size; so, we divided the analysis by size, because in Ecuador and also in many developing countries, bank’s competition is different for each group of size because the levels of liquidity, risk and other indicators are different from one group to another. Second, we show the robustness of the results using a scaled and unscaled equation, using many controls and using five methods to contrast the competition degree.

Details

Journal of Economics, Finance and Administrative Science, vol. 25 no. 50
Type: Research Article
ISSN: 2077-1886

Keywords

Click here to view access options
Article
Publication date: 1 October 2020

Emmanuel Sarpong-Kumankoma, Joshua Yindenaba Abor, Anthony Q. Q. Aboagye and Mohammed Amidu

This study aims to analyze the potential implications of economic freedom and competition for bank stability.

Abstract

Purpose

This study aims to analyze the potential implications of economic freedom and competition for bank stability.

Design/methodology/approach

Using system generalized method of moments and data from 139 banks across 11 Sub-Saharan African (SSA) countries during the period 2006–2012, this study considers whether the degree of economic freedom affects the relationship between competition and bank stability.

Findings

The results show evidence of the competition-fragility hypothesis in SSA banking, but suggests that beyond a setting threshold, increases in market power may also be damaging to bank stability. Financial freedom has a negative effect on bank stability, suggesting that banks operating in environments with greater financial freedom generally tend to be less stable or more risky. The authors also find evidence of a conditional effect of economic freedom on the competition–stability relationship, implying that bank failure is more likely to occur in countries with greater economic freedom, but with low competition in the banking sector.

Practical implications

The results suggests to policy makers that a moderate level of competition and economic freedom may be the appropriate policy to ensure the stability of banks.

Originality/value

The study provides insight on the competitionbank stability relationship, by providing new empirical evidence on the effect of economic freedom, which has not been previously considered.

Details

International Journal of Productivity and Performance Management, vol. 70 no. 7
Type: Research Article
ISSN: 1741-0401

Keywords

Click here to view access options
Article
Publication date: 9 July 2020

Abu Hanifa Md. Noman, Che Ruhana Isa, Md Aslam Mia and Chan Sok-Gee

This study aims to examine the impact of activity restrictions in shaping the risk-taking behaviour of banks through the channel of competition in different economic conditions.

Abstract

Purpose

This study aims to examine the impact of activity restrictions in shaping the risk-taking behaviour of banks through the channel of competition in different economic conditions.

Design/methodology/approach

The authors use a dynamic panel regression method, particularly a two-step system generalised method of moments to address the risk-taking persistence of banks and endogeneity of activity restrictions and competition with banks’ risk-taking using financial freedom and property rights as instrumental variables. Activity restrictions are computed by constructing an index based on the survey results of Barth et al. (2001, 2006, 2008 and 2013a). Competition is measured by the Panzar–Rosse H-statistic and risk-taking behaviour are measured by non-performing loan ratio and lnZ-score. In the investigation process, the authors control bank characteristics – size, efficiency, ownership and loan composition and macroeconomic factors – gross domestic product growth and inflation, and use 2,527 bank-year observations from 180 commercial banks of Association of the Southeast Asian Nations-five countries over the 1990–2014 period.

Findings

This study finds that activity restrictions exacerbate the risk-taking behaviour of the banks leading to changes in the channel of competition because of the “risk-shifting effect” of competition. The finding is robust by considering the financial crisis and alternative specifications.

Research limitations/implications

This study contributes to bank literature and policy formulation regarding the effect of activity restrictions on the risk-taking behaviour of banks, which is an issue of concern amongst bank regulators, policymakers and academics, especially in the aftermath of the 2008–2009 global financial crisis.

Practical implications

Understanding how the competition plays a role in the relationship between activity restrictions and the risk-taking of banks in different economic situations.

Originality/value

This study provides new insight into the bank literature by investigating the moderating role of competition on activity restrictions and the risk-taking behaviour of banks in a different economic environment.

Details

Journal of Financial Regulation and Compliance, vol. 29 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

1 – 10 of over 39000