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1 – 10 of 237The main goal of this paper is to establish whether there is some relationship between organizational charts (OC) and corporate social responsibility (CSR) in banks. The analysis…
Abstract
Purpose
The main goal of this paper is to establish whether there is some relationship between organizational charts (OC) and corporate social responsibility (CSR) in banks. The analysis is based on contents disclosed in their CSR/sustainability reports, as well as Mintzberg's taxonomy for OC.
Design/methodology/approach
This paper describes, from a theoretical point‐of‐view, both issues (CSR and social responsible actions), as well as OC patterns according to Mintzberg's taxonomy. Then, an empirical review is gained of CSR/sustainability reports published by a representative sample from the banking industry in the EU‐15. Using a triangular methodology, an attempt has been made to verify whether there is some correlation between Mintzberg's OCs patterns and their CSR contents disclosed, mainly referring to internal management issues.
Findings
The paper found no solid evidence to accept or reject a possible relationship between both variables (type of OC adopted by each bank and reporting contents revealed). However, this is a promising research line for future analysis, using a bigger sample and more CSR reporting issues.
Originality/value
This paper opens a new research path in CSR/Sustainability and OCs, for a possible link between both variables, a matter that has not been previously explored.
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Carlo Migliardo and Antonio Fabio Forgione
The purpose of this paper is to investigate the impact of ownership structure on bank performance in EU-15 countries. Specifically, it examines to what extent shareholder type and…
Abstract
Purpose
The purpose of this paper is to investigate the impact of ownership structure on bank performance in EU-15 countries. Specifically, it examines to what extent shareholder type and the degree of shareholder concentration affect the banks’ profitability, risk and technical efficiency.
Design/methodology/approach
This study uses a sample of 1,459 banks operating in EU-15 countries from 2011 to 2015. It constructs a set of continuous variables capturing the ownership nature, the concentration and their interactions, and estimates an instrumental variable random effect (IV-RE) model. In addition, a panel data stochastic frontier analysis is conducted to estimate the time-varying technical efficiency for profitability and costs.
Findings
The empirical analysis shows that bank performance is affected by shareholder type. When regressed against the entrenchment behavior of the controlling owner hypothesis, banks with large-block shareholders are more profitable, less risky and more profit efficient. Further, ownership concentration reverts the negative effect related to the institutional, bank and industry ownership.
Research limitations/implications
The results support the hypothesis that concentrated ownership helps to overcome agency problems. They also confirm that managerial involvement in banks’ capital enhances a bank’s profit and its volatility.
Originality/value
To the best of the authors’ knowledge, this is the first study to consider the ownership nature, the concentration and their interaction using continuous variables, which allows for more precise inferences. The results provide new evidence that bank profitability, cost efficiency and risk are affected by the type of direct shareholders.
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Paula Cruz-García, Anabel Forte and Jesús Peiró-Palomino
There is abundant literature analyzing the determinants of banks’ profitability through its main component: the net interest margin. Some of these determinants are suggested by…
Abstract
Purpose
There is abundant literature analyzing the determinants of banks’ profitability through its main component: the net interest margin. Some of these determinants are suggested by seminal theoretical models and subsequent expansions. Others are ad-hoc selections. Up to now, there are no studies assessing these models from a Bayesian model uncertainty perspective. This paper aims to analyze this issue for the EU-15 countries for the period 2008-2014, which mainly corresponds to the Great Recession years.
Design/methodology/approach
It follows a Bayesian variable selection approach to analyze, in a first step, which variables of those suggested by the literature are actually good predictors of banks’ net interest margin. In a second step, using a model selection approach, the authors select the model with the best fit. Finally, the paper provides inference and quantifies the economic impact of the variables selected as good candidates.
Findings
The results widely support the validity of the determinants proposed by the seminal models, with only minor discrepancies, reinforcing their capacity to explain net interest margin disparities also during the recent period of restructuring of the banking industry.
Originality/value
The paper is, to the best of the knowledge, the first one following a Bayesian variable selection approach in this field of the literature.
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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 between…
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.
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David Adeabah and Charles Andoh
The study examines the relationship between the consequential social cost of market power (i.e. welfare performance of banks) and cost efficiency using data covering the period…
Abstract
Purpose
The study examines the relationship between the consequential social cost of market power (i.e. welfare performance of banks) and cost efficiency using data covering the period 2009 to 2017 from the Ghanaian banking industry.
Design/methodology/approach
The study adopts the ordinary least squares (OLS), fixed effect (FE) panel regression and the quantile regression (QR) approaches to control for heterogeneity and provide increased room for policy relevance. The two-stage least squares instrumental variables (2SLS-IV) regression is used to ensure the robustness of the findings against the problem of possible reverse causality.
Findings
The results indicate a positive relationship between banks' welfare performance and cost efficiency, which suggests that greater cost efficiency hedges welfare losses. In other words, welfare gains and cost-efficient banks are not mutually exclusive. Also, the results show evidence that the sensitivity of welfare gain to cost efficiency depends on the knowledge of local market dynamics. Further, the findings from the QR estimation suggest that, but for welfare loss at low (Q.25) to the median (Q.50) quantiles, cost efficiency is a necessary and sufficient condition to hedge the welfare losses.
Practical implications
The results demonstrate that financial consumer protection cannot be achieved without cost efficiency in the presence of both foreign banks and high market knowledge. Therefore, our paper suggests an integrated cost efficiency policy approach that has the complementary effect of a robust information sharing mechanism and incentives to hedge against welfare losses in the banking sector of emerging economies. Moreover, if welfare gain is synonymous with cost-efficient banks, then the presence of a quiet life is typical of financial consumer protection.
Originality/value
This study provides insight into the importance of cost efficiency to the public policy of financial consumer protection in an era of foreign banks' dominance. From the review of prior literature, this paper is the first to apply the QR estimation technique to examine the effect of cost efficiency throughout the conditional distribution of bank welfare performance rather than just the conditional mean effect of cost efficiency.
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Rim Ben Selma Mokni, Mohamed Tahar Rajhi and Houssem Rachdi
The purpose of this paper is to investigate determinants of risk-taking in Islamic banks and conventional banks located in the MENA region.
Abstract
Purpose
The purpose of this paper is to investigate determinants of risk-taking in Islamic banks and conventional banks located in the MENA region.
Design/methodology/approach
The empirical study covers a sample of 15 conventional and 15 Islamic banks for the period 2002-2009. The authors estimate models using both generalized least square random effect and generalized method of moments system approaches.
Findings
The results of the empirical analysis show that the determinants’ risk-taking significance varies between Islamic and conventional banks.
Originality/value
The main aim is to develop a comprehensive model that integrates macroeconomic determinants, industry-specific determinants, and bank-specific determinants. This paper performs a comparison of the risk-taking between two different banking systems in the MENA region.
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Santi Gopal Maji and Preeti Hazarika
The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition…
Abstract
Purpose
The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables.
Design/methodology/approach
Secondary data on 39 listed Indian commercial banks are collected from “Capitaline Plus” corporate data database for a period of 15 years. Capital is measured by capital adequacy ratio as defined by the regulators, and two definitions of risk – credit risk and insolvency risk – are employed. Competition is measured by Herfindahl-Hirschman deposits index, concentration ratio and H-statistic. The value-added intellectual coefficient model is employed to compute human capital efficiency (HCE). Three-stage least squares technique in a simultaneous equation framework is used to estimate the coefficients.
Findings
The study finds that absolute level of regulatory capital and bank risk are positively associated, although the influence of capital on risk is not statistically significant. The influence of competition on risk is negative for all the models, which supports the “competition stability” view. The impact of human capital on bank risk is also negative for all cases.
Practical implications
The findings of the study are useful for the decision makers in several ways based on the inverse influence of competition and HCE on bank risk. Further, the observed positive association between capital and risk indicates that the capital regulation is not sufficient to enhance the stability in the banking sector.
Originality/value
This is the first study in the Indian context that incorporates the competition in the banking industry as an explanatory variable in the extant bank capital and risk relationship.
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This paper investigates the financial strength of banks in Bangladesh and factors affecting the financial strength over the years 2010–2015 on 35 banks.
Abstract
Purpose
This paper investigates the financial strength of banks in Bangladesh and factors affecting the financial strength over the years 2010–2015 on 35 banks.
Design/methodology/approach
Additive value function with CAMEL rating (capital stength, asset quality, managerial efficiency, earning ability, liquidity) has been employed to calculate banks’ financial strength index (FSI). In the second stage, panel regression has been exercised to find out the determinants of banks’ financial strength.
Findings
Empirical finding exhibits that the Islamic banks of Bangladesh are financially stronger and outperform conventional and Islamic window banks with higher liquidity. In the ownership category, private banks have more financial strength with higher capital strength, asset quality, managerial efficiency and earning ability than public banks. Bank size, loan recovery, salary and banking sector development positively affect whereas the loan-asset negatively affect the bank’s financial strength in Bangladesh.
Research limitations/implications
This study has its limitations despite its importance. CAMELS is a more improved form than using CAMEL. But because of the data deficiency on “S” which represents sensitivity, it would not be possible to use CAMELS framework. Further researchers could incorporate this.
Practical implications
Government and banks should allow Islamic banks to enter the market on easy terms because of their outstanding performance in the existing market. In addition, banks should provide loans with consideration so that they cannot create credit risk. In addition, they should calculate composite financial strength annually to understand which components they need to work on.
Originality/value
This study extends the extant result on the composite FSI. It is hard to examine the financial strength of banks using only ratio value, which misleads most of the time. The study offers evidence on how the FSI provides more rigorous results and what are the factors contribute most to the financial strength of banks.
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Apriani Dorkas Rambu Atahau and Tom Cronje
The Indonesian banks play crucial roles in the economy, especially because of less developed bond and stock markets. It has undergone drastic changes in bank-ownership composition…
Abstract
Purpose
The Indonesian banks play crucial roles in the economy, especially because of less developed bond and stock markets. It has undergone drastic changes in bank-ownership composition over time. This paper aims to analyze the impact of bank-specific characteristics on the performance of different bank-ownership types in Indonesia to determine whether their profitability drivers differ.
Design/methodology/approach
Fixed-effect panel data regression is applied to 1,649 bank-year observations (97 banks throughout 2003–2019). It encompasses the pre- and post-global financial crisis (GFC) period.
Findings
The findings show that age, liquidity, equity and credit risk are significant determinants of bank performance. The significance of these effects differs for each bank-ownership type and show changes between the pre-GFC and post-GFC periods.
Research limitations/implications
Notwithstanding the merit of this paper, the results are not without limitations. This paper only focuses on one country. Furthermore, the prominence of banks relative to bond and stock markets with consideration of the GDP of countries may result in different findings
Practical implications
These findings provide the owners and managers of banks with information that can be applied to compare and assess own bank drivers and performance to enhance their own efficiency. The findings also inform bank authorities and regulators about differences in performance drivers that could be considered in changes to policies aimed at improving the performance of different bank-ownership types.
Originality/value
This paper is a pioneer study that focuses on the drivers of bank performance for different ownership types during the pre- and post-GFC periods in a country where the financial market is overall small and bank credits dominate capital supply.
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