Search results

1 – 10 of over 6000
Article
Publication date: 22 February 2011

Abel E. Ezeoha

The aim of this paper is to identify the major determinants of bank asset quality in an era of regulation‐induced industry consolidation, using the Nigerian case to…

4663

Abstract

Purpose

The aim of this paper is to identify the major determinants of bank asset quality in an era of regulation‐induced industry consolidation, using the Nigerian case to demonstrate how consolidation can heighten incidences of non‐performing credits in a fragile banking environment.

Design/methodology/approach

The paper makes use of panel data from 19 out of a total of 25 banks operating in Nigeria. A multivariate constant coefficient regression model is adopted as the estimation technique. The dependent variable in the model is quality of bank assets, proxied as the proportion of non‐performing loans (NPL) to total loans; while operating efficiency, profitability, asset liquidity, loans to deposits ratio, predictability of depositors' behaviour, size of bank capital, and board skill constitute the exogenous variables.

Findings

The study reveals that deterioration in asset quality and increased credit crisis in the Nigerian banking industry between the periods 2004 and 2008 were exacerbated by the inability of banks to optimally use their huge asset capacity to enhance their earnings profiles. It shows that excess liquidity syndrome and relatively huge capital bases fueled reckless lending by banks; and that increase in the level of unsecured credits in banks' portfolios ironically helped to mitigate the level of NPL within the studied period.

Research limitations/implications

The findings here should be interpreted with caution. The reason is because of the relatively fewer number of observations and the likely biases associated with the use of pooled regression approach.

Originality/value

This paper is one of the first to investigate the specific impact of banking consolidation on the quality of bank assets in an underdeveloped financial system. Among such countries facing such challenge, the Nigerian case is unique considering that the 2004/2005 banking consolidation in the country was recorded as the largest in the history of banking in Africa. The findings here make clearer the policy/practical implications of using regulation‐induced consolidation to pursue the goal of increased credit flows in a less developed financial system.

Details

Journal of Financial Regulation and Compliance, vol. 19 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Book part
Publication date: 4 December 2012

Chuma Okafor, Ken Russell and Labaran Lawal

Purpose – The chapter seeks to examine the changing nature of competition during and immediately after the consolidation within the context of Nigerian banking sector…

Abstract

Purpose – The chapter seeks to examine the changing nature of competition during and immediately after the consolidation within the context of Nigerian banking sector reform.

Design/methodology/approach – The chapter deploys the Herfindahl–Hirschman Index, interest rate spread and conducted interviews with senior bank managers to test the hypothesis that there was no change in competition.

Findings – The results obtained support the CBN's expectation of sustained competition and higher efficiency levels, resulting in a minimal reduction of interest rate spread.

Originality/value – This is the first study that examines the changing nature of competition resulting from the 2004–2006 Nigerian banking consolidation.

Details

Finance and Development in Africa
Type: Book
ISBN: 978-1-78190-225-7

Keywords

Article
Publication date: 14 May 2018

Tinfah Chung and Ariff Mohd

The purpose of this paper is to report how banking competition has fared ex post a major consolidation exercise completed during 2002-2004, which led to a complete…

Abstract

Purpose

The purpose of this paper is to report how banking competition has fared ex post a major consolidation exercise completed during 2002-2004, which led to a complete restructuring of the sector in Malaysia. Nothing is known about the competitiveness of banking system ex post a major consolidation of banks in any country including Malaysia, a middle-income economy.

Design/methodology/approach

The authors apply two models, the Panzar and Rosse (1997) and the Lerner index (1934). The two competitiveness measures are quite refined, well received by researchers, but has yet been applied to measure banking sector competitiveness of a middle-income country to characterize post-merger behavior using post-global-crisis data set. The data were complemented by documentary analysis, including brand documents, descriptions of internal processes and copies of employee magazine articles.

Findings

The results indicate that, after 11 years of consolidation, the banking sector is not operating under perfect or monopolistic competition. Malaysia’s banking industry continues to benefit the charter holders at increasingly lower level because a cartel-like environment still provides trade-off of competition costs before 2002/2004 with the costs from a cartel-like industry structures now. There is only a weak evidence that, in recent years, the banking sector is moving toward more competition.

Research limitations/implications

The chosen area of research is to test the response of the banking sector ex post consolidation after a crisis. It enables researcher to compare results with those of other countries and may not be generalizable.

Practical implications

The findings reported in this study using corroborating measures for the first time, appear to suggest increasing concentration from consolidation may lead to the undesirable cartel-like industry structure where the exercise of market power in the name of stability may not be welfare promoting.

Originality/value

This paper fulfills an identified need to study how the banking sector has performed ex post consolidation after a crisis.

Details

Journal of Economic Studies, vol. 45 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 15 November 2011

Ahmad Bello Dogarawa

Governments of many developed and developing countries have designed and implemented various financial reforms to enable the sector to play the role of efficient financial…

869

Abstract

Purpose

Governments of many developed and developing countries have designed and implemented various financial reforms to enable the sector to play the role of efficient financial intermediation, thereby helping to bolster economic growth and development. The purpose of this paper is to survey past and present literature on the chronology of banking reforms in Nigeria and the implications of the last reform on the Nigerian economy.

Design/methodology/approach

The paper is analytical with mode of presentation based on content analysis.

Findings

The paper posits that the banking system in Nigeria has come a long way in term of regulations and reforms, number of institutions, structure of ownership, and depth and breadth of operations. However, the various reforms have not yet achieved the desired objectives, either due to poor implementation or improper institutional arrangement or sometimes due to abrupt termination of the reforms.

Originality/value

The paper suggests that henceforth, reforms should be designed according to the peculiarities of the Nigerian economy and institutional behaviour, and should be backed by adequate legislation.

Details

Journal of Financial Regulation and Compliance, vol. 19 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

Book part
Publication date: 4 December 2012

Chuma Okafor, Ken Russell and Labaran Lawal

Purpose – The chapter tests the effects of capitalisation on market structure within the context of Nigerian banking sector reform.Design/methodology/approach – The…

Abstract

Purpose – The chapter tests the effects of capitalisation on market structure within the context of Nigerian banking sector reform.

Design/methodology/approach – The chapter is based on data collected through secondary sources, mainly from financial statements of banks audited by the CBN. The time period under review is 2001–2009, encompasses the 18 months transitional window and a trajectory of 3 years before the consolidation announcement. Quantitative methods were used to analyse available data.

Findings – The result confirms that banking consolidation led to an increase in the size of the top end of Nigerian banks.

Originality/value – This is the first study that tests the effects of capitalisation on market structure of the Nigerian banking sector.

Details

Finance and Development in Africa
Type: Book
ISBN: 978-1-78190-225-7

Keywords

Book part
Publication date: 1 January 2006

Edward C. Boyer and Jongmoo Jay Choi

The financial services industry is experiencing rapid consolidation globally. Consolidation has proceeded not only in the same market but also across different market…

Abstract

The financial services industry is experiencing rapid consolidation globally. Consolidation has proceeded not only in the same market but also across different market segments and across national boundaries. In this paper, we (a) outline the general trend of the mergers and acquisitions (M&As) and consolidation of the financial service industry in the U.S. and in the global economy; (b) identify and analyze the reasons that contribute to the consolidation of the financial service industry; (c) examine some cases of successful and unsuccessful financial service M&As; and (d) arrive at some strategic implications.

Details

Value Creation in Multinational Enterprise
Type: Book
ISBN: 978-1-84950-475-1

Article
Publication date: 14 September 2015

Mona A. ElBannan

– The purpose of this paper is to examine the effect of bank consolidation and foreign ownership on bank risk taking in the Egyptian banking sector.

1507

Abstract

Purpose

The purpose of this paper is to examine the effect of bank consolidation and foreign ownership on bank risk taking in the Egyptian banking sector.

Design/methodology/approach

Following prior studies (e.g. Yeyati and Micco, 2007; Barry et al., 2011), this study uses pooled Ordinary Least Squares regression models under two main analyses to test the relation between concentration and foreign ownership on one hand and bank risk-taking behavior on the other hand, where observations are pooled across banks and years for the 2000-2011 period. The reform plan was launched in 2004 and resulted in various restructuring activities in the banking system. Thus, to control for the effect of implementing the financial sector reform plan on bank insolvency and credit risk, this study includes a reform dummy variable (RFM) for the post-reform period in models testing the association between consolidation, foreign ownership and bank risk. Therefore, this categorical variable identifies whether bank risk is related to the reform activities that have been observed during the post-restructuring period, 2005-2011. Moreover, to accommodate the possibility that effects of bank concentration and foreign ownership on bank risk differ due to the implementation of the reform plan, the author create two interaction terms: one uses the product of the reform dummy variable and concentration measures, while the other uses the product of the reform dummy and foreign ownership variables to capture interactions. These interaction terms and the dummy variable provide ample room to capture the effect of bank concentration and foreign ownership on bank risks during the post-reform period.

Findings

This study provides empirical evidence that bank concentration is associated with low insolvency risk and credit risk as measured by loan loss provisions (LLP) in the post-reform period. These results are consistent with the “concentration-stability” view, suggesting that concentration of the banking sector will enhance stability. Moreover, evidence shows that while a higher presence of foreign banks reduces bank credit risk in the post-reform period, it appears to increase insolvency risk. These results are robust to using alternative measures. These findings imply that regulators in emerging countries should support foreign investments in banks to transfer better managerial skills and systems. However, government-owned banks are found to be more prone to insolvency and credit risks; thus, their ownership should not be encouraged. Finally, policy makers should reinforce bank consolidation, be prudent in determining the capital adequacy ratio (CAR) and monitor intensively less profitable, well-capitalized and small-sized banks.

Practical implications

Consolidation of the banking sector decreases insolvency risk and credit risk, as measured by LLP in the post-reform period. This study proposes that bank supervisors implement prudent polices in determining the bank CAR, and monitor intensively less profitable, well-capitalized and smaller banks, as they have incentives to increase risk. In addition, regulators should encourage foreign investment in the banking sector and facilitate their operations in Egypt.

Social implications

Bank supervisors should intensely monitor banks with high-CARs that exceed mandatory requirements because they may be more likely to engage in more risk-taking activities.

Originality/value

It provides empirical evidence from a country-specific, emerging market perspective, in which restructuring events affect the national economy. Egypt, similar to other emerging countries in Africa, pursues an institutionally based (bank-based) system of corporate governance, where banks are the primary sources of finance for firms. Therefore, restructuring banks and other financial institutions and supervising their operations ensure the soundness and stability of these institutions, which represent the nerve of emerging economies. Because emerging countries tend to share common characteristics and economic conditions, and the reform of their financial systems is significant for economic development, the Egyptian banking reform and restructuring program should be of interest to other emerging countries to capitalize on this experiment. While international studies on these relationships are mostly cross-country or focus on US banks, firm-specific studies are scant. Furthermore, the findings of this study should be of interest to Egyptian regulators, bank supervisors and policy makers studying the implications of bank reforms.

Details

Managerial Finance, vol. 41 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 10 May 2022

Jake David Hoskins and Sarah Abadi

With rising industry consolidation in the banking industry, it is unclear whether community banks may find more or less market opportunities. This paper aims to…

Abstract

Purpose

With rising industry consolidation in the banking industry, it is unclear whether community banks may find more or less market opportunities. This paper aims to investigate how industry consolidation may affect community banks’ market share outcomes. The second goal of this paper is to establish the ways in which community banks may successfully manage market share growth goals that may be antithetical to the principles of being a local brand.

Design/methodology/approach

The empirical analysis is on the US banking industry, spanning the years from 1994 to 2018. This comprehensive panel data set includes county-year level granularity for more than 15,000 banks. Panel regression models that include bank-, county- and year-specific fixed effects are deployed.

Findings

It is found that local brands, operationalized as community banks in this study’s empirical context, are having the most success in consolidated market contexts. When pursuing market share growth, a distribution strategy to saturate a local market is found to be advantageous while expanding across geographies is less advisable for community banks.

Originality/value

The findings shed empirical light on the challenges and opportunities for community banks, thereby contributing to the banking industry literature and to an emerging stream of research on local brand management. By demonstrating the means of which growth can be successfully managed by local brands, the important and largely unanswered question of how a local brand can effectively grow is addressed.

Article
Publication date: 26 July 2013

Fadzlan Sufian and Muzafar Shah Habibullah

The purpose of the present study is to investigate the effect of consolidation on Malaysian banking sector's market structure and competition.

1482

Abstract

Purpose

The purpose of the present study is to investigate the effect of consolidation on Malaysian banking sector's market structure and competition.

Design/methodology/approach

The paper employs the Panzar‐Rosse (P‐R) method to compute the H‐statistics of the Malaysian banking sector.

Findings

The results from the P‐R method indicate positive H‐statistics ranging from 0.680‐0.747 under the TREV estimation and 0.547‐0.714 under the TINT estimation. The Wald χ2 test statistics seem to reject the market structure of monopoly or perfect competition hypothesis. The results clearly indicate monopolistic competition behavior in the Malaysian banking sector. During the period under study, the paper finds evidence of greater competition in the overall market segment, which is comprised of operating income from fee and commission based products compared to the traditional interest‐based market.

Research limitations/implications

The empirical findings from this study clearly indicate that competitive behaviour of banks may be explained by factors other than the number of banks operating in the banking sector and their levels of concentration. However, the results need to be interpreted with caution since the liberalization and deregulation of the Malaysian banking sector remains an ongoing process.

Originality/value

Despite substantial studies performed to examine the impact of consolidation on banks' competitive behaviour, these studies have concentrated mainly on the banking sectors of the western and developed countries. On the other hand, empirical evidence on the developing countries banking sectors is relatively scarce.

Details

Journal of Economic Studies, vol. 40 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 1 January 1997

Gary Whalen

Using an event study approach, this analysis examines whether or not intracompany mergers of subsidiary banks by multibank holding companies result in significant…

Abstract

Using an event study approach, this analysis examines whether or not intracompany mergers of subsidiary banks by multibank holding companies result in significant, positive, abnormal stock returns. Such a result implies that investors expect this type of merger will improve future profitability, presumably by permitting efficiencies to be realized or revenues to increase. The analysis of the stock returns for a sample of 39 consolidating companies indicates that this is the case. These findings appear to be quite robust. Furthermore, the findings imply that permitting holding companies with interstate operations to consolidate their banking units across state lines could yield efficiencies as proponents of interstate branching claim.

Details

Managerial Finance, vol. 23 no. 1
Type: Research Article
ISSN: 0307-4358

1 – 10 of over 6000