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Article
Publication date: 2 November 2015

James R. Barth, Tong Li, Wen Shi and Pei Xu

The purpose of this paper is to examine recent developments pertaining to China’s shadow banking sector. Shadow banking has the potential not only to be a beneficial…

Abstract

Purpose

The purpose of this paper is to examine recent developments pertaining to China’s shadow banking sector. Shadow banking has the potential not only to be a beneficial contributor to continued economic growth, but also to contribute to systematic instability if not properly monitored and regulated. An assessment is made in this paper as to whether shadow banking is beneficial or harmful to China’s economic growth.

Design/methodology/approach

The authors start with providing an overview of shadow banking from a global perspective, with information on its recent growth and importance in selected countries. The authors then focus directly on China’s shadow banking sector, with information on the various entities and activities that comprise the sector. Specifically, the authors examine the interconnections between shadow banking and regular banking in China and the growth in shadow banking to overall economic growth, the growth in the money supply and the growth in commercial bank assets.

Findings

Despite the wide range in the estimates, the trend in the size of shadow banking in China has been upward over the examined period. There are significant interconnections between the shadow banking sector and the commercial banking sector. Low deposit rate and high reserve requirement ratios have been the major factors driving its growth. Shadow banking has been a contributor, along with money growth, to economic growth.

Practical implications

The authors argue that shadow banking may prove useful by diversifying China’s financial sector and providing greater investments and savings opportunities to consumers and businesses throughout the country, if the risks of shadow banking are adequately monitored and controlled.

Originality/value

To the authors’ knowledge, this paper is among the few to systematically evaluate the influence of shadow banking on China’s economic growth.

Details

Journal of Financial Economic Policy, vol. 7 no. 4
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 1 February 2021

Najimu Saka and Ayokunle Olubunmi Olanipekun

Banking sector reforms can impact the development of the real sector. However, there is very little known about this impact on the construction sector in a developing…

Abstract

Purpose

Banking sector reforms can impact the development of the real sector. However, there is very little known about this impact on the construction sector in a developing country context. This study aims to evaluate the impact of the banking sector reform on the construction output (CNS) using the banking sector reform in Nigeria in 2005 (2005 Banking Sector Reform Programme [BSRP]) as a case.

Design/methodology/approach

This study used econometric methodology comprising unit root test for stationarity, Johansen test for cointegration, analysis of variance (ANOVA) and the analysis of covariance. Time series data covering a period from 1981 to 2017 (37 years) about the banking and construction sector performances are analyzed using ten-time series equations.

Findings

The ANOVA estimates reveal that the 2005 BSRP positively impacted the CNS and construction sector growth rate. However, the ANOVA estimates reveal that the gross domestic product (GDP) and bank total loan had a positive impact on CNS in the period (1981–2017) before and after the 2005 BSRP, and consequently removing the effect of the 2005 BSRP on CNS.

Practical implications

This paper concludes that the banking sector reform has a positive impact on CNS in the Nigerian construction industry. The impact is greater and lasting when the reform is directly targeted at improving CNS.

Originality/value

This study provides empirical evidence of the dependence between banking sector reform and construction sector performance in a developing country context. Also, this study demonstrates the relationship between GDP, banking sector reform and construction sector performance in a developing country context.

Details

Journal of Financial Management of Property and Construction , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1366-4387

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Article
Publication date: 28 May 2020

Rafik Harkati, Syed Musa Alhabshi and Salina Kassim

This paper aims to assess the nature of competition between conventional and Islamic banks operating in Malaysia. It is an effort to enrich the existing literature by…

Abstract

Purpose

This paper aims to assess the nature of competition between conventional and Islamic banks operating in Malaysia. It is an effort to enrich the existing literature by offering an empirical compromise on the differences in the results of studies related to competition between the two types of banks.

Design/methodology/approach

Secondary data on all banks operating in Malaysia’s diversified banking sector is collected from the FitchConnect database for the period 2011-2017. A non-structural measure of competition (H-statistic) as informed by Panzar–Rosse is used to measure the competition between conventional and Islamic banks. Panel data analysis techniques are used to estimate H-statistic. Wald test for the market structure of perfect competition/monopoly is used to affirm the validity and consistency of the results.

Findings

The findings of this study signify that the Malaysian banking sector operated under monopolistic competition during the period of study. The long-run equilibrium condition holds for the Malaysian banking sector. Competition among conventional banks is more intense than that among Islamic banks. Financial reform endeavours of Bank Negara Malaysia (BNM) along with the liberalisation wave of the financial system were successful in promoting competition, rendering the financial system contestable, resilient and dynamic.

Practical implications

Regulators and policymakers may find the results beneficial in terms of rethinking the number of banks operating in the Islamic sector. The number of banks, however, is not the only determinant of competition in the banking sector. Implications of competition change for stability and risk-taking behaviour of banks should be considered.

Originality/value

Within the context of Malaysia’s diversified banking system, given the contradictory results reported in studies on competition, this study is an effort to provide a plausible middle ground. It suggests a possible answer as to why competition nature has not changed since the policy change initiatives of BNM, namely, banks merger, expansion of Islamic banking operation scope and liberalisation process.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 9
Type: Research Article
ISSN: 1759-0817

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Article
Publication date: 6 April 2012

Fadzlan Sufian

The purpose of this paper is to provide new empirical evidence on the impact of credit risk on China banks' total factor productivity.

Abstract

Purpose

The purpose of this paper is to provide new empirical evidence on the impact of credit risk on China banks' total factor productivity.

Design/methodology/approach

The paper employs the Malmquist Productivity Index (MPI) which allows for the examination of five different indices: total factor productivity change (TFPCH); technological change (TECHCH); efficiency change (EFFCH); pure technical efficiency change (PEFFCH); and scale efficiency change (SECH) indices.

Findings

The empirical findings indicate that the State Owned Commercial Banks (SOCB), Joint Stock Commercial Banks (JSCB), and City Commercial Banks (CCB) have exhibited lower TFPCH levels with the inclusion of risk factor. It was found that the JSCB and CCB have exhibited lower TFPCH due to TECHCH, while the SOCB have exhibited lower TFPCH due to EFFCH. The empirical findings suggest that the inclusion of credit risk factor has resulted in a higher JSCB EFFCH levels. On the other hand, the SOCB and CCB have exhibited a lower EFFCH levels due to SECH and PEFFCH, respectively.

Research limitations/implications

The results clearly highlight the importance of credit risk and lending quality in determining the total factor productivity change of banks operating in the China banking sector. The author demonstrates that the inclusion of credit risk factor has resulted in a lower TFPCH level of all banks operating in the China banking sector. Thus, excluding the credit risk factor from the analysis on the China banking sector may potentially bias the result upwards.

Practical implications

In an environment of heavy government influence over the lending process, a large proportion of loans extended by Chinese banks over the years have gone bad. Policymakers should prevent the flow of new non‐performing loans by separating bad clients from banks that are being restructured and recapitalized in the reform of the banking sector.

Originality/value

By employing the Malmquist Productivity Index (MPI), the present paper contributes to the existing literature by examining, for the first time, the impact of credit risk on China banks' total factor productivity. To the best of the author's knowledge, this type of analysis is completely missing from the literature in regard to the China banking sector.

Details

China Finance Review International, vol. 2 no. 2
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 15 May 2017

Rishi Kant and Deepak Jaiswal

In the present competitive scenario in the Indian banking industry, service quality has become one of the most important facets of interest to academic researchers. The…

Abstract

Purpose

In the present competitive scenario in the Indian banking industry, service quality has become one of the most important facets of interest to academic researchers. The purpose of this paper is to determine the dimensions of perceived service quality and investigate their impact on customer satisfaction in the Indian banking context, with special reference to selected public sector banks in India.

Design/methodology/approach

On the basis of the empirical study, the authors validate a measurement model using structural equation modeling for investigating the impact of perceived service quality dimensions on customer satisfaction. The study sample consists of 480 respondents in the National Capital Region (NCR) of India; the data were collected through a structured questionnaire utilizing a seven-point Likert scale while implementing a purposive sampling technique.

Findings

The perceived service quality dimensions identified were tangibility, reliability, assurance, responsiveness, empathy, and image. The empirical findings revealed that “responsiveness” was found to be the most significant predictor of customer satisfaction. On the other hand, “image” (corporate image) has a positive but the least significant relationship with customer satisfaction followed by all other constructs. The exception is “reliability,” which is insignificantly related to customer satisfaction in Indian public sector banks.

Research limitations/implications

The study cannot be generalized in the context of Indian banking sectors, as it only focused on the public sector. The findings of this study suggest that the six dimensions of perceived service quality model are a suitable instrument for evaluating bank service quality for public banks in India. Therefore, bank managers can use this model to assess the bank service quality in the context of Indian public sector banks.

Originality/value

There is dearth of research focusing on corporate image as a dimension of perceived service quality and its effect on customer satisfaction in the Indian banking context. Furthermore, similar studies were rarely found in the Indian context, especially within the public banking sector. Hence, this paper attempts to accomplish the research gap by empirically testing the satisfaction level of a large sample of the population in NCR toward six dimensions of perceived service quality rendered by selected public sector banks in India.

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Article
Publication date: 31 August 2012

Abdifatah Ahmed Haji and Sanni Mubaraq

This paper longitudinally examines the intellectual capital (IC) disclosure practices of Nigerian banks following the restructuring exercise and the subsequent policy…

Abstract

Purpose

This paper longitudinally examines the intellectual capital (IC) disclosure practices of Nigerian banks following the restructuring exercise and the subsequent policy changes in the Banking sector.

Design/methodology/approach

Content analysis of annual reports of the banks was carried out over a period of four years (2006‐2009), a period following the consolidation exercise and the subsequent introduction of the mandatory code of corporate governance. A self‐constructed IC disclosure checklist was used to measure the extent of IC information disclosed in the annual reports. A number of statistical techniques were performed to assess the trend of IC disclosures and compare the IC disclosure categories.

Findings

The results show that the overall IC disclosures of the Nigerian banks increased moderately over the four year period. Human and internal capital disclosures dominated the banks' IC disclosures, with only internal capital disclosures showing a significant increasing trend over time.

Research limitations/implications

The increasing trend of IC disclosures of the banks suggests that the introduction of the mandatory code of corporate governance had positive implications on IC reporting practices. Hence, the findings of this study give support to previous research that established a strong positive association between IC disclosures and corporate governance development. However, this study only examines the IC disclosures of Nigerian banks following the reformation of the banking sector. Future research should incorporate other countries experiencing similar regulatory changes.

Practical implications

The introduction of the corporate governance code might have positively influenced the IC disclosure practices of the banks. However, the results had shown that the IC disclosures were mainly inconsistent and discursive in nature. Hence, the regulatory authorities, accounting setters and other relevant government agencies may wish to devise a detailed IC reporting framework for the banking sector.

Originality/value

Despite the significance of the banking sector to any economy, the IC disclosure practices of the banks largely remained unexplored. This study provides a much needed longitudinal assessment of the IC disclosures in the case of Nigerian banks following a major consolidation exercise and the introduction of a mandatory code of corporate governance specifically designed for the banks. The study also represents the first empirical investigation of IC reporting practices in Nigeria.

Details

Journal of Human Resource Costing & Accounting, vol. 16 no. 3
Type: Research Article
ISSN: 1401-338X

Keywords

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Article
Publication date: 20 July 2012

V.K. Gupta

Retail banking is mass market banking where individual customers use local branches of large commercial banks for services such as savings and checking accounts…

Abstract

Purpose

Retail banking is mass market banking where individual customers use local branches of large commercial banks for services such as savings and checking accounts, mortgages, personal loans, car loans, debit cards, credit cards, insurance and other value added services. The purpose of this paper is to gain an understanding of the retail banking business processes from the perspective of continuity and change and identify the factors that affect these processes and overall performance of the retail banking sector. The aim was to develop a flexible framework for managing forces of continuity and change in retail banking business processes from a strategic perspective.

Design/methodology/approach

The data on which this study is based were generated through secondary research using published sources and primary research through focused discussion with industry experts and personal interviews with over 100 experts from leading banks selected using a structured questionnaire.

Findings

It was found that most of the public sector banks scored high on the continuity forces and relatively low on the change forces. Most of the private‐sector banks studied scored high on continuity and also high on change forces making them more competitive, except one bank which is low on both the forces because it is a newly established bank. The study suggests that there is a need for public sector banks to focus their strategies on factors affecting change forces for the improvement of their overall performance in the long run.

Social implications

The paper brings in the need for social responsibility for private sector banks and a need for a fine balance in forces of continuity and change for a long‐term sustainable business model.

Originality/value

This research paper represents one of the few efforts to study the business process management of retail banking in India from a strategic perspective and come out with a flexible strategic framework for managing forces of continuity and change for guiding this sector for its long‐term survival and growth. The flexible framework suggested and the C‐C Matrix can be of interest to researchers and practising managers to validate the applicability for other sectors, such as financial services, insurance, corporate finance, mortgages, risk management and other domains. The framework suggested can be adapted for application in the global context.

Details

Business Process Management Journal, vol. 18 no. 4
Type: Research Article
ISSN: 1463-7154

Keywords

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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.

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

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Article
Publication date: 29 November 2018

Sangita Dutta Gupta, Ajitava Raychaudhuri and Sushil Kumar Haldar

Information Technology has transformed the banking sector with respect to various systems and processes. Banks have adopted various measures to quicken their business…

Abstract

Purpose

Information Technology has transformed the banking sector with respect to various systems and processes. Banks have adopted various measures to quicken their business activity and also save cost and time. That is why there has been large requirement of IT in the banking sector. The question arises whether this investment is enhancing the profitability of the bank or not. The purpose of this paper is to examine the presence of profitability paradox in Indian Banking Sector.

Design/methodology/approach

Data are collected from ten nationalized banks and three private sector banks from 2006 to 2013. The impact of IT expenditure on return on assets and profit efficiency is examined. Profit efficiency is determined using Stochastic Frontier Analysis. Data are collected from annual reports of the banks. Data on IT expenditure are collected through Right to Information Act 2005. Correlation and Panel Regression are used to investigate the relationship between IT expenditure and ROE or Profit Efficiency.

Findings

The findings of the paper confirm the presence of profitability paradox in the Indian Banking sector.

Research limitations/implications

Extension of this study to other developing countries of the world will help to identify if any common pattern is there among the developing countries as far as productivity or profitability paradox is concerned.

Originality/value

There are some studies on the impact of IT on the banking sector in USA and Europe. This type of study however is rare in the context of India or for that matter other developing countries. Therefore, this paper will add new dimension to the existing literature and pave the way for future research in this area.

Details

International Journal of Emerging Markets, vol. 13 no. 5
Type: Research Article
ISSN: 1746-8809

Keywords

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Article
Publication date: 30 March 2021

Yaoteng Zhao, Supat Chupradit, Marria Hassan, Sadaf Soudagar, Alaa Mohamd Shoukry and Jameel Khader

Recently, the financial sector has faced significant challenges regarding the market competition, its technical efficiency and risk factors around the globe and gain…

Abstract

Purpose

Recently, the financial sector has faced significant challenges regarding the market competition, its technical efficiency and risk factors around the globe and gain recent researchers' intentions. Thus, the present study aims to examine the impact of technical efficiency, market competition and risk in banking performance in Group of Twenty (G20) countries.

Design/methodology/approach

Data have been obtained from the World Development Indicator from 2008 to 2019. For analysis purpose, random effect model and generalized method of moments (GMMs) have been executed using Stata.

Findings

The results revealed that market competition and banks' capital efficiency have a positive impact on banking performance, while banks' lending efficiency and non-performing loans have a negative association with the banking sector performance of G20 countries. These outcomes provide the guidelines to the regulators that they should formulate the effective policies related to the lending practices and non-performing loans that could improve the banking sector performance worldwide.

Research limitations/implications

The study has examined only three economic factors like the technical efficiency rate, market competition and risk element, and their influences on banking institutions' operational and economic performance. But the analysis has proved that except these factors, several factors affect banking institutions' operational and economic performance. Thus, future scholars recommend they analyze all the banking sector areas, pick more factors and enlighten their operational and economic performance influences. Moreover, the author of this article has chosen a particular source for collecting data to meet his study's objective. Only a single piece of software has been applied to analyze data; thus, the data collected for this paper may be incomplete, lack accuracy and reliability. Therefore, the future authors are recommended to use multiple sources to collect data and its analysis to ensure the comprehension, completeness and accuracy.

Originality/value

Last but not least, this study with the evidences from the banking sector of G20 countries tries to show on the banking management how the risk element matters in the banking sector in an economy. It makes it clear in which areas the banking institutions may be exposed to the risks, and how much sever different kinds of risks may be. Thus, it motivates the management to set a body of persons within the organization to monitor the risks, to try to avoid them and to overcome the problems created by these risks events.

Details

Business Process Management Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-7154

Keywords

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