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This paper aims to investigate the impact of banking market competition on banks’ profitability and banks’ risk using a sample of six countries from the Middle East from 2006 to 2017.

This paper uses the system generalized method of moments estimator to tackle potential omitted variable bias, endogeneity and simultaneity issues.

After controlling for bank market and country-specific characteristics, this study reports strong and robust evidence that competition in the banking market is conducive to lower financial performance. This research further finds that intense banking competition leads to lower profitability and increased risk regardless of bank type. As the relationship is not different for Islamic banks, one can argue that activities of Islamic banks are based on the basic traditional banking operations and products, and banks need to diversify their business activities to reduce failure risk and preserve the banking sector’s stability.

This paper tries to bridge the gap by studying the impact of competition on bank performance in high-income dual banking Gulf Cooperation Council (GCC) economies. Earlier studies have either covered all the dual banking economies or the Middle East and North African region. The authors suggest that the GCC banking market is required to be studied separately because of its idiosyncrasies. Second, unlike earlier studies, the authors have not only examined the impact of competition on bank return but also on bank risk.

Empirical studies, to date, show that financial inclusion (FI) enhances financial stability (FS) by promoting a large deposit base, reducing information asymmetry, and strengthening market power on the one hand, and leads to financial fragility by expanding credit without proper screening, increasing operational costs, and provoking borrowers' moral hazard on the other. Thus, the most important issue is to maintain FS while extending formal financial services to the impoverished and disadvantaged segments of society. Therefore, this paper investigates the efficacy of macroprudential regulations (MPRs) to align these policy divergences.

To accomplish the objective and facilitate policy implications, the authors use aggregated and disaggregated measures of both FI and MPRs, employ advanced econometric models that minimize endogeneity and ensure robustness, and investigate their joint effectiveness in upholding FS using data of 138 countries spanning the 2004–2017 years.

The findings indicate that the effectiveness of MPRs is instrument specific. Some MPRs that obstruct access to formal financial services, in particular, moderate the advantage of FI in achieving FS, while others boost the effect of inclusion in attaining financial sector stability. Therefore, prudence should be emphasized while designing MPRs as a tool for aligning the policy trade-off between FI and FS.

To the best of the authors knowledge, this paper extends previous empirical research by investigating the conditioning impact of MPRs in the FI-FS nexus.

Banks, financial statement users, and accounting standard setters have long disagreed on the informativeness of banks’ statements of cash flows (SCFs) and there is a lack of relevant evidence in the literature. This paper examines the informativeness of the SCFs of U.S. commercial banks in two settings where SCFs are purported to be useful. The first analysis tests the incremental value relevance of banks’ SCFs beyond income statements and balance sheets and compares bank's SCFs with those of industrial firms. We find that banks’ SCFs have limited incremental value relevance, and are much less value relevant than industrial firms’ SCFs. The second analysis examines and finds no distress-predictive power of banks’ SCFs, especially in the presence of standard distress predictors. Overall, our results are consistent with the view that banks’ SCFs have limited informativeness.

Reviews previous research on the efficiency and performance of financial institutions and uses Siems and Barr’s (1998) data envelopment analysis (DEA) model to evaluate the relative productive efficiency of US commercial banks 1984‐1998. Explains the methodology, discusses the input and output measures used and relates bank performance measures to efficiency. Describes the CAMELS rating system used by bank examiners and regulators; and finds that banks with high efficiency scores also have strong CAMELS ratings. Summarizes the other relationship identified and recommends the use of DEA to help analysts and policy makers understand organizations in greater depth, regulators and examiners to develop monitoring tools and banks to benchmark their processes.

The purpose of this research is to contribute to the development of an effective incentive policy implementation model, through an in-depth analysis of the stock option and/or stock grant schemes adopted by the major Italian banking groups.

Out of the 77 banking groups operating in Italy on 30 June 2011, The paper selected 12 banking institutions that implemented either stock option or stock grant plans over the years 2007-2010. The documentary analysis was carried out on 22 stock option and/or stock grant schemes and based on the examination of corporate governance reports, as well as information memoranda on incentive plans.

The results show a limited implementation of equity-based incentive plans in the Italian banking sector during the investigation period (2007-2010) and clearly demonstrates that, as far as these types of incentives are concerned, there is ample room for improvement as well as substantial adjustments.

The research covers a limited period of time. Therefore, further extending the scope of its survey will definitely be of great academic interest in the light of the latest regulatory changes made to the banking sector remuneration regime.

By giving a clear indication of the critical points that should be addressed to improve the policies in force, this research study aims to provide greater knowledge about the remuneration practices adopted by Italian banks, in terms of equity-based incentive plans.

The purpose of this paper is to explore the impact of creditors' undervaluing the total expected cost of a borrower's bankruptcy filing because a portion of the cost will be borne by other lenders. Creditors who bear a smaller portion of the total cost of a personal bankruptcy would be expected to take less care to avoid triggering one.

This paper presents a theoretical model of a creditor's decision of how aggressively to pursue collection. The model shows that because each lender's collection actions increase the probability of bankruptcy, each lender will collect more aggressively when a borrower has many loans. The paper tests the predictions of the model using a large dataset of credit card accounts.

The model highlights an important testable result: holding the level of debt constant, a borrower with many loans is more likely to choose formal bankruptcy and less likely to choose informal bankruptcy, i.e. chronic non-repayment absent a bankruptcy filing. This paper finds evidence that strongly supports the predictions of the model. Laws that limit creditor collection actions do not appear to mitigate the effects of increasing number of loans.

While a few papers have tested whether strategic interactions may impact business bankruptcy, no paper of which the author is aware has provided clear empirical evidence of the existence of common pool effects in the personal credit market. These effects point to an important and potentially underappreciated source of risk for borrowers and creditors in this market.

The purpose of this paper is to identify which small businesses are most “debt sensitive”, or most likely to be affected by banking market conditions.

For the primary debt sensitivity categories, the paper hypothesizes that bank conditions are most likely to have significant effects on firms in size classes and industries that are “on the bubble” for credit availability (probability of credit close to 0.50), rather than those with “relatively easy” or “relatively difficult” access to credit (probability much higher or lower, respectively). The secondary classifications also require that loans fund a substantial proportion of assets for the firms in the category that have loans. These hypotheses are tested using a comprehensive data set of US small businesses by size class and industry matched with variables measuring bank market power, market structure, and efficiency in the firm's local markets.

Findings show that the data are consistent with the hypotheses, with the strongest support for the hypotheses occurring using the secondary classifications. In terms of policy implications, the findings suggest that the credit availability of small, debt‐sensitive firms may be reduced by within‐market mergers that increase concentration in rural markets, but that the more common type of recent consolidation – creating larger banks that operate in more markets – may be associated with an increase in credit availability for these sensitive firms. Such an increase in credit availability would be magnified if consolidation resulted in increased bank operating efficiency.

The paper offers insights into the effect of banks on “debt‐sensitive” small businesses.

Islamic banking is a viable sustainable banking model that has shown resilience to financial crises. The aim of this research is to design a consensus-based ethical and market-driven corporate governance index (CGI) to boost financial performance and ensure compliance with Islamic rulings.

The design of the CGI is the outcome of the feedback obtained from a cross-country survey to measure bank efforts in enhancing corporate governance (CG) throughout the ten-year period of 2001-2011. The CGI is divided into six core CG themes and 40 sub-themes.

First, the results of the multiple regression analysis show a consistent positive relationship between CG and financial performance metrics. Second, the authors detect misaligned compensation structures for directors. Third, poor governance leads to higher risk exposures.

CG in Islamic banks is yet an evolving discipline and infant practice. This research aims to introduce a CGI that should be updated and improved as the discipline evolves.

The research concludes by proposing a CG paradigm. The outcome of the research could also be of use to both Islamic banks and to the rapidly growing sustainable banking sector in designing a similar CGI and CG model incorporating the ethical features of sustainable finance.

The core ethos of Islam are: avoiding the exploitation of the needy, avoiding excessively risky transactions, avoiding unethical transactions and justice, equity and income redistribution. If properly applied, Islamic banking will display all features of sustainable finance as well as enhance social welfare.

To the best of the authors' knowledge, this is the first CGI that is based on an ethical and all-inclusive input of all stakeholders.

The Indonesian Islamic banking industry is very promising, but there has been no analysis of the optimal and decreasing growth rate of the industry. Information regarding these is essential for policy makers, Islamic bankers and all related parties to guide the future development of the industry and sets up proper plans and strategies. The paper aims to explore the optimal and decreasing growth rates of the industry and in so doing contribute to the current literature on the Indonesian Islamic banking industry.

The paper first reports on the performance of the Indonesian Islamic banking industry, before explaining conditions where the Islamic banking industry is believed to be still immature. Third, in order to identify the optimal and decreasing growth rates, the paper estimates the future performance of the industry by using ARIMA models to identify periods where the growth rate is at optimal and decreasing points. Then, on the basis of a number of assumptions and statistical simulations, the analysis broadens to become qualitative in nature by determining the optimal numbers of Islamic banks to be established in the future.

The paper generates some important findings. First, the optimum growth rate of the market share (0.12 percent) is predicted to occur in December 2012; the market share in that month is estimated to be 5.75 percent. Second, although the market share keeps growing, the paper finds the rate of increase to be slow, and in October 2018, it becomes negative, at 0.004 percent. The estimated market share in that time is 11.63 percent. Finally, the optimal number of Islamic banks in December 2012 is shown to be 23 and in October 2018, 24.

Qualitative information on the months of the optimal and decreasing growth rates and quantitative information on the optimal number of Islamic banks to be established are significant information for policy makers, Islamic bankers and other related parties. The information is likely to be important in relation to their efforts to develop the Islamic banking industry, to anticipate decreasing growth in the industry and to establish new Islamic banks. More generally, the paper helps the related parties to direct and guide the future development of the industry.

To the best of the authors' knowledge, this is the first paper that attempts to establish optimal and decreasing growth rates in the Indonesian Islamic banking industry, or the optimal numbers of Islamic banks to be established in the future.

The purpose of this paper is to analyze whether and how “living wills” and public disclosure of such resolution plans contribute to market discipline and the effective resolution of too big and too complex to fail banks.

The disorderly collapse of Lehman Brothers is analyzed. Large, systemically important banks are now required to prepare resolution plans (living wills). In the USA, parts of the living wills must be disclosed to the public. The public component is analyzed with respect to contribution to market discipline and effective resolution of banks considered too big and complex to fail. In a statistical analysis of the publicly available section of living wills, this information is contrasted with legislative requirements.

The analysis of public disclosures of resolution plans shows that they are insufficient to facilitate market discipline and, in some instances, fail to enhance public understanding of the financial institution and its business. When coupled with the uncertainty over how an internationally active financial institution will be resolved, the paper concludes that these reforms will do little to reduce market expectations that some financial firms are simply too big or too complex to fail.

A very small data set and the necessity of cross-checking the authors' observations with all publicly available sources. The authors have also tried to infer a purpose for public disclosure of parts of resolution plans. The authorities are remarkably vague on the issue and so the authors have assumed they actually did have a specific intent that would strengthen the system.

The inference from the publicly available portion of living wills is that the authorities are a very long way from abolishing too-big-to-fail.

So far as the authors know, this is the first in-depth analysis of the information available in the public sections of living wills.