Search results

1 – 10 of over 13000
To view the access options for this content please click here
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. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

Keywords

To view the access options for this content please click here
Article
Publication date: 16 December 2019

Yasin Mahmood, Maqsood Ahmad, Faisal Rizwan and Abdul Rashid

The purpose of this paper is to investigate the role of banking sector concentration, banking sector development and equity market development in corporate financial…

Abstract

Purpose

The purpose of this paper is to investigate the role of banking sector concentration, banking sector development and equity market development in corporate financial flexibility (FF).

Design/methodology/approach

The study used annual data for the period from 1991 to 2014 to examine the relationship between banking sector concentration, banking sector development, equity market development and corporate FF; hypotheses were tested using an unbalanced panel logistic regression model.

Findings

The paper provides empirical insights into the relationships between macroeconomic factors and corporate FF. The results suggest a substantial change in FF across firms; banking sector concentration discourages firms from borrowing, leading to the reduction of corporate borrowing, consequently an increase in FF can be observed. Banking sector development facilitates debt financing, hence reducing FF. Equity market development also has a positive impact on FF, as it is a substitute for debt financing.

Practical implications

The banking sector is an important provider of capital to business entities. A concentrated banking system discourages the provision of capital to firms; hence regulators have to take appropriate measures to resolve the problem of a reduced supply of capital. Banking sector development facilitates the provision of capital; further development may reduce bank lending rates to firms. Equity market development positively affects FF; hence, firm managers can use equity financing to resume FF. By following pecking order theory, managers use internal sources to finance value-maximizing investment projects, debt and issue shares as the last choice to get financing. When borrowing capacity is depleted, managers can obtain further funds by issuing stocks.

Originality/value

FF is an emergent area of research in advanced countries, while in developing economies, it is in the initial stages. Little work is available in this area to find the impact of banking sector concentration, banking sector development and equity market development, therefore, this study fills this gap in the existing literature.

Details

South Asian Journal of Business Studies, vol. 9 no. 1
Type: Research Article
ISSN: 2398-628X

Keywords

To view the access options for this content please click here
Book part
Publication date: 29 December 2016

Hanh Thi My Phan and Kevin Daly

This study aims to investigate both market concentration and bank competition of banking across six emerging Asian countries (e.g., Bangladesh, Indonesia, India…

Abstract

This study aims to investigate both market concentration and bank competition of banking across six emerging Asian countries (e.g., Bangladesh, Indonesia, India, Philippines, Malaysia, and Vietnam) over pre and post the 2008 global financial crisis. The conduct parameter approach following the framework suggested by Uchida and Tsutsui (2005) is used to estimate bank competition in these countries. The study employs both seemingly unrelated regression (SUR) and three-stage least squares (3SLS) to estimate simultaneously the system of equations in our model. Generally we find a negative association between market concentration and bank competition across most of the countries in the study suggesting that banks in concentrated markets collude to generate higher profits. Monopolistic competition was the best description of competitive structure of banking across the majority of countries investigated by this study. The study fills the gap in the banking literature by investigating bank competition, concentration, and their relationship across emerging Asian economies over the 2008 global financial crisis. Moreover, several policy implications for banking industry are suggested.

Details

Risk Management in Emerging Markets
Type: Book
ISBN: 978-1-78635-451-8

Keywords

To view the access options for this content please click here
Article
Publication date: 19 September 2016

Farzin Abadi, A.N. Bany-Ariffin, Ryszard Kokoszczynski and W.N.W. Azman-Saini

The purpose of this paper is to explore the impact of banking concentration on firm leverage in 21 major emerging countries from different geographical regions…

Abstract

Purpose

The purpose of this paper is to explore the impact of banking concentration on firm leverage in 21 major emerging countries from different geographical regions, controlling for firm determinant and macroeconomic determinant of firm leverage.

Design/methodology/approach

This study is based on a relatively large sample of 5,779 enterprises with total 48,280 numbers of observations over the period from 2006 to 2013 and the regression model is performed by applying two-step system general method of moment estimator methodology.

Findings

This study finds a positive and significant relationship between banking concentration and firm leverage. Therefore, the overall results follow the information-based theory which indicates lower firms financing obstacles as banks are more concentrated.

Research limitations/implications

Bank-level data of all the countries to measure banking concentration is until 2013, which restrict the empirical analysis until 2013. Also, the study conducts the analysis.

Practical implications

The study enables policymakers, society, and academics to have better understanding on the beneficial effects of alternative banking market structure on firms’ access to credit and therefore, in determining the level of firm leverage in emerging countries.

Originality/value

The study represents one of the limited available empirical researches to examine the beneficial effect of alternative banking market structures of firm leverage in emerging countries.

Details

International Journal of Emerging Markets, vol. 11 no. 4
Type: Research Article
ISSN: 1746-8809

Keywords

To view the access options for this content please click here
Article
Publication date: 19 July 2013

Thao Ngoc Nguyen and Chris Stewart

The purpose of this paper is to examine the degree of concentration and efficiency in the Vietnamese banking system using the structural model.

Abstract

Purpose

The purpose of this paper is to examine the degree of concentration and efficiency in the Vietnamese banking system using the structural model.

Design/methodology/approach

The authors apply the concentration ratio (CR), Herfindahl‐Hirschman Index (HHI) and concentration‐profitability model based upon the Structure‐Conduct‐Performance (SCP) and Efficiency Hypothesis (EH) approaches to examine 48 Vietnamese commercial banks over the period 1999‐2009.

Findings

The authors' empirical results show that the Vietnamese banking industry has become substantially less concentrated; however, large commercial banks still dominate the whole banking system. Further, their results do not support either the traditional Structure‐Conduct‐Performance or the Efficiency Hypothesis.

Practical implications

The State Bank of Vietnam needs to have policies for restructuring the system and promoting competition in the banking sector of Vietnam.

Originality/value

This is the first such study of the Vietnamese banking system.

Details

Journal of Financial Regulation and Compliance, vol. 21 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

To view the access options for this content please click here
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.

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

To view the access options for this content please click here
Article
Publication date: 6 June 2016

Bana Abuzayed and Nedal Al-Fayoumi

This study aims to examine the influence of institutional quality on the relationship between economic growth and banking sector concentration.

Abstract

Purpose

This study aims to examine the influence of institutional quality on the relationship between economic growth and banking sector concentration.

Design/methodology/approach

The sample of our study covers 15 Middle East and North African (MENA) countries over the period 1996-2010. The results are estimated based on static and dynamic panel data analysis.

Findings

The results reveal a positive and significant relationship between economic growth and each banking concentration and institutional quality. The results support the argument that banking concentration and institutional quality are matters for growth in MENA countries. The results also indicate that the interaction variable between concentration and institutional quality is negative and significant.

Research limitations/implications

Building on Petersen and Rajans’ (1995) argument, this study suggests that in the absence of an appropriate level of institutional quality, banks in MENA region can depend on their market power to protect their benefits. This can be achieved by building long-term relationships with their borrowers to provide continuing credit and subsequently enhancing economic growth.

Practical implications

Under the low level of institutional quality in MENA countries, regulators and decision-makers should thoroughly think before imposing any policy that aims to restrict banking market power because such action could harm the economy.

Social implications

In developing countries, banking concentration may have a positive impact on the economy. This outcome may lead to an improvement in the standard of living for the society.

Originality/value

This is the first known study, to the best of our knowledge, that examines the role of institutional quality in shaping the relationship between economic growth and banking concentration in MENA countries. The authors opted to select MENA countries’ data because they generally reflect an institutional setting similar to many developing countries. Therefore, the results could be applicable in many developing economies and will encourage other researchers to investigate this proposition.

Details

Review of International Business and Strategy, vol. 26 no. 2
Type: Research Article
ISSN: 2059-6014

Keywords

To view the access options for this content please click here
Article
Publication date: 17 July 2009

Miki Malul, Amir Shoham and Mosi Rosenboim

The banking system has a huge impact on a nation's economic environment. A concentrated banking system has a negative impact on the economy. Therefore, the research in…

Abstract

Purpose

The banking system has a huge impact on a nation's economic environment. A concentrated banking system has a negative impact on the economy. Therefore, the research in this paper has two main goals: to explore the main factors that impact the level of concentration in the banking system; and to demonstrate how a reform in a banking system can reduce the negative impact of high levels of concentration.

Design/methodology/approach

A sample of 42 nations was used with various levels of concentration in their banking system to examine factors influencing bank concentration. Logit and OLS regressions were conducted to highlight the impact of the independent variables on the level of concentration in those nations. The latest Israeli reforms in the banking system were used to illustrate how reforms reduce concentration.

Findings

The empirical results concluded that economic freedom had a positive impact on the level of concentration. It was also found that cultural variables had an impact on the concentration level. Finally, analyzing the banking sector in Israel, it was found that the reform did decrease the level of concentration of the banking system.

Originality/value

The innovation of this paper is that it adds Hofstede's cultural variables as explanatory variables for the level of concentration in the banking system. It also highlights the role of public regulation for achieving efficiency in the banking sector by using the example of Israeli banking reforms.

Details

EuroMed Journal of Business, vol. 4 no. 2
Type: Research Article
ISSN: 1450-2194

Keywords

To view the access options for this content please click here
Article
Publication date: 3 June 2019

Saeed Al-Muharrami

In 2013-2014, Bank Muscat and National Bank of Oman requested a merger and Bank Sohar and Bank Dhofar lodged a similar request. This paper aims to investigate the shape of…

Abstract

Purpose

In 2013-2014, Bank Muscat and National Bank of Oman requested a merger and Bank Sohar and Bank Dhofar lodged a similar request. This paper aims to investigate the shape of the market structure, and it tries to answer whether approving such requests is good for the industry, economy and society.

Design/methodology/approach

The study examines the market structure of Oman Banking Industry, and it also presents the shape of the market structure if there had been an approval for these mergers’ requests. The Herfindahl–Hirschman Index (HHI) and the biggest k-banks Concentration Ratio (CRk), which measure concentration changes over 17 years during the period 1998-2014, are used in this study.

Findings

The study finds that Oman’s Banking Industry is highly concentrated, which should cause concerns over these two requests of mergers or similar requests in the future. In general, the concentration ratio shows decreasing trend. The concentration ratio in the deposit market implies a concentrated market with CR2 and CR3 recording 67 and 85%, respectively, while HHI reached 2,864 points in the 1998. However, in 2014, the concentration ratio had decreased, to CR2 and CR3 recording 52 and 65% respectively, and HHI standing at 2,112 points.

Research limitations/implications

The researcher suggests future investigation and further research in setting a benchmark index as a guideline for mergers’ requests.

Practical implications

Exercising monopoly power, by fewer banks, is very harmful to the economy. Charging higher interest rates on business loans escalates the cost of production of products and services which will cause inflation; therefore, monopoly power will lead to slow growth of the economy.

Social implications

Regulators in Central Bank of Oman (CBO) or in any central bank should be very careful in granting mergers, especially among big banks, because it enables newly bigger banks to exercise monopoly power, thereby harming depositors who will be getting low deposit interest rates and harming borrowers by charging them high loan interest rate.

Originality/value

Even though, this study discussed two requests of mergers between banks in Oman; however, it has presented formal approaches to the measurement of market structure in any country. Overall, it provides the policymakers in making the final decisions on mergers between banks in the future which are not limited to these banks or to Oman’s Banking Industry.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 12 no. 2
Type: Research Article
ISSN: 1753-8394

Keywords

To view the access options for this content please click here
Article
Publication date: 6 July 2020

Hassan Hamadi and Ali Awdeh

Bank consolidations in many Middle East and North Africa (MENA) countries have been proceeding at a rapid pace, leading to a decline in the number of banks and an increase…

Abstract

Purpose

Bank consolidations in many Middle East and North Africa (MENA) countries have been proceeding at a rapid pace, leading to a decline in the number of banks and an increase in market concentration. This may raise concerns regarding the impact of such increase in concentration on the behaviour of banks and consequently on the financial development. Therefore, this study aims to examine the impact of concentration on the financial development of MENA region.

Design/methodology/approach

The study adopts fully modified ordinary least squares model on a heterogeneous, non-stationary, cointegrated panel data set. The exploited panel is formed of 15 MENA countries and covers the period 1996–2014.

Findings

The empirical results show that concentration per se is not harmful for financial development. Nevertheless, concentration combined with bank market power may deteriorate the development of MENA financial systems.

Originality/value

In addition to considering an understudied region, the research presents very important findings, which suggest that if banks obtain market power, an increase in concentration following a wave of bank mergers, could weaken the financial development.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 13 no. 4
Type: Research Article
ISSN: 1753-8394

Keywords

1 – 10 of over 13000