Search results

1 – 10 of over 2000
Article
Publication date: 27 September 2023

Navendu Prakash, Shveta Singh and Seema Sharma

This paper aims to investigate the short- and long-run influence of core banking solutions (CBSs) on productive efficiency and identify the presence of potential network…

Abstract

Purpose

This paper aims to investigate the short- and long-run influence of core banking solutions (CBSs) on productive efficiency and identify the presence of potential network externalities arising from CBS adoption. This paper further examines the differential behaviour of long-term effects across the banking structure.

Design/methodology/approach

This study uses a panel data set of Indian commercial banks from 2005 to 2021. Economic efficiency is quantified using VRS-based DEA programming algorithms. Productivity changes are measured through an input-oriented, DEA-based Malmquist productivity index. Short- and long-run effects are examined through a finite autoregressive distributed lag model, estimated through a pooled mean-group estimator.

Findings

Findings suggest that CBS adoption negatively correlates with cost structure until the first year of adoption. Nevertheless, significant benefits are visible from the third year. Furthermore, such associations are highly susceptible to the industry structure. CBS results in higher incremental benefits for private banks vis-à-vis state-owned banks. Large banks receive significant and quicker productivity improvements from CBS vis-à-vis small banks. Bank age guides CBS–performance associations, highlighting that mature banks may face the issue of legacy infrastructure in CBS adoption. The resultant networking externalities are significant as they enhance the attractiveness of the network, which subsequently augments inter-branch and inter-bank communications.

Originality/value

To the best of the authors’ knowledge, this study is the first to recognise the stickiness of one of the most homogeneously adopted technological innovations in the Indian banking sector. The presence of a conjoint technological network has the potential to enhance the service delivery process and ensure superior returns for Indian banks.

Details

International Journal of Organizational Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1934-8835

Keywords

Article
Publication date: 13 December 2023

Huimin Jing and Yixin Zhu

This paper aims to explore the impact of cycle superposition on bank liquidity risk under different levels of financial openness so that banks can better manage their liquidity…

Abstract

Purpose

This paper aims to explore the impact of cycle superposition on bank liquidity risk under different levels of financial openness so that banks can better manage their liquidity risk. Meanwhile, it can also provide some ideas for banks in other emerging economies to better cope with the shocks of the global financial cycle.

Design/methodology/approach

Employing the monthly data of 16 commercial banks in China from 2005 to 2021 and based on the time-varying parameter vector autoregressive model with stochastic volatility (TVP-SV-VAR) model, the authors first examine whether the cycle superposition can magnify the impact of China's financial cycle on bank liquidity risk. Subsequently, the authors investigate the impact of different levels of financial openness on cycle superposition amplification. Finally, the shock of the financial cycle of the world's major economies on the liquidity risk of Chinese banks is also empirically analyzed.

Findings

Cycle superposition can magnify the impact of China's financial cycle on bank liquidity risk. However, there are significant differences under different levels of financial openness. Compared with low financial openness, in the period of high financial openness, the magnifying effect of cycle superposition is strengthened in the short term but obviously weakened in the long run. In addition, the authors' findings also demonstrate that although the United States is the main shock country, the influence of other developed economies, such as Japan and Eurozone countries, cannot be ignored.

Originality/value

Firstly, the cycle superposition index is constructed. Secondly, the authors supplement the literature by providing evidence that the association between cycle superposition and bank liquidity risk also depends on financial openness. Finally, the dominant countries of the global financial cycle have been rejudged.

Details

Kybernetes, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 30 August 2023

Mahdi Bastan, Reza Tavakkoli-Moghaddam and Ali Bozorgi-Amiri

Commercial banks face several risks, including credit, liquidity, operational and disruptive risks. In addition to these risks that are challenging for banks to control and…

Abstract

Purpose

Commercial banks face several risks, including credit, liquidity, operational and disruptive risks. In addition to these risks that are challenging for banks to control and manage, crises and disasters can exert substantially more destructive shocks. These shocks can exacerbate internal risks and cause severe damage to the bank's performance, leading banks to bankruptcy and closure. This study aims to facilitate achieving resilient banking policies through a model-based assessment of business continuity management (BCM) policies.

Design/methodology/approach

By applying a system dynamics (SD) methodology, a systemic model that includes a causal structure of the banking business is presented. To build a simulation model, data are collected from a commercial bank in Iran. By presenting the simulation model of the bank's business, the consequences of some given crises on the bank's performance are tested, and the effectiveness of risk and crisis management policies is evaluated. Vensim Personal Learning Edition (PLE) software is used to construct the simulation model.

Findings

Results indicate that the current BCM policies do not show appropriate resilience in the face of various crises. Commercial banks cannot create sustainable value for the banks' shareholders despite the possibility of profitability, as the shareholders lack adequate resilience and soundness. These commercial banks do not have the appropriate resilience for the next pandemic after coronavirus disease 2019 (COVID-19). Moreover, the robustness of the current banking business model is very fragile for the banking run crisis.

Practical implications

A forward-looking view of resilient banking can be obtained by combining liquidity coverage, stable funding, capital adequacy and insights from stress tests. Resilient banking requires a balanced combination of robustness, soundness and profitability.

Originality/value

The present study is a combination of bank business management, risk and resilience management and SD simulation. This approach can analyze and simulate the dynamics of bank resilience. Additionally, present of a decision support system (DSS) to analyze and simulate the outcomes of different crisis management policies and solutions is an innovative approach to developing effective and resilient banking policies.

Details

Kybernetes, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 11 January 2024

Houssem Ben-Ammar

This study aims to evaluate the interaction between bank capital and explicit deposit insurance scheme (DIS) on the financial stability of Islamic and conventional banks.

Abstract

Purpose

This study aims to evaluate the interaction between bank capital and explicit deposit insurance scheme (DIS) on the financial stability of Islamic and conventional banks.

Design/methodology/approach

The author's sample covers 52 Islamic and 108 conventional banks operating in 12 countries over the period 2000–2021 using the random-effects generalized least squares (RE-GLS) regression technique.

Findings

The author's results reveal that bank capital negatively mediates the relationship between explicit DIS and the financial stability of both Islamic and conventional banks. Additionally, explicit DIS has a positive impact on the financial stability of conventional banks. However, the results are mixed for Islamic banks, as the effect of explicit DIS is positive for the Middle East and North Africa (MENA) region but negative for the South and Southeast Asia (SSA) region. Finally, the interaction between explicit DIS and the COVID-19 pandemic has a negative effect on conventional banks operating in the MENA region, while it has a positive effect on Islamic banks operating in the SSA region.

Research limitations/implications

The findings of this paper have important implications for regulators in evaluating DIS policies and in anticipating any potential adverse consequences that might arise for both Islamic and conventional banks in normal and crisis times. Policymakers should strive to preserve the benefits of DIS while mitigating the destabilizing effects of its interaction with capital ratios.

Originality/value

This study introduces a novel aspect by examining the mediating role of capital in the relationship between explicit DIS and the financial stability of Islamic and conventional banks.

Details

Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 27 September 2023

Samir Belkhaoui

The aim of this paper is to evaluate empirically the impact of oil price fluctuations on the relationship between banking sector development and economic growth in oil-importing…

Abstract

Purpose

The aim of this paper is to evaluate empirically the impact of oil price fluctuations on the relationship between banking sector development and economic growth in oil-importing MENA countries.

Design/methodology/approach

The study used the newly developed panel autoregressive distributed lagged (ARDL) approach in order to address any potential endogeneity between research variables.

Findings

The empirical results show a unidirectional causality in the long run from oil price to both economic growth and banking sector development for oil-importing countries. Also, banking sector development not only leads directly to economic growth but also can play a moderator role in the oil price—economic growth nexus.

Research limitations/implications

The study has two principal limitations. On the one hand, this study was conducted in a relatively limited sample of countries. On the other hand, the study did not consider others indicators for banking sector development and others macroeconomic variables.

Practical implications

The results found have imperative implications for banks' managers, regulators and researchers. Bank managers should be more concerned with the negative repercussions of oil price fluctuations on the development of their banks. The regulatory authorities must emphasize policies and strategies to further strengthen their banking sector in order to alleviate the negative influence of oil price shocks on economic growth. Researchers focused on finance-growth nexus must take into account the potential influence of oil price shocks.

Originality/value

The developed conceptual model allows examining to what extent the oil price fluctuations might affect the relationship between economic growth and banking sector development. This effect is neither evaluated nor clarified in the relevant literature.

Details

EuroMed Journal of Business, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1450-2194

Keywords

Article
Publication date: 8 August 2022

Kailash Pradhan and Vinay Kumar

This study attempts to examine the relationship between the banking sector and stock market development in India.

Abstract

Purpose

This study attempts to examine the relationship between the banking sector and stock market development in India.

Design/methodology/approach

To analyze the relationship between banks and stock market development, the ratio of stock market capitalization to GDP is proxied by stock market development. The determinants of the stock market development are used for analysis namely domestic credit to the private sector as a ratio of GDP is used as a proxy for the development of banks, saving rate, per capita real GDP, and inflation. The autoregressive distributed lag (ARDL)-Bounds testing approach is used for the analysis. The paper also used the unrestricted error correction model and CUSUM and CUSUM square test to check the stability of the model.

Findings

The ARDL bounds test found that there is a long-run relationship between stock market development and bank-centered financial development. The results also revealed that the stock market is positively influenced by the development of banks, savings, and per capita real GDP in the short-run as well as long-run.

Research limitations/implications

This paper suggests that improvement of banking sector plays an important role to increase liquidity of the capital market development in India. This paper also suggests that the economic growth and savings rate have positive impact to induce the capital market growth in both short run and long run.

Originality/value

The study has investigated the empirical relationship between the banking sector and the stock market development in a different methodological approach by using an ARDL model which is appropriate for a small sample size. There are few studies related to bank-centered financial development and stock market development in the context of India.

Details

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

Keywords

Article
Publication date: 8 August 2023

Salman Ahmed Shaikh

This study aims to examine the dynamics of the market development of Islamic banking in Pakistan. This study investigates how shocks to the economy in the form of changes in…

Abstract

Purpose

This study aims to examine the dynamics of the market development of Islamic banking in Pakistan. This study investigates how shocks to the economy in the form of changes in benchmark rate and exchange rate and internal factors such as efficiency, profitability and asset quality affect the development of Islamic banking. The study also evaluates the impact of Islamic banking on the real economy in the macro perspective and society at large in terms of inclusiveness, competitiveness and fairness.

Design/methodology/approach

Autoregressive distributed lagged model method is used for analysing the short-run and long-run determinants of market development of Islamic banking and the economic impact of Islamic banking on the real economy.

Findings

Profitability and exchange rate have a positive effect on market development of Islamic banking while higher inefficiency and interbank rate have a negative effect. On the other hand, financing intensity and profitability in Islamic banking positively affect the large-scale manufacturing sector.

Practical implications

Stable profits, high asset quality, efficiency and rising import demand with low policy rate environment complement Islamic banking growth. Moreover, the economic assessment shows that Islamic banks have been able to achieve the financial inclusion of those who want to avoid Riba, but they need concerted efforts to improve competitiveness and distinction with regard to distributional impact.

Originality/value

To the best of the authors’ knowledge, this is the first study in Pakistan to evaluate determinants of market development of Islamic banking taking 16-year quarterly data and assessing the economic effects of Islamic banking on inclusiveness, competitiveness and fairness.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 27 January 2023

Md Badrul Alam, Aziz Ullah Sayal, Muhammad Naveed Jan and Muhammad Tahir

This research paper attempts to empirically examine the relationship between the performance of the banking industry and foreign direct investment (FDI), thereby helping the…

Abstract

Purpose

This research paper attempts to empirically examine the relationship between the performance of the banking industry and foreign direct investment (FDI), thereby helping the readers contemplate one of the least explored areas of the existing literature associated with the idiosyncratic characteristics of FDI resulting from its interaction with the efficient banking performance of the host country. The study has focused on the economy of Bangladesh because of its significant amount of FDI inflows from the rest of the world and its adoption of many liberalization policies, especially in the banking sector and in the areas of international business and trade.

Design/methodology/approach

The study, to produce unbiased estimates, employed the autoregressive distributed lag (ARDL) model for analyzing the time series data collected from reliable sources.

Findings

The key outcomes of the study reveal that the sound performance of the banking industry appears to be counterproductive for FDI inflows, which is a bit unconventional insight. In the context of Bangladesh, trade openness, inflation rate and infrastructural development seem to be the dominant factors behind the rising inflows of FDI. Market size appears to be an insignificant determinant of FDI inflows.

Originality/value

This is a unique study because of its focus on the unexplored area in the literature.

Details

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

Keywords

Article
Publication date: 27 February 2024

Burhanuddin Susamto and Akhmad Akbar Susamto

This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance.

Abstract

Purpose

This paper aims to develop a novel approach to Islamic deposit insurance, specifically addressing the deficiencies in the current prevailing models of Islamic deposit insurance.

Design/methodology/approach

The analysis in this paper adopts a qualitative content analysis approach to review the existing literature on Islamic deposit insurance and propose a new model.

Findings

The proposed model includes a revised scheme. In the event of a bank failure, the funds used to reimburse depositors of the failed bank are divided into two distinct categories. The first category includes nonrepayable premiums that have been previously paid by the failed bank and managed by the Islamic deposit insurance agency or Islamic deposit insurance corporation. The second category comprises qard hasan, an interest-free loan provided by the Islamic deposit insurance agency or Islamic deposit insurance corporation using the deposit insurance funds from the collective pool of premiums of other banks.

Practical implications

The proposed model ensures that well-managed banks are not unfairly burdened by the failures of their poorly managed counterparts, thus preventing a sense of unfairness and inefficiency. Implementing the proposed model may result in higher business practices and risk management standards, ultimately leading to better depositors’ protection and banking system’s stability.

Originality/value

This paper offers a significant contribution to the limited literature on Islamic deposit insurance. The proposed model enriches the discourse and offers valuable insights for the future development of Islamic banking.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 28 April 2022

Alaa Salhani and Sulaiman Mouselli

The choice between different financing sources is governed by a number of finance theories, particularly, trade-off theory and pecking order theory. However, the special…

Abstract

Purpose

The choice between different financing sources is governed by a number of finance theories, particularly, trade-off theory and pecking order theory. However, the special characteristics of Islamic finance, which forces the exclusion of conventional bonds, leave Islamic banks with limited number of alternatives. Tier 1 sukuk are distinguished type of sukuk that combines the features of conventional bonds and stocks. This paper aims to answer the following question: Does the issuance of Tier 1 sukuk positively affect Islamic banks’ profitability or is their impact concentrated on enhancing Islamic banks’ capital adequacy ratios?

Design/methodology/approach

The data set used in this study consists of all United Arab Emirates (UAE) Islamic banks that issued Tier 1 sukuk over the period 2010–2020. Pooled and fixed effects panel regressions of Tier 1 sukuk and other control variables on three proxies of Islamic banks’ profitability were run. The selection of fixed-effect model is based on Hausman test, redundant fixed effects and likelihood ratio test.

Findings

This study reveals novel findings. Tier 1 sukuk increases both earnings per share (EPS) and capital adequacy ratios. That is, this study finds that there is a positive significant impact of Tier 1 sukuk on EPS, which indicates that issuing more Tier 1 sukuk will generate more return to shareholders in terms of higher EPS because of the lower cost of Tier 1 sukuk compared to equity. However, this study finds that there is an insignificant impact of Tier on sukuk on both return on assets and return on equity. Hence, it is concluded that Tier 1 sukuk does not increase the risk appetite of UAE Islamic banks.

Research limitations/implications

Tier 1 sukuk is a niche instrument that has been recently used by Islamic banks. Hence, there are a limited number of Islamic banks that have issued this type of sukuk and consequently limited number of observations. Therefore, with the increased use of this instrument, a larger set of data will be available for examination. In addition, future research could examine the relationship between issuing Tier 1 sukuk and profitability in other countries where such sukuk have loss absorption feature. The impact of other types of sukuk, such as liability sukuk, on Islamic banks’ profitability could also be an interesting field of study.

Practical implications

This study recommends Islamic banks to issue more Tier 1 sukuk to enhance their profitability indicators while meeting Basel III accord. This study also recommends investors to purchase the stocks of Islamic banks that issue Tier 1 sukuk because they are able to offer them higher EPS. The authors advise the UAE regulators to allow Islamic banks to issue Tier 1 sukuk with loss absorption feature to enable Islamic banks engage in more risky activities that usually provide larger profits. This study also suggests that the Islamic Financial Services Board (IFSB) reclassifies Tier 1 sukuk, with loss absorption feature, within the highest quality of capital, common equity Tier 1, to encourage Islamic banks to issue this type of sukuk, especially Basel III accord and IFSB 15 require higher ratios of common equity Tier 1 to risk-weighted assets.

Originality/value

This research contributes to the existing literature in two ways. First, it adds to the existing literature on the impact of sukuk on Islamic banks profitability. That is, contrary to prior studies that merely investigate the impact of issuing ordinary sukuk on profitability, this study explores a distinguished type of sukuk, that is Tier 1 sukuk, that has been surprisingly ignored so far. Second, this study shows that it is not only capital adequacy ratios that have improved as a result of issuing Tier 1 sukuk but also Tier 1 sukuk reduce the cost of capital of UAE Islamic banks which has been reflected in a higher profitability proxied by EPS. Hence, these sukuk serve a dual function for Islamic banks by improving both capital adequacy and profitability ratios.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

1 – 10 of over 2000