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Article
Publication date: 14 October 2019

Mohamed Aseel Shokr

This paper aims to examine the effectiveness of monetary policy on bank loans in Egypt using generalized method of moments (GMM) model. Also, it investigates the impact of…

Abstract

Purpose

This paper aims to examine the effectiveness of monetary policy on bank loans in Egypt using generalized method of moments (GMM) model. Also, it investigates the impact of bank level variables, namely, total assets, liquidity, capital and income on bank loans. It develops the equation of loans, which is introduced by Ehrmann et al. (2002) using bank level variables such as income and the interaction between income and interest rate.

Design/methodology/approach

This paper examines the impact of monetary policy shocks on bank loans in Egypt by applying the GMM technique and panel data from 1996 to 2014.

Findings

The results reveal that real interest rate has a significant impact on bank loans, which indicates that the bank lending channel is effective in Egypt. Furthermore, the bank level variables, namely, banks’ size, liquidity and income have significant effects on bank loans in Egypt, which sustains the heterogeneous effect of monetary policy on bank loans. Therefore, the Central Bank of Egypt (CBE) can adjust interest rate to influence the bank loans and total demand.

Research limitations/implications

It does not examine the effect of monetary policy on small and large banks in Egypt.

Practical implications

The policy implications from this paper indicate that the monetary authority in Egypt should adjust interest rate to stabilize the bank loan supply. By stabilizing the bank loans, the monetary authority is able to stabilize investment, consumption and total demand.

Social implications

The relevance of bank lending channel indicates that the role of commercial banks is very important in transmitting monetary policy shocks to the real sector.

Originality/value

It is important for the CBE, banks and people because it shows the effectiveness of bank lending channel and the effect of global financial crisis on the Egyptian economy.

Details

Journal of Financial Economic Policy, vol. 12 no. 2
Type: Research Article
ISSN: 1757-6385

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Article
Publication date: 18 June 2020

Abdulazeez Y.H. Saif-Alyousfi

The purpose of this paper is to examine the impact of the Yemen War on banking services (deposits and loans) at the aggregate and at the level of conventional and Islamic…

Abstract

Purpose

The purpose of this paper is to examine the impact of the Yemen War on banking services (deposits and loans) at the aggregate and at the level of conventional and Islamic banks in GCC countries. The author also tests hypotheses of direct and indirect impacts of the Yemen War on bank services.

Design/methodology/approach

The sample comprises a total of 70 banks (45 conventional and 25 Islamic banks) over the period 2000–2018. The static and dynamic panel generalized methods of moments (GMM) estimation techniques are applied.

Findings

Empirical results indicate that the Yemen War has a significant negative direct impact on deposits and loans of GCC banks. The results lend support for the direct channel hypothesis, but not for the indirect channel hypothesis. The negative direct impact is most prominent on banks in GCC countries that are directly involved in the Yemen War, although the war has an asymmetric effect on conventional and Islamic banks, the former being more vulnerable. The overall conclusion is that the Yemen War exerts an asymmetric impact on the GCC region, across both banks and countries.

Practical implications

These results are a warning to policymakers to be cautious when formulating a strategy for macroeconomic stability.

Originality/value

It is widely recognized that the Yemen War has a significant impact on the economies of the GCC countries. However, the possible impact of the war on GCC bank services has not so far been subjected to robust empirical analysis. This paper therefore seeks to fill this gap by providing an in-depth quantitative analysis of this impact. It distinguishes between direct and indirect channels through which the Yemen War may affect bank services. It is also the first to examine the asymmetric impact of the Yemen War on the GCC region, across both banks (Islamic and conventional banks) and countries (whether or not involved in the war). The study uses both static panel and dynamic panel GMM estimation techniques to analyze the data.

Details

Journal of Economic and Administrative Sciences, vol. 36 no. 4
Type: Research Article
ISSN: 1026-4116

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Article
Publication date: 29 November 2018

Mohamed Aseel Shokr and Anwar Al-Gasaymeh

The purpose of this paper is to examine the relevance of the bank lending channel (BLC) of monetary policy and the bank efficiency in Egypt.

Abstract

Purpose

The purpose of this paper is to examine the relevance of the bank lending channel (BLC) of monetary policy and the bank efficiency in Egypt.

Design/methodology/approach

This paper examines the effectiveness of bank lending channel using generalized method of moments GMM model during the period from 1996 to 2014. Also, it uses stochastic frontier approach (SFA) to examine the bank efficiency in Egypt.

Findings

This study supports the relevance of the BLC using panel data. Moreover, applying SFA, this paper computes cost efficiency taking account of both time and country effects directly. The finding suggests that banks with low inflation and high GDP tend to perform more efficiently.

Research limitations/implications

The limitation of the study is examining one country only.

Practical implications

The finding signals that the Central Bank of Egypt (CBE) should adjust interest rate in order to stabilize the bank loan supply.

Social implications

It is important for the CBE and Egyptian banks because it highlights the importance of BLC.

Originality/value

It examines one channel of monetary policy and bank efficiency in Egypt.

Details

International Journal of Emerging Markets, vol. 13 no. 5
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 4 January 2018

Nufazil Altaf and Farooq Ahamad Shah

The purpose of this paper is twofold: first, to investigate the relationship between ownership concentration and firm performance and, second, to determine the moderating…

Abstract

Purpose

The purpose of this paper is twofold: first, to investigate the relationship between ownership concentration and firm performance and, second, to determine the moderating role of investor protection quality on the ownership concentration-performance relationship from a dynamic perspective.

Design/methodology/approach

The study is based on secondary financial data of 236 Indian manufacturing firms obtained from CAPITALINE database, pertaining to a period of five years. This study uses ordinary least squares, fixed effects and two-step generalized method of moments (GMM) techniques to arrive at results.

Findings

Results of the study confirm the inverted U-shaped relationship between ownership concentration and firm performance and a significant positive effect of investor protection quality on firm performance. With regard to moderating role of investor protection quality on ownership concentration–performance relationship, results show that investor protection quality would significantly moderate the ownership concentration–performance relationship.

Originality/value

The study is a pioneer in proving that an inverted U-shaped relationship exists between ownership concentration and firm performance in an emerging market in general and India in particular. This study extends the corporate governance literature by examining ownership concentration–performance relationship in a dynamic perspective and in an unexplored market.

Details

Journal of Indian Business Research, vol. 10 no. 1
Type: Research Article
ISSN: 1755-4195

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Article
Publication date: 17 June 2020

Abdulazeez Y.H. Saif-Alyousfi, Rohani Md-Rus, Kamarun Nisham Taufil-Mohd, Hasniza Mohd Taib and Hanita Kadir Shahar

The purpose of this paper is to examine the determinants of capital structure using a dataset of firms in Malaysia.

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Abstract

Purpose

The purpose of this paper is to examine the determinants of capital structure using a dataset of firms in Malaysia.

Design/methodology/approach

This paper carries out a panel data analysis of 8,270 observations from 827 listed non-financial firms on the Malaysia stock market over the period 2008–2017. To estimate the model and analyse the data collected from the DataStream and World Bank databases, the authors use static panel estimation techniques as well as two-step difference and system dynamic GMM estimator.

Findings

The results show that profitability, growth opportunity, tax-shield, liquidity and cash flow volatility have a negative and significant impact on debt measures. However, the effects of collateral, non-debt tax and earnings volatility on measures of debt are positive and significant. In addition, firm size, firm age, inflation rate and interest rate are important determinants of the present value of debt. The results also show a significant inverse U-shaped relationship between the firm's age and its capital structure. In general, the results support the proposition advocated by the pecking order and trade-off theories.

Practical implications

The results of this study necessitate formulation of various policy measures that can counter the effects of debt on firms.

Originality/value

The present study is among the earliest to use both the book and market value measures of capital structure. It also uses three proxies for each: total debt, long-term debt and short-term debt. It incorporates earning volatility and cash flow volatility as new independent variables in the model. These variables have not previously been used together with both book and market value measures of capital structure. The study also examines the non-monotonic relationship between firm's age and capital structure using a quadratic regression method. It applies both static panel techniques and dynamic GMM estimation techniques to analyse the data.

Details

Asia-Pacific Journal of Business Administration, vol. 12 no. 3/4
Type: Research Article
ISSN: 1757-4323

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Article
Publication date: 13 August 2021

Fanyu Chen, Siong Hook Law, Zi Wen Vivien Wong and W.N.W Azman-Saini

This study aims to examine the effects of institutions on private investment (PI) using panel data analysis, where the sample countries consist of 100 countries around the…

Abstract

Purpose

This study aims to examine the effects of institutions on private investment (PI) using panel data analysis, where the sample countries consist of 100 countries around the world and the time period is covering from 2007 to 2016. The system generalized method of moments (GMM) estimator, introduced by Arellano and Bond (1991) and further developed by Blundell and Bond (1998) is used to analyze the data sets.

Design/methodology/approach

This study uses the panel data approach to estimate the empirical model due to the panel nature of the data. In particular, due to the presence of lagged dependent variables and the ability to capture individual country-specific effects, the system GMM estimator, introduced by Arellano and Bond (1991) and further developed by Blundell and Bond (1998), is adopted to analyze the roles of institutions in PI. The system GMM is developed specifically to solve the problems of weak instruments and persistency (Blundell and Bond, 1998). Jointly, they suggest to adopt additional moment conditions where lagged difference of the dependent variable is orthogonal to the level form of the disturbances. The system GMM estimator is able to combine the moment conditions for the different models, as well as the level model, thereby (is capable of) generate consistent and efficient parameters. Due to the dynamic nature of the data, this study uses one-step and two-step system GMM to investigate the roles of institutions in PI.

Findings

The empirical results based on the two-step system GMM demonstrate that the quality of institutions plays an important role in stimulating PI. The finding is reinforced by the analysis of the institutional sub-components’ effects on PI.

Originality/value

This study is unique as its measurement of institutions is multi-dimensional (including law and order, rules and regulation, government stability, bureaucratic quality, control of corruption, socio-economic condition, etc.), and hence are more comprehensive. Second, it is different than the previous studies as its sample of countries includes both democracies and non-democracies, as well as both developed and non-developed economies in which policy implications are widely acceptable. Third, this study contributes to the policymakers especially those in the debt-ridden economies where governments are budget-tightening (limited capacity for public investment), as to which practical direction should be focused on so as to attract PI and eventually sustainable growth can take place.

Details

Studies in Economics and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 13 May 2021

Abdulazeez Y.H. Saif-Alyousfi

This paper aims to examine and compare the impact of foreign direct investment (FDI) inflows on bank deposits in aggregate as well as at the level of conventional and…

Abstract

Purpose

This paper aims to examine and compare the impact of foreign direct investment (FDI) inflows on bank deposits in aggregate as well as at the level of conventional and Islamic banks in Middle East and North Africa (MENA) countries. The study also tests hypotheses of direct and indirect impacts of FDI flow and FDI stock on bank deposits.

Design/methodology/approach

Static and dynamic panel generalized methods of moments (GMM) estimation techniques are applied to analyze a large data set of 491 commercial banks (422 conventional banks and 69 Islamic banks) across 18 MENA countries between 1993 and 2017 (12,275 year observations).

Findings

Empirical results indicate that inflowing FDI flow and FDI stock have a significant negative direct impact on deposits of MENA banks. The results lend support for the direct channel hypothesis for the effect of FDI on bank deposits and find no evidence in support of the indirect channel hypothesis. FDI inflows affect bank deposits directly via increased FDI-related excessive competition in the banking market. Deposits from conventional banks appear to be more affected than those from Islamic banks. The variation may due to the fact that Islamic banks have fewer multinational corporations (MNC) customers than conventional banks and therefore are less sensitive to fluctuations in FDI.

Practical implications

From this analysis, this study concludes that foreign investments have a higher productivity than local investments in MENA region. Attracting more FDI is aimed at increasing overall national productivity through competition. However, governments would be wise to enact such a policy to maximize benefits and minimize potential harm to local industry. Furthermore, FDI policy should encourage small to medium-size banks and firms (SMEs)’ participation and linkage with multinational banks and MNCs, while upgrading research and development institutions and innovation activities to help SMEs to benefit from potential spillovers from foreign presence in the industry. In addition, the linkage and connection between SMEs and foreign firms should be strengthened and promoted by government policy.

Originality/value

This study is the first of its kind to examine the effect of FDI inflows on bank deposits. It also provides an in-depth quantitative analysis of the impact of FDI flow and FDI stock, separately, on bank deposits for both conventional and Islamic banks. It distinguishes between direct and indirect channels through which FDI inflows may affect bank deposits. The study analyzes 25 years of panel data for 491 banks (12,275 year observations) and uses both static and dynamic panel GMM estimation techniques to analyze the data.

Details

Competitiveness Review: An International Business Journal , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1059-5422

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Article
Publication date: 27 July 2020

Abdulazeez Y.H. Saif-Alyousfi

This paper investigates and compares the impact of foreign direct investment (FDI) inflows (flow and stock) on bank off-balance sheet (OBS) activities in aggregate as well…

Abstract

Purpose

This paper investigates and compares the impact of foreign direct investment (FDI) inflows (flow and stock) on bank off-balance sheet (OBS) activities in aggregate as well as at the level of conventional and Islamic banks in GCC countries. It also tests hypotheses of direct and indirect impacts of FDI flow and FDI stock on OBS activities.

Design/methodology/approach

This paper uses both static and dynamic panel generalized methods of moments (GMM) estimation techniques to analyze the data of 70 GCC banks (45 conventional and 25 Islamic banks) over the period 1995–2017.

Findings

Empirical results indicate that FDI flow and FDI stock have a significant negative direct impact on OBS activities of GCC banks. The results lend support for the direct channel hypothesis for the effect of FDI on OBS activities and find no evidence in support of the indirect channel hypothesis. OBS activities from conventional banks appear to be more affected than those from Islamic banks.

Practical implications

The results of this study are expected to trigger appropriate policy response from the central banks of the respective GCC countries as well as their governments.

Originality/value

It is widely recognized that FDI inflows are of great importance to the economic development of emerging and developing countries. However, their impact on bank OBS activities has so far not been subject to accurate empirical assessment. This paper aims to fill this gap by providing an in-depth quantitative analysis of the impact of FDI flow and FDI stock separately, on bank OBS activities for both conventional and Islamic banks in GCC countries. It distinguishes between direct and indirect channels through which FDI flow and FDI stock may affect OBS activities for banks as a whole and both conventional and Islamic banks separately. It also uses both static and dynamic panel GMM estimation techniques to analyze the data.

Details

China Finance Review International, vol. 11 no. 2
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 27 July 2021

Shahzad Akhtar, Haroon Hussain and Rana Yassir Hussain

This study aims to estimate the regulatory compliance impact on the risk of banks operating in Pakistan. The direct and indirect regulatory compliance of conventional…

Abstract

Purpose

This study aims to estimate the regulatory compliance impact on the risk of banks operating in Pakistan. The direct and indirect regulatory compliance of conventional banks with Islamic operations in terms of risk from 2009 to 2017 are estimated.

Design/methodology/approach

This study used a two-step system generalized method of moment (GMM) (dynamic panel) to examine the relationship between regulatory compliance, Islamic operations and the bank risk and tested the direct and indirect impacts of regulatory compliance and Islamic operations on the said risk.

Findings

Regulatory compliance has a significant and positive relation with bank risk, whereas the Islamic bank operations have a significant and negative relationship. Thus, regulatory compliance creates pressure on banks, but the Islamic operations of conventional banks reduce this pressure in direct and indirect ways.

Practical implications

Per the policy of State Bank of Pakistan (SBP), banks shall pursue Islamic operations to reduce regulatory pressure and widen their scope. The results suggest that regulatory compliance creates pressure on bank risk irrespective of the type of the bank. Thus, the SBP should seek the appropriate measure for this occurrence.

Originality/value

To the best of the authors’ knowledge, this work is the very first study that has considered the unique Islamic operations of conventional banks and estimated its impact on risk. Moreover, this work examined two types of bank risk instead of employing stability and market measure. This research is also the first to implement a two-step system GMM for the methodology.

Details

Nankai Business Review International, vol. 12 no. 4
Type: Research Article
ISSN: 2040-8749

Keywords

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Article
Publication date: 12 July 2021

Imran Abbas Jadoon, Raheel Mumtaz, Jibran Sheikh, Usman Ayub and Mohammad Tahir

The international institutions, policymakers and governments are promoting green growth as a policy objective for global financial stability (FS) without sound empirical…

Abstract

Purpose

The international institutions, policymakers and governments are promoting green growth as a policy objective for global financial stability (FS) without sound empirical investigation. Therefore, the purpose of this study is to investigate whether the green economy would be successful in achieving its main objective i.e. stabilizing the world financial system because the investment stakes are too high for this green transition.

Design/methodology/approach

The study used the two-step system generalized method of moments (GMM) methodology on panel data of 90 countries for 6 years from 2010 to 2015 to investigate the impact of green growth economy on FS.

Findings

The results of the current study revealed that overall green growth enhanced FS in the country for both the short and long run. However, the social inclusive dimension of green growth was irrelevant in creating FS.

Research limitations/implications

The results of the current study validate the growth-led finance hypothesis and encourage the policymakers to strengthen the policy initiative for green growth. Because green growth mitigates economic and environmental risk to create a stable financial environment. However, social inclusiveness needs to be explored through alternate paradigm in relevance to FS.

Originality/value

As per the author’s knowledge, it is a pioneer study to empirically investigate the impact of green growth on FS which would be useful in understanding the green growth and FS dynamics.

Details

Journal of Financial Regulation and Compliance, vol. 29 no. 5
Type: Research Article
ISSN: 1358-1988

Keywords

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