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Article
Publication date: 13 February 2009

Claudia Girardone, John C. Nankervis and Ekaterini‐Fotini Velentza

This paper aims to compare the cost efficiencies across bank‐and market‐based EU countries for the different groups of commercial, savings and co‐operative banks; and…

Abstract

Purpose

This paper aims to compare the cost efficiencies across bank‐and market‐based EU countries for the different groups of commercial, savings and co‐operative banks; and between listed and non‐listed banking institutions. In addition, it attempts to determine any potential implications for bank efficiency originating from differences in financial structure.

Design/methodology/approach

Efficiency scores are estimated using the Battese and Coelli's time‐varying stochastic frontier approach. The classification of bank‐ and market‐based financial systems is based on the World Bank's Financial Structure Database.

Findings

On the whole the results reject the agency theory hypothesis that managers of privately‐owned banks are more cost efficient than those of mutual banking institutions because of capital market devices as it is found that mutual banks operating in EU‐15 countries are significantly more cost efficient than commercial banks. Furthermore, results are mixed concerning the financial structure hypothesis that in developed financial systems bank efficiency should not be statistically different across bank‐vs market‐based economies.

Research limitations/implications

The analysis suggests that differences in cost efficiency across bank types can often be explained by the prevailing financial system in each economy.

Practical implications

The evidence illustrates the national diversity of corporate governance systems in Europe and can be important to policy makers who are concerned with the full integration of the European financial system.

Originality/value

To the best of the authors’ knowledge, there are no previous similar empirical works for the EU banking sector. Such a study has important policy implications especially due to the fact that the EU banking sector is experiencing profound structural changes and a full integration has not yet been achieved.

Details

Managerial Finance, vol. 35 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

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Article
Publication date: 24 August 2012

Vafa Moayedi and Matin Aminfard

The purpose of this study is to provide solid examination of Iran's Islamic financial system and its development after the end of the Iran‐Iraq war in 1988.

Abstract

Purpose

The purpose of this study is to provide solid examination of Iran's Islamic financial system and its development after the end of the Iran‐Iraq war in 1988.

Design/methodology/approach

The analysis is conducted by using financial data over the period 1993‐2007 as solid data aren't available for the period 1988‐1992. Parallel, 39 other countries are analyzed as well in order to have a solid international basis of comparison. The data are provided by the World Bank's financial dataset. The paper computes three key‐indices referring to the activity, efficiency, and size of Iran's financial sectors. A fourth measure is calculated as an aggregated index of the three key‐indices in order to allow a vivid comparison with other countries.

Findings

Iran's financial system is apparently highly bank‐based. The paper can confirm that Iran has been struggling for a less bank‐based financial system during this period. Although Iran still shows up a mainly bank‐based financial system, its financial market has been growing by considerable rates during the examined period. When referring to the international comparison, Iran shows up an underdeveloped and weak financial system, especially in regard to its stock market.

Originality/value

There haven't been any similar research for this time period using this kind of indices. Especially, Iranian economists haven't used this very comprehensive approach in order to confirm the widely made assumption of a bank‐based Iranian financial system. This study sheds light on the topic and at the same time offers a comprehensive picture of Iran's financial system.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 5 no. 3
Type: Research Article
ISSN: 1753-8394

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Article
Publication date: 1 August 2016

Wenling Lu and David A. Whidbee

This paper aims to examine the characteristics of banks that were the target of intervention in the form of bailout or failure during the financial crisis and, of those…

Abstract

Purpose

This paper aims to examine the characteristics of banks that were the target of intervention in the form of bailout or failure during the financial crisis and, of those subjected to intervention, what characteristics distinguish those that received bailout funds from those that were deemed failures.

Design/methodology/approach

The study estimates a series of logit regressions in an effort to identify the causes of regulatory intervention while controlling for bank-level characteristics and the economic and regulatory environment.

Findings

The empirical results indicate that many of the same characteristics associated with banks receiving bailout funds are similar to the characteristics associated with failed banks. However, non-performing loans increased the likelihood of failure, but reduced the likelihood of a bank receiving Capital Purchase Program (CPP) funds, suggesting that regulatory authorities discriminated in their use of CPP funds based on the quality of a bank’s asset portfolio. Further, those banks located in states with limits on de novo branching and those banks that are part of a multi-bank holding company structure were less likely to fail but were more likely to receive CPP funds.

Originality/value

This paper provides a comprehensive analysis of regulatory intervention in the banking industry during the late 2000s financial crisis and the impact of different banking organizational structures, economic circumstances, and financial fragility on the likelihood of a bank failing or receiving bailout funds.

Details

Journal of Financial Economic Policy, vol. 8 no. 3
Type: Research Article
ISSN: 1757-6385

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Book part
Publication date: 1 October 2014

Roseline Nyakerario Misati, Alfred Shem Ouma and Kethi Ngoka-Kisinguh

All over the world, the role of central banks is being redefined following the outbreak of the global financial crisis and subsequent breakdown of the “great moderation”…

Abstract

All over the world, the role of central banks is being redefined following the outbreak of the global financial crisis and subsequent breakdown of the “great moderation” consensus. Consequently, most advanced economies adopted non-conventional approaches of monetary policy which resulted in spill-overs to emerging markets and developing countries with implications on their financial system and monetary policy transmission. This, coupled with, internal developments in the financial systems of developing countries necessitated modifications of not only monetary policy frameworks but also responsibilities of most central banks. This chapter acknowledges possible evolutions of the financial structure variables in developing countries and uses data from Kenya to analyze the dynamic linkages between financial sector variables and monetary policy transmission in the light of the financial crisis. The study used structural vector autoregression to examine the relationship between financial structure variables and monetary policy as well as assess the relative importance of various monetary transmission channels in Kenya. The results show that the changing financial structure represented by credit to the private sector and stock market indicators in Kenya only slightly altered relative importance of monetary policy transmission. The insignificance of credit to the private sector suggests that the importance attached to the bank lending channel in previous studies is waning while the marginal significance of the stock market indicator signals the potential for asset price channel. The results also indicate that the interest rate and exchange rate channels are relatively more important in Kenya while the asset prices is only marginally significant and bank lending channel is the weakest in the intermediate stage of monetary policy transmission. However, transmission of monetary policy to the ultimate objectives is somewhat slow and weak to inflation and almost absent to output. The result implies a limited role of monetary policy on growth and questions the wisdom of pursuing multiple objectives.

Details

Risk Management Post Financial Crisis: A Period of Monetary Easing
Type: Book
ISBN: 978-1-78441-027-8

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Article
Publication date: 3 April 2018

Pradeepta Sethi

This paper aims to examine how financial development affects the growth of industries that are more dependent on external finance, demystifying the roles played by the…

Abstract

Purpose

This paper aims to examine how financial development affects the growth of industries that are more dependent on external finance, demystifying the roles played by the banks, stock and bond markets.

Design/methodology/approach

The authors apply panel fixed-effects and dynamic panel generalized methods of moments on disaggregated industry-level data of the Indian manufacturing sector for the period of 2001-2015 to examine the relationship between financial development, banking market structure and economic growth.

Findings

The study finds that financial development has a significant impact on the growth process by reducing cost of external finance. Among the three sources of finance, the study finds that while the banking sector has been the most preferred source of external finance, increasing concentration and selective disbursement of credit have continued to dent the prospects of the industry. This paradoxical result explains the dismal performance of the Indian manufacturing sector.

Originality/value

The effect of financial development (encompassing banking market structure) on economic growth has received sparing attention. Related literature is unclear regarding the impact of banking market structure on the growth process in the context of emerging economies. The authors attempt to fill this important gap in the literature. Moreover, they add novelty to the literature by calculating the external dependence at the firm level, diverging from using US industry as a proxy for calculation of external dependence.

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Article
Publication date: 26 July 2013

Wenling Lu and David A. Whidbee

This paper aims to examine the impact of charter type (national vs state), holding company structure, and measures of bank fragility on the likelihood of bank failure…

Abstract

Purpose

This paper aims to examine the impact of charter type (national vs state), holding company structure, and measures of bank fragility on the likelihood of bank failure during the late 2000s financial crisis.

Design/methodology/approach

The study estimates a series of logit regressions in an effort to identify the causes of failure and assess the role of the bank‐level characteristics while controlling for the economic and regulatory environment.

Findings

The empirical results indicate that established institutions were more likely to fail, dependent upon whether a bank received bailout funds or not, if they were relatively large, had relatively low capital ratios, had relatively low liquidity, relied more heavily on brokered deposits, held a relatively large portfolio of real estate loans, had a relatively large proportion of non performing loans, and had less income diversity. Consistent with being financially fragile, de novo banks and those banks that grew substantially prior to the crisis faced an increased likelihood of failure relative to established banks. However, capital levels were not significantly related to the likelihood of failure in de novo institutions.

Originality/value

This paper provides a comprehensive analysis of the possible business models' impact on the likelihood of failure during the recent financial crisis. It contributes to the ongoing debate regarding appropriate regulatory reform in the banking industry by shedding light on the extent to which the business model decisions made by bank managers have an impact on the stability of the banking system.

Details

Journal of Financial Economic Policy, vol. 5 no. 3
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 8 April 2021

Abdulazeez Y.H. Saif-Alyousfi and Asish Saha

This paper aims to examine the effect of bank-specific, financial structure and macroeconomic factors on the risk-taking behavior, stability and profitability of banks in…

Abstract

Purpose

This paper aims to examine the effect of bank-specific, financial structure and macroeconomic factors on the risk-taking behavior, stability and profitability of banks in Gulf Cooperation Council (GCC) economies during 1998–2017.

Design/methodology/approach

The authors use a two-step system generalized method of moments dynamic model to analyze the data.

Findings

The results show that non-traditional activities increase the risk and decrease the stability and profitability of banks that are highly capitalized, highly liquid and large. Banks in this group are less engaged in securities investments and their higher degree of loan exposure leads to a decrease in risk and an increase in their stability and profitability. Higher concentration increases the risk and decreases the stability and profitability of banks that are less capitalized, less liquid and small. Banks with a higher share of non-traditional activities are riskier and less stable and less profitable before the financial crisis. The study finds that banks with relatively higher capitalization and high lending growth rates are riskier, profitable and less stable during the crisis. Larger commercial banks are less risky and more stable and profitable than smaller banks before the global financial crisis. Islamic banks performed better in terms of fee income, capitalization, liquidity, asset quality and have higher market concentration than conventional banks.

Originality/value

The study provides the first comprehensive empirical evidence on the drivers of risk-taking behavior, stability and profitability of the GCC banks. It also investigates the differences across these variables based on the characteristics of financial strength such as capitalization, liquidity and size; before, during and after the financial crisis; and differences between Islamic and conventional banks.

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

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Article
Publication date: 7 January 2019

Irene Bengo and Marika Arena

The purpose of this paper is to perform a critical analysis of the relationship between small- and medium-sized social enterprises (SMSEs) and banks. Based on the…

Abstract

Purpose

The purpose of this paper is to perform a critical analysis of the relationship between small- and medium-sized social enterprises (SMSEs) and banks. Based on the conceptual framework for the analysis of SME’s credit availability developed by Berger and Udell (2006), this study aims to contribute to the current debate in two ways: first, outlining the characteristics of the lending technologies currently used by banks and financial institutions to evaluate SMSEs when they apply for credit; and second, discussing, based on the results of the empirical analysis, the coherence of these systems from the social ecosystem perspective and identifying areas for possible improvement.

Design/methodology/approach

The paper develops a conceptual framework based on the model proposed by Berger and Udell (2006), which defines the characteristics of lending technologies that banks use to evaluate SMEs, and applies it to the case of SMSEs. To study the interplay of these lending technologies, the empirical analysis is based on a case study of five Italian banks. Data are collected from multiple sources to capture key dimensions of the problems analyzed.

Findings

The paper provides empirical insight about the relationship between SMSEs and banks. The Italian case shows that the current lending infrastructure must be revised to support SMSE credit availability, and government policies affect the national financial institution structure. The relationship between SMSEs and Italian banks remains underdeveloped.

Social implications

The research supports the scaling up of social business.

Originality/value

This paper fulfills an identified need to study how social enterprises credit access can be enabled.

Details

International Journal of Productivity and Performance Management, vol. 68 no. 2
Type: Research Article
ISSN: 1741-0401

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Article
Publication date: 2 August 2011

Abdullahi D. Ahmed and Abu N.M. Wahid

This paper aims to use the newly developed panel data cointegration analysis and the dynamic time series modeling approach to examine the linkages between financial

Abstract

Purpose

This paper aims to use the newly developed panel data cointegration analysis and the dynamic time series modeling approach to examine the linkages between financial structure (market‐based vs bank‐based) and economic growth in African economies.

Design/methodology/approach

The research investigates the dynamic relationship between financial structure and economic growth in a panel of a group of seven African developing countries over the period of 1986‐2007. The paper uses various indicators/measures of financial structure and financial system, and employs the traditional time‐series analysis for causality as well as the newly developed panel unit root and cointegration techniques and estimated finance‐growth relationship using FMOLS for heterogeneous panel.

Findings

From the dynamic heterogeneous panel approach, the paper firstly finds that market‐based financial system is important for explaining output growth through enhancing efficiency and productivity. Second, the authors' empirical evidence supports the view that higher levels of banking system development are positively associated with capital accumulation growth and lead to faster rates of economic growth.

Originality/value

Panel cointegration, group mean panel FMOLS and country‐by‐country time series investigations indicate that the market‐based financial system is important for explaining output growth through enhancing efficiency and productivity, whereas the development of banking system is significantly associated with capital accumulation growth. Further results from the time‐series approach show evidence of unidirectional causality running from market‐oriented as well as bank‐oriented financial systems to economic growth.

Details

Journal of Economic Studies, vol. 38 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

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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

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