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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

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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

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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.

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

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Article
Publication date: 16 August 2013

Shaista E. Khilji

The purpose of this article is to offer a recap of the past two years at SAJGBR in terms of its submissions, outline SAJGBR publication criteria and discuss the Editor's…

Abstract

Purpose

The purpose of this article is to offer a recap of the past two years at SAJGBR in terms of its submissions, outline SAJGBR publication criteria and discuss the Editor's future goals with respect to solidifying its reputation as a high‐quality regional journal with a global impact.

Design/methodology/approach

The paper reviews the past two years, explains the SAJGBR publication process and criteria, and discusses the Editor's goals and how they will be achieved.

Findings

SAJGBR is unique with respect to its focus upon a neglected (but socio‐economically vibrant) region and span across the full spectrum of business discipline. In its two volumes and four issues, it has made significant contributions to creating a repository of knowledge of South Asian business issues, and integrating South Asian perspectives and approaches to international business literatures.

Originality/value

The paper reviews the past two years, explains the SAJGBR publication process and criteria, and discusses the Editor's goals and how to achieve them. The Editor makes a plea to all researchers to select South Asia as the context of their studies; and to all authors to undertake rigorous research and carefully evaluate their manuscripts in terms of contribution, attention to context and quality before submitting to SAJGBR.

Details

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

Keywords

Content available
Article
Publication date: 26 January 2010

Yusaf H. Akbar

Abstract

Details

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

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