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Article
Publication date: 22 August 2023

Nyonho Oh and Kevin Nooree Kim

The survivorship of firms under extreme weather poses an essential question about the local economy's health. Over 90% of agricultural banks are categorized as community banks…

Abstract

Purpose

The survivorship of firms under extreme weather poses an essential question about the local economy's health. Over 90% of agricultural banks are categorized as community banks, which are important financial institutions promoting local growth. While previous studies suggest that climate change and weather shocks adversely impact community banks' resiliency, studies on whether these institutions engage in risk-reducing management strategies have been limited. In this study, the authors examine strategic choices of local community banks when facing flood events which include (1) safety net increase, (2) portfolio diversification, and (3) branch opening. These strategic choices are the coping mechanisms banks can take to survive while affecting the local competitive lending market.

Design/methodology/approach

The authors use panel-fixed effect regressions based on the storm data from National Oceanic and Atmospheric Administration (NOAA)'s National Weather Service (NWS) and the call reports from the Federal Deposit Insurance Corporation (FDIC). The authors focus on community banks' account variable characteristics and the number of offices to examine whether community banks take an active role in managing flood risk.

Findings

Results suggest that community banks do employ the selected strategic choices to a certain degree, as it is found that there is an increase in the core capital that absorbs shocks and portfolio diversification. However, the magnitudes of these activities are rather small and not large enough to fully mitigate the climate risk. Also, the authors do not find any evidence of branch expansion associated with local floods.

Originality/value

This study contributes to the literature by examining different strategic choices of community banks in the face of natural uncertainty. Even though concerns of climate risk have been raised in the regulatory setting, a lack of guidance or assessment tools could contribute to the passive action of these community banks, even though climate risks can have a significant economic impact. Thus, the evidence documented from this study calls for further guidelines and the importance of highlighting climate risks on community banks so that they can actively engage in risk-reducing strategies.

Details

Agricultural Finance Review, vol. 83 no. 4/5
Type: Research Article
ISSN: 0002-1466

Keywords

Open Access
Article
Publication date: 22 March 2024

Zuzana Bednarik and Maria I. Marshall

As many businesses faced economic disruption due to the Covid-19 pandemic and sought financial relief, existing bank relationships became critical to getting a loan. This study…

Abstract

Purpose

As many businesses faced economic disruption due to the Covid-19 pandemic and sought financial relief, existing bank relationships became critical to getting a loan. This study examines factors associated with the development of personal relationships of rural small businesses with community bank representatives.

Design/methodology/approach

We applied a mixed-method approach. We employed descriptive statistics, principal factor analysis and logistic regression for data analysis. We distributed an online survey to rural small businesses in five states in the United States. Key informant interviews with community bank representatives supplemented the survey results.

Findings

A business owner’s trust in a banker was positively associated with the establishment of a business–bank relationship. However, an analysis of individual trust’s components revealed that the nature of trust is complex, and a failure of one or more components may lead to decreased trustworthiness in a banker. Small businesses that preferred personal communication with a bank were more inclined to relationship banking.

Research limitations/implications

Due to the relatively small sample size and cross-sectional data, our results may not be conclusive but should be viewed as preliminary and as suggestions for future research. Bankers should be aware of the importance of trust for small business owners and of the actions that lead to increased trustworthiness.

Originality/value

The study extends the existing knowledge on the business–bank relationship by focusing mainly on social (instead of economic) factors associated with the establishment of the business–bank relationship in times of crisis and high uncertainty.

Details

Journal of Small Business and Enterprise Development, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 11 July 2023

Ca Nguyen, Alejandro Pacheco and Randall Stone

This paper investigates the significant increase in S corporation banks converting to C corporations following the 2017 Tax Cuts and Jobs Act (TCJA) and the shift in motivations…

Abstract

Purpose

This paper investigates the significant increase in S corporation banks converting to C corporations following the 2017 Tax Cuts and Jobs Act (TCJA) and the shift in motivations behind these conversions.

Design/methodology/approach

The paper uses bank-level panel data from Federal Deposit Insurance Corporation (FDIC) Call Reports to analyze the determinants of S bank conversions after the TCJA, comparing post-TCJA conversion trends with pre-TCJA trends utilizing an ordinary least squares (OLS) and logistics model.

Findings

The study finds that post-TCJA conversions are primarily driven by financially stable banks seeking improved tax conditions and relaxed shareholder restrictions as C corporations. This contrasts with pre-TCJA conversions, which were predominantly driven by financially distressed S corporation banks seeking new equity capital to maintain solvency.

Research limitations/implications

The findings necessitate a comprehensive reconsideration of the Subchapter S status' sustained relevance for smaller institutions, especially in light of the comparative benefits now offered by the C corporation status post-TCJA. The results underscore the importance of ongoing academic investigation to deepen the understanding of the evolving fiscal landscape's effects on community banks, thereby contributing to the knowledge of the resilience and health of the US economy.

Practical implications

This research nudges policymakers and regulators to contemplate the ongoing relevance and advantages of the S corporation status. Given the substantial benefits conferred by the C corporation status in the post-TCJA environment, this study suggests that retaining the S corporation status may not offer the same appeal for smaller community banks as it once did.

Originality/value

This paper contributes to the broader understanding of the impact of tax policy on businesses' organizational choices, particularly in the banking industry and emphasizes the need for a comprehensive review of the S corporation status to assess its ongoing applicability in fostering small and community-focused financial institutions in light of the evolved corporate tax landscape.

Details

Managerial Finance, vol. 49 no. 12
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 19 March 2024

Bastien Bezzon, Geoffroy Labrouche and Rachel Levy

This study analyzes the role of regional cooperative banks in identifying and financing small and medium-sized enterprises (SMEs) from a proximity perspective. Access to finance…

Abstract

Purpose

This study analyzes the role of regional cooperative banks in identifying and financing small and medium-sized enterprises (SMEs) from a proximity perspective. Access to finance is a major challenge for SMEs. Regional cooperative banks can remove this barrier based on cooperative bank's characteristics and geographic proximity to SMEs. Understanding the interplay between these financial actors and firms can contribute to a better support of SMEs development.

Design/methodology/approach

The results are based on a case study of eight SMEs located in southwestern France. Interviews were conducted with two regional cooperative funds and eight SMEs. The interview guide included questions related to the company, the projects financed and how financing was accessed.

Findings

Results reveal that a combination of three forms of proximity allows regional cooperative banks and SMEs to establish effective financing operations. They show that regional cooperative banks are key players in the existing financing mechanisms for SMEs. Such financing is often used to gain access to larger players at a later stage. The findings suggest the need for public policies that promote the integration of financing actors in regional ecosystems to advance SMEs' development.

Originality/value

This article examines how SMEs access financing, with a focus on regional cooperative banks, which have received little attention in the literature. Moreover, the relationships between these actors are studied through the lens of proximity. Regional cooperative banks are able to finance projects that may have been overlooked by traditional banks due to trust-building local dynamics.

Details

Journal of Small Business and Enterprise Development, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 15 March 2023

Yingying Shao, Babu G. Baradwaj, Michaël Dewally and Pu Liu

The purpose of this study is to examine whether banks’ commitment to corporate social responsibility (CSR) is related to the diversification of their activities and whether CSR…

Abstract

Purpose

The purpose of this study is to examine whether banks’ commitment to corporate social responsibility (CSR) is related to the diversification of their activities and whether CSR, as a result, affects banks’ risk profile.

Design/methodology/approach

Using a sample of 215 publicly traded U.S. bank holding companies between 1996 and 2016, this study applies regression analysis to examine the links between CSR and activity diversification and risk-taking. It also conducts a mediation test to determine whether CSR affects risk through its influence on banks’ activity diversification.

Findings

The results of this study show that banks engaging in positive CSR activities significantly increase the diversification of their banking activities, consistent with the theory that CSR serves as an implicit risk hedging strategy. Mediation analysis provides evidence that this translates into more stable and less risky banks.

Originality/value

This study contributes to the literature by suggesting that activity diversification is a channel through which CSR reduces bank risk and improves asset quality.

Details

Social Responsibility Journal, vol. 19 no. 9
Type: Research Article
ISSN: 1747-1117

Keywords

Abstract

Details

The Significance of Chinatown Development to a Multicultural America: An Exploration of the Houston Chinatowns
Type: Book
ISBN: 978-1-80455-377-0

Open Access
Article
Publication date: 17 October 2022

Elisa Menicucci and Guido Paolucci

This study aims to investigate the impact of environmental performance, social responsibility and corporate governance (ESG) on bank performance (BP) in the Italian banking…

10502

Abstract

Purpose

This study aims to investigate the impact of environmental performance, social responsibility and corporate governance (ESG) on bank performance (BP) in the Italian banking sector. It analyzes the relationships between 10 dimensions of ESG pillars and BP indicators during the period 2016–2020.

Design/methodology/approach

This study examines a sample of 105 Italian banks and develops three econometric models to verify the effect of ESG initiatives on BP indicators. The independent variables are the ESG dimensions collected from the Refinitiv database, whereas the explanatory variables are performance indicators measured through accounting and market variables.

Findings

The findings show that ESG policies negatively affect operational and market performance in the banking sector, suggesting that Italian banks have not fully embraced strong sustainability procedures. However, the relationships between ESG dimensions are mixed if measured individually. The results show a significant positive impact of emission and waste reductions on financial and operating performance, but regarding social aspects, it is proved that better product responsibility decreases accounting performance.

Research limitations/implications

This study offers an in-depth examination of ESG practices in relation to current and future performance. In particular, the findings provide practitioners and academics with an actual set of predictors in the ESG area to improve BP.

Originality/value

To the best of the authors’ knowledge, this is the only study that has investigated the impact of ESG issues on BP in Italy. Few prior studies have used all dimensions of ESG policies at a disaggregated level to investigate their effect on various performance indicators.

Details

Corporate Governance: The International Journal of Business in Society, vol. 23 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

Book part
Publication date: 16 August 2023

Abdul Karim Kafoir and Emeka Raphael Agu

Traditional savings and credit associations, also known as ‘Osusu’ in Sierra Leone, are unions of individuals with common economic goals aimed at reducing poverty and economic…

Abstract

Traditional savings and credit associations, also known as ‘Osusu’ in Sierra Leone, are unions of individuals with common economic goals aimed at reducing poverty and economic vulnerability. The chapter examined the ecosystem of traditional indigenous savings and credit associations, their role as an emerging financial inclusion strategy, and contributions to the socio-economic transformation of business processes in the ecosystem of business operations in Sierra Leone. The chapter adopted the case study method to discuss the Tawoponneh model of ROSCAs in Sierra Leone. The institutional theory provided insight into why individuals join ROSCAs, as well as the resulting outcomes and benefits. Additionally, this chapter discusses the challenges associated with indigenous financial sustainability practices and provides actionable recommendations for joint private and government policy collaboration in supporting traditional entrepreneurial businesses.

Article
Publication date: 9 October 2023

Maria Georgiou, Sofia Daskou, Athanasios Anastasiou and Michailina Siakalli

The paper aims to explore the effects of the behavioural antecedents suggested by the theory of planned behaviour (TPB) (i.e. positive subjective norms, high perceived behavioural…

Abstract

Purpose

The paper aims to explore the effects of the behavioural antecedents suggested by the theory of planned behaviour (TPB) (i.e. positive subjective norms, high perceived behavioural control and positive attitudes towards switching) on the switching propensity of retail banking customers at several critical switching incidents (CSIs) (i.e. events of unfavourable reputation concerning their current bank or favourable reputation concerning competitor banks, service failures, problems with charges and interest rates, herding behaviour, inconvenience, alternative banks' attractiveness and unethical bank practices).

Design/methodology/approach

A self-completed online survey was conducted among 324 Cypriot retail banking customers. For the data analysis, the researchers used principal component analysis (PCA), confirmatory factor analysis (CFA) and structural equation modelling (SEM).

Findings

The study revealed that the behavioural antecedents specified by TPB play different roles in various CSIs. Positive subjective norms may drive bank customers to switch at critical incidents such as: service failure, unfavourable bank reputation, alternative banks' attractiveness, inconvenience, favourable reputation of other banks and herding behaviour. High perceived behavioural control can lead to switching, only in the case of other banks' favourable reputation. Finally, positive attitudes towards switching may affect bank clients to switch in cases of service failure, unfavourable bank reputation, alternative attractiveness and inconvenience.

Originality/value

To the best of the authors' knowledge, no other previous research work has examined the interaction between the antecedents of switching behaviour (as specified by TPB) and switching propensity at different CSIs. The study addresses the gap of explaining the reasons for which, at similar incidents, some bank customers choose to switch to other banks, whereas others do not.

Details

International Journal of Bank Marketing, vol. 41 no. 7
Type: Research Article
ISSN: 0265-2323

Keywords

Open Access
Article
Publication date: 6 November 2023

Haruna Issahaku, Munira Alhassan Muhammed and Benjamin Musah Abu

This paper aims to estimate the determinants of the intensity of use of financial inclusion by households in Ghana.

Abstract

Purpose

This paper aims to estimate the determinants of the intensity of use of financial inclusion by households in Ghana.

Design/methodology/approach

Due to the reality of a household using one or more financial products or services, this study uses the generalised Poisson model applied to GLSS6 and GLSS7 data collected in 2012/2013 and 2016/2017 respectively, to estimate the determinants of the intensity of use of financial inclusion. To deepen the analysis, a multinomial probit model is also applied.

Findings

Results show that infrastructural variables such as roads, public transport and banks stimulate the intensity of financial inclusion. In addition, agricultural development characteristics such as markets and cooperatives are essential for the intensity of inclusion.

Research limitations/implications

There is a need to incorporate how many services or depth of services that people use as part of the conceptualisation of financial inclusion, as this can provide more policy-relevant evidence to enhance priority setting in financial inclusion policies. Also, micro-level financial inclusion studies in agrarian economies should consider exploring agricultural development and infrastructure variables in the modelling framework. As lead to further studies, count models of financial inclusion should consider exploring cross-country analysis, the use of panel data, or other methodological approaches to provide more robust evidence.

Originality/value

Previous studies have not modelled financial inclusion based on a count model as a means of measuring intensity though conceptualisations highlight the fact that people use varied financial products or services. Following from this angle, to the best of the authors’ knowledge, this study provides the first attempt at analysing the underlying determinants of the number of financial products or services used by households.

Details

Journal of Economics, Finance and Administrative Science, vol. 28 no. 56
Type: Research Article
ISSN: 2077-1886

Keywords

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