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1 – 10 of 379Nurhastuti Kesumo Wardhani, Robert Faff, Lewis Liu and Zairihan Abdul Halim
This research aims to investigate the disciplinary functions of depositors and subordinated debt holders within Indonesia's dual banking system, examining the impact of regulatory…
Abstract
Purpose
This research aims to investigate the disciplinary functions of depositors and subordinated debt holders within Indonesia's dual banking system, examining the impact of regulatory changes on market discipline.
Design/methodology/approach
The study employs a comprehensive analysis of the dual banking system in Indonesia over 15 years. Utilizing a non-public dataset from the Financial Services Authority and the Indonesia Deposit Insurance Corporation, the study employs propensity score matching and difference-in-differences analysis.
Findings
The findings reveal distinct patterns in the exercise of market discipline by depositors over different regulatory regimes. During the blanket guarantee regime (2002–2005), depositors lacked the incentive to monitor banks but resumed their disciplinary role under the limited guarantee regime (2005–2017). Islamic banks faced simultaneous market and regulatory discipline, with market discipline prevailing.
Originality/value
This study contributes to the literature by providing novel insights into the interplay between regulatory changes, market discipline and depositor behavior within Indonesia's dual banking system. The utilization of a comprehensive non-public dataset from regulatory authorities adds to the originality of the research.
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This study attempts to comprehensively analyze the cost Malmquist productivity index of conventional and Islamic banks in Saudi Arabia, the largest dual banking sector in the…
Abstract
Purpose
This study attempts to comprehensively analyze the cost Malmquist productivity index of conventional and Islamic banks in Saudi Arabia, the largest dual banking sector in the world, during the COVID-19 pandemic.
Design/methodology/approach
This study employs the novel approach of cost Malmquist productivity index, which focuses on production costs, to measure the change in cost productivity so that the actual impact of the COVID-19 pandemic could be captured.
Findings
The Saudi Central Bank has successfully mitigated the impact of the COVID-19 epidemic on the Saudi banking sector by implementing several policies and services. This success is reflected in the large positive shift in the production frontier of Saudi banks. Moreover, it was found that Islamic Saudi banks were by far more productive than conventional Saudi banks during the COVID-19 pandemic. However, the total cost productivity index (CMPCH) of Islamic Saudi banks starts to decline sharply in the last quarter of 2022 compared to conventional Saudi banks, indicating that Islamic banks in Saudi Arabia are suffering the most from the tighter monetary policy recently implemented by the Saudi Central Bank.
Practical implications
The results provide insights for policymakers and investors on how different types of banks respond differently to economic crises and monetary policy changes. Targeted support measures may be needed to ensure all banks remain productive and efficient.
Originality/value
To the author’s knowledge, this is the first study to use this innovative methodology to assess the impact of COVID-19 on bank performance in a dual banking sector.
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Rukaiyat Adebusola Yusuf and Mamiza Haq
This paper examines the effect of restrictions on executive pay and high CEOs’ compensation on bank performance following the “2008 UK bank rescue policy”.
Abstract
Purpose
This paper examines the effect of restrictions on executive pay and high CEOs’ compensation on bank performance following the “2008 UK bank rescue policy”.
Design/methodology/approach
Using the difference-in-difference estimation technique we assess the relationship between executive compensation and financial performance of rescued banks relative to non-rescued banks over the period 1999–2019.
Findings
Our main finding indicates that the relationship between executive compensation and financial performance declines in rescued banks relative to non-rescued banks. Further, we document that performance continues to deteriorate in rescued banks relative to non-rescued banks. Our results are robust to different estimation techniques.
Originality/value
This study contributes to the literature that examines the efficacy of government bailouts during the 2008 crisis. To the best of the author’s knowledge, this study is among the first to examine the long-term implications of bank rescue and pay restrictions on executive compensation and performance post–rescue.
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This paper aims to examine the influence of sustainability reporting on bank performance. Furthermore, this study investigates the impact of the country’s economic development…
Abstract
Purpose
This paper aims to examine the influence of sustainability reporting on bank performance. Furthermore, this study investigates the impact of the country’s economic development, financial system and crisis in moderating sustainability reporting and bank performance relationship.
Design/methodology/approach
The sample consists of 400 listed banks from 19 countries over the 2009–2022 period. Panel fixed-effect regression is applied, and System Generalized Method of Moments is used as robustness to address endogeneity concerns. The results are robust and survive several sensitivity tests.
Findings
The results, aligning with legitimacy and agency theories, suggest a negative relationship between sustainability reporting and bank performance. Based on further classifications, results suggest the negative (positive) impact of country’s financial system (economic development) in moderating the sustainability reporting and bank performance nexus. Finally, this study documents the positive influence of sustainability reporting on bank performance during the crisis period. Overall, the findings fail to support the reduced information asymmetry accruing from higher sustainability disclosures in developing and bank-based economies.
Practical implications
This study has important implications for regulators, policymakers and other stakeholders, especially in light of recent banking scandals that have deteriorated stakeholders' faith in financial institutions' reporting quality.
Originality/value
This study extends the scant literature on sustainability reporting in banking from a cost-benefit vantage point. Furthermore, to the best of the author’s knowledge, no previous research has examined the moderating role of the country’s financial structure and crisis in sustainability reporting and bank performance relationship.
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Almina Bešić, Christian Hirt and Zijada Rahimić
This study focuses on HR practices that foster employee engagement during Covid-19. Companies in transition economies are particularly vulnerable to crisis and downsizing and…
Abstract
Purpose
This study focuses on HR practices that foster employee engagement during Covid-19. Companies in transition economies are particularly vulnerable to crisis and downsizing and other recessionary practices are frequently used.
Design/methodology/approach
Drawing on the model of caring human resource management, we utilise interviews with human resource representatives of 10 banks in the transition economy of Bosnia and Herzegovina. We analyse the banks at two different times to demonstrate how and why companies adapt their HR practices.
Findings
Our findings show a changing mindset in the deployment of highly context-specific HR practices. Strengthening company culture through a sense of community and communication ensure stability and continuity in work. Rather than layoffs, flexible work has become standard.
Practical implications
By highlighting the interplay between HR practices and employee engagement, we contribute to the discussion on engagement in exceptional circumstances and challenging settings and demonstrate how caring responsibilities “migrate” into HR practices in the professional context of a transition economy.
Originality/value
We propose a context-specific “protective caring approach” to foster employee engagement during crises.
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Adnène Sghaier and Taher Hamza
This study investigates the relationship between CEO power and the risk profile (RP) of acquiring banks through mergers and acquisitions (M&A) transactions.
Abstract
Purpose
This study investigates the relationship between CEO power and the risk profile (RP) of acquiring banks through mergers and acquisitions (M&A) transactions.
Design/methodology/approach
The analysis is based on 214 transactions between 2010 and 2022 involving European Union-based acquirers. To assess the impact of M&A on the acquiring bank’s RP, we compare changes in the acquirer’s RP to control banks. We use linear regression with two-stage least squares instrumental variables (2SLS-IV) to examine the effect of CEO power on changes in merger-related risk.
Findings
The findings suggest that CEO power reduces the RP of the acquiring bank. Specifically, CEOs who hold both the CEO and board chair positions tend to take fewer risks. Additionally, CEOs with high ownership, CEO pay and extensive experience (measured by tenure and acquisition experience) decrease the RP. However, prestige power is positively correlated with an increase in RPs.
Practical implications
This research examines CEO influence on bank risk post-mergers, providing insights into governance, risk and strategic choices. The findings can guide banks in CEO selection and governance to mitigate M&A risks, improving risk management and decision-making in the financial sector.
Originality/value
This study is the first empirical investigation introducing diverse executive power metrics to analyze the link between executive power and risk-taking in the European banking sector, with a specific emphasis on the impact on M&A as critical investment choices.
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Egidio Palmieri and Greta Benedetta Ferilli
Innovation in financing processes, enabled by the advent of new technologies, has supported the development of alternative finance funding tools. In this context, the study…
Abstract
Purpose
Innovation in financing processes, enabled by the advent of new technologies, has supported the development of alternative finance funding tools. In this context, the study analyses the growing importance of alternative finance instruments (such as equity crowdfunding, peer-to-peer (P2P) lending, venture capital, and others) in addressing the small and medioum enterprises' (SMEs) financing needs beyond traditional bank and market-based funding channels. By providing more flexible terms and faster approval times, these instruments are gradually reshaping the traditional bank-firm relationship.
Design/methodology/approach
To comprehensively understand this innovation shift in funding processes, the study employs a novel approach that merges three MCDA methods: Spherical Fuzzy Entropy, ARAS and TOPSIS. These methodologies allow for handling ambiguity and subjectivity in financial decision-making processes, examining the effects of multiple criteria, including interest rate, flexibility, accessibility, support, riskiness, and approval time, on the appeal of various financial alternatives.
Findings
The study’s results have significant theoretical and practical implications, supporting SMEs in carefully evaluate financing alternatives and enables banks to better identify the main “competitors” according to the “financial need” of the firm. Moreover, the rise of alternative finance, notably P2P lending, indicates a shift towards more efficient capital access, suggesting banks must innovate their funding channels to remain competitive, especially in offering flexible solutions for restructuring and high-risk scenarios.
Practical implications
The study advises top management that SMEs prefer traditional loans for their reliability and accessibility, necessitating banks to enhance transparency, innovate, and adopt digital solutions to meet evolving financing needs and improve customer satisfaction.
Originality/value
The study introduces a novel integration of Spherical Fuzzy TOPSIS, Entropy, and ARAS methodologies to face the complexities of financial decision-making for SME financing, addressing ambiguity and multiple criteria like interest rates, flexibility, and riskiness. It emphasizes the importance of traditional loans, the rising significance of alternative financing such as P2P lending, and the necessity for banks to innovate, thereby enriching the literature on bank-firm relationships and SME funding strategies.
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Maha Shehadeh, Fatma Ahmed, Khaled Hussainey and Fadi Alkaraan
This study investigates the impact of corporate governance on FinTech disclosure levels in Jordanian conventional and Islamic banks. It aims to determine whether governance…
Abstract
Purpose
This study investigates the impact of corporate governance on FinTech disclosure levels in Jordanian conventional and Islamic banks. It aims to determine whether governance mechanisms affect disclosure practices in the FinTech sector, exploring the interplay between governance and transparency in financial innovations.
Design/methodology/approach
The research methodology entails a thorough analysis of data from all 15 Jordanian conventional and Islamic banks listed on the Amman Stock Exchange, covering the period from 2015 to 2022. This study uses manual content analysis using a custom FinTech Disclosure Index (FDI) and quantitative analysis with a two-way clustered error regression model.
Findings
The findings show that corporate governance mechanisms, particularly board size, board meetings and “Big4” audit firms, are crucial in enhancing FinTech disclosure across conventional and Islamic banks. However, Islamic banks consistently show higher disclosure levels than their conventional counterparts, attributed to their distinct governance structures that emphasize ethical governance and transparency. These results indicate an awareness among decision-makers about the importance of business model transformation toward FinTech.
Originality/value
This study pioneers the introduction of FDI, using it for a novel comparative analysis of FinTech disclosure levels between Islamic and conventional banks. By exploring how various governance structures influence FinTech disclosure, this research provides fresh insights into the interplay between corporate governance and financial technologies in the banking sector.
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Omer Unsal and Bora Ozkan
This chapter examines the patterns influencing the trajectory of fintech enterprises. With the looming challenge of climate change, the financial realm's responsibility in…
Abstract
This chapter examines the patterns influencing the trajectory of fintech enterprises. With the looming challenge of climate change, the financial realm's responsibility in mitigating climate risks has surged into focus. This chapter investigates fintech enterprises' response to climate-related corporate social responsibility in six main domains: (1) climate risk assessment tools, (2) green bonds and sustainable investment tools, (3) ESG integration, (4) carbon trading and carbon credits, (5) sustainable banking, and (6) DeFi and climate initiatives. It also investigates how fintech firms recognize the impact of climate change within their official declarations and efforts to amplify consciousness about climate-related concerns. This chapter assesses climate-linked terminology and expressions using quantitative and qualitative approaches, illuminating these firms' dedication to assimilating climate risk within their operational blueprints.
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This chapter first examines how the confluence of the three forces discussed in the previous chapter is affecting demand and supply dynamics and giving rise to new business models…
Abstract
This chapter first examines how the confluence of the three forces discussed in the previous chapter is affecting demand and supply dynamics and giving rise to new business models that could form the core of the emerging digital financial landscape. This chapter then examines the challenges that arise from these new business models as well as from digitalization of financial services in general. The next chapter will review how these challenges might affect monetary and financial stability and the strategy that central banks might use to address them.
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