Search results

1 – 10 of 17
To view the access options for this content please click here
Article
Publication date: 8 July 2021

Faisal Alqahtani, Besma Hamdi and Michael Skully

The purpose of this study is to examine whether the relationship between asset quality and profitability is linear or nonlinear, using a global dataset containing 2,943…

Abstract

Purpose

The purpose of this study is to examine whether the relationship between asset quality and profitability is linear or nonlinear, using a global dataset containing 2,943 banks from advanced and emerging economies.

Design/methodology/approach

The authors use the U-shape test to investigate the existence of a nonlinear relationship between asset quality and profitability. In addition, the dynamic panel generalised method of moments (GMM) and quantile regression are used to examine the nonlinear effect of profitability on nonperforming loans (NPLs).

Findings

After controlling for macroeconomic and bank internal factors, the authors find empirical evidence supporting the existence of a nonlinear relationship in the form of a U-shape. This is also confirmed through the three-stage U test procedure. After distinguishing between advanced and emerging economies, the authors also find that, in advanced markets, the credit policy responds more rapidly to changes in credit market conditions than in emerging markets, providing insights into credit market dynamics.

Research limitations/implications

Further research can check the robustness of this study’s findings in different markets and investigate the existence of nonlinearity in other bank variables.

Practical implications

In a nutshell, the results demonstrate potential implications for policymakers who need to carefully monitor banks' lending behaviour to ensure that banks do not lower lending standards. In addition, banking regulators and supervisors should consider the possible nonlinear relationship in their risk assessments and macrostress tests. Further, these results are important for bank managers, who should monitor the performance of their loan portfolios to ensure that their credit officers do not lower credit standards. Likewise, for banks located in an emerging economy, investing in human capital and advanced technologies can enable them to respond more effectively to changes in the credit market.

Originality/value

To the best of the authors' knowledge, this study is considered the first to provide empirical evidence for the nonlinear relationship between asset quality and profitability.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

Keywords

To view the access options for this content please click here
Article
Publication date: 2 March 2012

Shrimal Perera and Michael Skully

Since there is no agreement on the consistency of their estimates, the purpose of this paper is to investigate whether parametric stochastic frontier analysis (SFA) and…

Abstract

Purpose

Since there is no agreement on the consistency of their estimates, the purpose of this paper is to investigate whether parametric stochastic frontier analysis (SFA) and nonparametric data envelopment analysis (DEA) generate consistent bank efficiency assessments.

Design/methodology/approach

The authors utilize four alternative efficiency computation models: two DEA technical efficiency models based on constant and variable returns to scale, and two SFA cost efficiency models employing Translog and Fourier functional specifications. An unbalanced panel of 59 Indian banks over 1990‐2007 is employed as a model, developing country, banking market.

Findings

The Translog and Fourier specifications in SFA and the constant and variable returns to scale assumptions in DEA are found to rank and identify “best‐practice” and “worst‐practice” approximately in the same order. The association between DEA efficiency estimates and non‐frontier standard performance measures, however, is mixed and inconclusive. Unlike DEA scores, SFA efficiency assessments were found to be consistent with cost and profit ratios and hence are “believable”.

Practical implications

For regulators and bankers alike, the authors' findings highlight the importance of investigating the consistency of efficiency scores across various research methods. They should ensure that frontier‐based efficiency assessments are not simply “artificial constructs” of models' assumptions/specifications.

Originality/value

This paper extends the existing literature by checking jointly the statistical consistency of both DEA technical efficiency scores and SFA cost efficiency scores. The prior studies focus either on technical efficiency or cost efficiency, but not both. Moreover, as far as the authors are aware, this is the first cross‐methodological validation study to focus on bank efficiency in the context of a developing country banking market.

To view the access options for this content please click here
Article
Publication date: 2 March 2012

Shrimal Perera, Michael Skully and My Nguyen

The purpose of this paper is to investigate whether the level of market concentration in Sri Lanka's banking sector is positively associated with bank‐specific interest…

Abstract

Purpose

The purpose of this paper is to investigate whether the level of market concentration in Sri Lanka's banking sector is positively associated with bank‐specific interest spreads after controlling for other bank‐specific and exogenous influences.

Design/methodology/approach

A pooled, time‐series and cross‐section model is utilized which distinguishes between banks’ dominance in loan and deposit market segments. Results are presented for the total sample as well as for a truncated sample of private‐owned banks.

Findings

Changes in industry concentration do not affect bank‐level interest margins of Sri Lankan banks. Nevertheless, the dominant Sri Lankan banks seem to extract them and banks’ cost structures are priced in their interest spreads. The less‐capitalized, high risk banks operate with narrow interest margins, possibly due to the relatively higher deposit rates they pay to attract deposits. Although regulatory changes seem to have no effect, the growing capital market exerts negative pricing pressure on Sri Lankan banks.

Practical implications

The regulators should closely watch banks with larger loan and deposit market shares because they seem to exploit their dominant presence and geographical reach to extract higher spreads. Similarly, state‐owned banks should also draw regulatory attention for they extract higher interest margins, possibly, in lieu of their high operational inefficiency levels.

Originality/value

The authors employ an extended time‐series and cross‐section model which controls for sample heterogeneity using proxies for cost structures, risk profiles, regulatory restrictions and other environmental influences. Moreover, as far as it could be ascertained, this is the first such study on Sri Lanka's banking sector.

Details

South Asian Journal of Global Business Research, vol. 1 no. 1
Type: Research Article
ISSN: 2045-4457

Keywords

To view the access options for this content please click here
Article
Publication date: 26 January 2010

Shrimal Perera, Michael Skully and J. Wickramanayake

The purpose of this paper is to investigate whether any deviations in South Asian banks' interest margins can be attributed to market concentration (MC) after controlling…

Abstract

Purpose

The purpose of this paper is to investigate whether any deviations in South Asian banks' interest margins can be attributed to market concentration (MC) after controlling for other bank‐specific factors and exogenous environmental influences.

Design/methodology/approach

The paper employs an improved structural price‐concentration model with multiple definitions of market share (MS) covering loan and deposit markets. This model is estimated using generalized least squares method and random effect estimates are reported. The sample consists of 120 South Asian banks with a total of 1,226 bank‐year observations over 1992‐2005.

Findings

The findings suggest that no significant deviations in bank interest margins can be attributed to MC. Instead, only dominant South Asian banks with larger MSs are found to extract higher interest margins.

Research limitations/implications

This paper suffers from three main limitations: first, due to data limitations the sample only consists of South Asian domestic commercial banks. Second, due to the lack of product‐specific interest rates the authors have to contend with approximated bank‐specific interest margins. Third, throughout the study, annual bank‐specific data are used due to lack of high‐frequency data.

Practical implications

The regulators should closely monitor dominant banks with larger loan and deposit shares because these institutions operate with higher interest margins. Similarly, state‐owned banks (with relatively inefficient cost structures) should also draw regulatory attention for they extract higher interest margins, possibly, for survival.

Originality/value

The existing literature is extended by utilizing a pooled cross‐section and time series data model which controls for sample heterogeneity using proxies for cost structures, risk profiles and regulatory restrictions.

Details

International Journal of Emerging Markets, vol. 5 no. 1
Type: Research Article
ISSN: 1746-8809

Keywords

To view the access options for this content please click here
Book part
Publication date: 16 February 2006

Michael Skully and Kym Brown

Romania was a centrally planned economy until 1990. Over 1950 to 1975 large-scale government investments were made into heavy industry and hence productivity increased…

Abstract

Romania was a centrally planned economy until 1990. Over 1950 to 1975 large-scale government investments were made into heavy industry and hence productivity increased. Performance was measured against required production quotas rather than quality products that could be exported (Bacon, 2004). Compared to most other Central and Eastern European countries, Romania had little prior experimentation with market practices, so when the change occurred it was even more significant (Bacon, 2004). Romanians initially enjoyed their new economic freedoms and imported consumables previously not permitted. Inflation increased and workers sought higher wages, with consequential negative effects on output (Daianu, 2004). The government also expended large amounts, particularly foreign exchange reserves, prior to elections. Meanwhile, supranationals, such as the International Finance Corporation (IFC), World Bank, International Monetary Fund (IMF) and European Bank for Reconstruction and Development (EBRD), all funded Romania's burgeoning market economy. In 1993, a pyramid-type scheme offering huge returns for money invested for 3 years blossomed and became so large it rivalled gross domestic product (GDP) at the time. Hence the 1990s was a period of instability despite efforts to transform the economy to market practices.

Details

Emerging European Financial Markets: Independence and Integration Post-Enlargement
Type: Book
ISBN: 978-0-76231-264-1

Content available
Article
Publication date: 25 February 2014

Abstract

Details

South Asian Journal of Global Business Research, vol. 3 no. 1
Type: Research Article
ISSN: 2045-4457

Content available
Article
Publication date: 1 March 2013

Abstract

Details

South Asian Journal of Global Business Research, vol. 2 no. 1
Type: Research Article
ISSN: 2045-4457

Content available

Abstract

Details

Journal of Accounting & Organizational Change, vol. 4 no. 1
Type: Research Article
ISSN: 1832-5912

To view the access options for this content please click here
Book part
Publication date: 16 February 2006

Jonathan A. Batten and Colm Kearney

The history and prospects of European integration are both fascinating and exciting. Analysts of every aspect of this process, including its cultural, economic, financial…

Abstract

The history and prospects of European integration are both fascinating and exciting. Analysts of every aspect of this process, including its cultural, economic, financial, historical, political, and social dimensions, should recall that its main rationale remains as it has always been, to permanently end conflict and to secure peace and prosperity for all Europeans. As the European Union's (EU's) own website (see http://europa.eu.int) points out Europe has been the scene of many and frequent bloody wars throughout the centuries. In the 75-year period between 1870 and 1945, for example, France and Germany fought each other three times with huge loss of life. The history of modern European integration commenced in earnest with the realization in the early 1950s that the best way to prevent future conflict is to secure more economic and political integration. This led to the establishment of the European Coal and Steel Community in 1951, followed shortly by the European Economic Community (EEC) in 1957. Since then, the process of integration and enlargement has progressed at varying speeds, but always moving forwards. In 1967, the founding institutions of the EEC were merged to form today's European Commission (EC), the Council of Ministers, and the European Parliament. The members of the European Parliament were initially chosen by the member governments of the EEC, but direct elections commenced in 1979, and have continued every 5 years since then. The Treaty of Maastricht created the EU in 1992 and established the process of economic and monetary union (EMU) that culminated in the introduction of the euro in 12 of the 15 Member States in 2002.

Details

Emerging European Financial Markets: Independence and Integration Post-Enlargement
Type: Book
ISBN: 978-0-76231-264-1

To view the access options for this content please click here
Article
Publication date: 1 January 1994

Belverd E. Needles

This paper provides, first, a historical perspective of accounting research relating to Asian/Pacific countries as seen from the vantage of the leading international…

Abstract

This paper provides, first, a historical perspective of accounting research relating to Asian/Pacific countries as seen from the vantage of the leading international journal in the United States and, second, a bibliographical data base and index of twenty‐six years of articles on this region of the world. It accomplishes the first objective by presenting a tabular profile of research in international accounting as it pertains to countries in the Asian/Pacific Rim region as shown in articles published in the International Journal of Accounting (formerly, the International Journal of Accounting, Education and Research) and related publications which appeared from 1965 to 1990. The articles are classified according to country, research methodology, subject, and five‐year time periods. The paper accomplishes the second objective by providing an annotated bibliography of 125 articles on Asian/Pacific Rim countries and indices by country and methodology, and subject.

Details

Asian Review of Accounting, vol. 2 no. 1
Type: Research Article
ISSN: 1321-7348

1 – 10 of 17