Search results

This paper aims to examine the effects of financial freedom and competition on bank profitability.

The study uses system generalized method of moments and data from 139 banks across 11 Sub-Saharan African countries during the period 2006-2012.

The results of the study show that higher market power (less competition) is positively related to bank profitability, but operating efficiency is a more important determinant of profitability than market power. Also, both financial freedom and economic freedom show a positive impact on bank profits. The authors find evidence that banks with higher market power operating in countries with higher freedom for banking activities are more profitable than their counterparts in countries with greater restrictions on banking activities.

The results have shown that allowing banks greater freedom to operate would enhance their performance, without necessarily damaging the economy, as operating efficiency appears to be a more important reason for the observed profitability than market power.

This study provides insight on the ambiguous relationship between competition and bank profitability by considering the moderating effect of financial freedom which has not been taken into account in previous studies.

This paper examines the effect of financial (banking) freedom and market power on bank net interest margins (NIM).

The study uses data from 11 sub-Saharan African countries over the period, 2006-2012, and the system generalized method of moments to assess how financial freedom affects the relationship between market power and bank NIM.

The authors find that both financial freedom and market power have positive relationships with bank NIM. However, there is some indication that the impact of market power on bank margins is sensitive to the level of financial freedom prevailing in an economy. It appears that as competition intensifies, margins of banks in freer countries are likely to reduce faster than those in areas with more restrictions.

Competition policies could be guided by the insight on how financial freedom moderates the effect of market power on bank margins.

This study provides new empirical evidence on how the level of financial freedom affects bank margins and the market power-bank margins relationship.

This study aims to analyze the potential implications of economic freedom and competition for bank stability.

Using system generalized method of moments and data from 139 banks across 11 Sub-Saharan African (SSA) countries during the period 2006–2012, this study considers whether the degree of economic freedom affects the relationship between competition and bank stability.

The results show evidence of the competition-fragility hypothesis in SSA banking, but suggests that beyond a setting threshold, increases in market power may also be damaging to bank stability. Financial freedom has a negative effect on bank stability, suggesting that banks operating in environments with greater financial freedom generally tend to be less stable or more risky. The authors also find evidence of a conditional effect of economic freedom on the competition–stability relationship, implying that bank failure is more likely to occur in countries with greater economic freedom, but with low competition in the banking sector.

The results suggests to policy makers that a moderate level of competition and economic freedom may be the appropriate policy to ensure the stability of banks.

The study provides insight on the competition–bank stability relationship, by providing new empirical evidence on the effect of economic freedom, which has not been previously considered.

Microfinance institutions (MFIs) play a significant role in society to help low-income consumers that liaise with sustainable development goals. Therefore, the purpose of this paper is to examine the effects of two economic freedom components, namely, regulatory efficiency on business freedom and monetary freedom; and market openness on investment freedom and financial freedom. Their influence on the efficiency of MFIs in both social and financial ways is examined.

This study collected a total of 88 MFIs from Thailand and the Philippines for the years 2011 to 2017. The data envelopment analysis approach has been used to measure the MFIs’ efficiency level. Then, the ordinary least squares and generalised least square estimation methods serve to analyse the effects of economic freedom and other determinants on efficiency.

The results show that overall MFIs operate at an encouraging level. However, they were managerially inefficient when exploiting resources to achieve both social and financial efficiency. Therefore, MFIs should focus more on managerial operations to improve the level of efficiency. Results from panel regression analysis showed a mixed outcome for the relationship between economic freedom and MFIs’ efficiency both financially and socially. This suggested that different freedoms will result in different outcomes and significantly influence MFIs’ financial and social efficiency.

Regulatory efficiency and market openness are the vital aspects of economic freedom components that may significantly influence MFI’s performance specifically on social and financial efficiency. This study fills the research gap by examining the relationship between economic freedom components and specific MFIs’ social and financial efficiency, to ensure MFIs work to achieve sustainable development goals.

This study aims to consider the effect of financial (banking) freedom and competition on bank efficiency.

With data from 11 Sub-Saharan African countries over the period 2006-2012, the study estimates both competition (market power) and bank cost efficiency using the same stochastic frontier framework. Subsequently, Tobit models, including instrumental variable Tobit regression, are used to assess how financial freedom affects the relationship between competition and bank efficiency.

The results show that increase in market power (less competition) leads to greater bank cost efficiency, but the effect is weaker with higher levels of financial freedom. This is not consistent with the quiet life hypothesis.

Policymakers usually take the view that opening up banking markets to greater competition may lead to higher efficiency. However, the results have shown that allowing banks to maintain some level of market power may be necessary to ensure banking system efficiency.

This study deepens the understanding of the inconsistent relationship between competition and bank efficiency, by using the same framework to measure both competition and efficiency, and by providing new empirical evidence on how the level of financial freedom affects this relationship.

This paper aims to examine the relationship between economic freedom and Islamic rural banks' efficiency in the case of Indonesia.

The study covers 40 Islamic rural banks in 34 Indonesian regions from 2014 to 2020. Tobit regression is utilized to expose the impact of economic freedom on the efficiency of Islamic rural banks, and nonparametric frontier data envelopment analysis is used to acquire banks' technical efficiency.

The findings reveal that overall economic freedom has a strong favorable impact on the efficiency of Islamic rural banks. The study’s breakdown components suggest that business freedom, government spending and investment freedom are favorable indicators, whereas government integrity and tax burden are negative indicators, and all indicators agree with previous studies.

This research can serve as a guideline for Islamic rural bank management in terms of maintaining financial efficiency. The government should think about the ramifications of financial sector liberalization and reforms, according to these findings. When financial intermediaries operate in a less constrained environment, they are more likely to pursue competitive practices that increase their operating rate and other efficiency metrics. Finally, academics might utilize this information to investigate the economic flexibility of Islamic rural banks.

The novelty of this study is in using data envelopment analysis and Tobit regression to identify economic freedom and Islamic rural banks' efficiency. To the best of the authors' knowledge, the study of the role of economic freedom in Islamic rural bank's efficiency is limited, particularly in the context of Indonesia.

The paper aims to explore the impact of economic freedom on the efficiency of the Malaysian banking sector.

The analysis is confined into two stages. In the first stage, the bias-corrected data envelopment analysis method is used to compute the efficiency of individual banks. Then bootstrap regressions are used to examine the impact of economic freedom on bank efficiency, while controlling for the potential impacts of contextual variables.

It was found that greater freedom to start new businesses tend to impede the efficiency of banks operating in the Malaysian banking sector. The results indicate that restrictions on the activities of which banks could undertake exert negative impact on their efficiency levels. The empirical findings seem to support for official regulation and supervision of banks by setting the limits on activities which banks could undertake. In addition evidence supporting for government interventions in the foreign exchange and money markets was found.

The purpose of the present paper is to extend the earlier works on the performance of the banking sector in a developing economy and establish empirical evidence on the impact of economic freedom. Although empirical evidence which examines the performance of banking sectors is abundant in the literature, to the best of our knowledge, virtually nothing has been published to address the impact of economic freedom.

This study explores how entrepreneurs modify their financial path(s) and go beyond job security to attain greater financial freedom. The present work examines the cash-flow quadrant (CFQ) attributes and demonstrates the importance of the push-pull factors for an individual's quadrant transition in achieving financial freedom.

A hypothetical model and an abductive approach were used through regression models in a population sample of 260 Bahraini entrepreneurs. Fuzzy participatory cognitive mapping was also used to develop a conceptual model of financial path transition's decision making among entrepreneurs and study the impact of certain push-pull factors on the entrepreneurs' decisions.

The triangulated study identifies six categories of variables: financial freedom, workplace condition, independence, salary level, family life-building and retirement savings as key pull-push factors that significantly impact financial path transition's decision. Fuzzy cognitive mapping (FCM) extends our knowledge of the dynamics of CFQ transitions from a push-pull factor perspective. The results indicate no significant differences between the variables listed in the regression model and the fuzzy cognitive map model. Four categories of pull-push factors appeared as the entrepreneurs' top rankings when ordered by complexity, centrality scores and impact weight. These categories were workplace conditions, financial freedom, independence and salary level. The findings widen the scope of knowledge of each quadrant and rationalize how and why such factors impact quadrant decisions among Bahraini entrepreneurs.

Many studies discuss the CFQ model and consider its quadrants a specific method for identifying a unique financial path to generate income. A shifting quadrant occurs when individuals want to change their financial path and move beyond job security to achieve more financial freedom. Although this transition is well-established in the literature, the factors accounting for the individual's transition across quadrants have not received enough attention. This study fills this gap and calls for more in-depth investigations of this area to better understand the dynamics of CFQ transitions from a push-pull factor perspective.

The role of financial institutions and financial intermediaries in fostering economic growth (ECO) by improving the efficiency of capital accumulation, encouraging savings, and ultimately improving the productivity of the economy has been well established by the researchers. The reforms in the financial sector worldwide during the 1980s and 1990s were aimed at ushering in greater efficiency and more competitiveness.

The impact of financial market freedom (MF) on the overall development of the financial sector and thereby the growth in an economy is one of the most important considerations for policymakers over the years. This chapter aims to examine the causal relationship between financial MF and ECO in the Indian economy in the post-reform period.

This study aims to examine the impact of economic freedom and corruption on bank stability in sub-Saharan Africa (SSA).

This study uses 38 countries in SSA from 2008 to 2019 using system GMM technique.

The authors found that greater economic freedom increases economic efficiency through improving bank stability. Besides this, the authors also find that banks in environments with greater business freedom, financial freedom, trade freedom and investment freedom are less prone to solvency. The results also show that corruption improves bank stability, suggesting evidence of the “grease the wheels” hypothesis.

The results suggest to policymakers that a high economic freedom may be an appropriate policy toward enhancing bank stability. Besides this, the results also suggest to policymakers to prioritize addressing the core issues that encourage corruption to extort bribes.

This study provides insightful discussion on whether economic freedom and its subcomponents and corruption have an effect on bank stability in SSA.