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1 – 10 of over 5000Huong Ha, Man Chung Wong and Hui Shan Loh
This study examines whether corporate social responsibility (CSR) initiatives positively impact customers’ selection of retail banks in Hong Kong (HK) and identifies which CSR…
Abstract
Purpose
This study examines whether corporate social responsibility (CSR) initiatives positively impact customers’ selection of retail banks in Hong Kong (HK) and identifies which CSR domains affect customers’ selection of banks.
Design/methodology/approach
This study adopted a quantitative approach. Primary data were collected from 416 customers of 22 retail banks in HK. The theoretical framework of this study was developed from a literature review, prior studies by Oberseder et al. (2013 and 2014), and CSR initiatives implemented by leading retail banks in HK. Descriptive statistics and statistical tests were used to analyze the data.
Findings
The study found that CSR initiatives positively affect customers’ bank selection. CSR initiatives related to the customer and environment domains are likely to have a greater impact on customers than those related to the society domain and are not likely to significantly impact customers’ bank selection.
Originality/value
This study contributes to the CSR literature by offering enhanced insight into the dynamics of CSR and its effects on customer bank selection. Furthermore, this study tests consumers’ perceptions of CSR initiatives in each CSR domain in the banking sector in Hong Kong – a novel approach that has not been previously explored in existing studies. These findings can help banks review the effectiveness of their CSR initiatives and make informed decisions on which initiatives should pursue improved CSR performance and efficient resource allocation.
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Kavita Kanyan and Shveta Singh
This study aims to examine the impact and contribution of priority and non-priority sectors, as well as their sub-sectors, on the gross non-performing assets of public, private…
Abstract
Purpose
This study aims to examine the impact and contribution of priority and non-priority sectors, as well as their sub-sectors, on the gross non-performing assets of public, private and foreign sector banks.
Design/methodology/approach
The Reserve Bank of India's database on the Indian economy is used to retrieve data over 13 years (2008–2021). Public sector (12), private sector (22) and foreign sector (44) banks are represented in the sample. Two-way ANOVA, multiple regression and panel regression statistical techniques are used in SPSS and EViews to examine the data. Further, the results are also validated by using robustness testing by applying the fully modified ordinary least square (FMOLS) and dynamic least square (DOLS) regression.
Findings
The results showed that, for private and foreign banks, the non-priority sector makes up the majority of the total gross non-performing assets, although both the priority and non-priority sectors are substantial for public sector banks. The largest contributors to the total gross non-performing assets in public, private and foreign banks are industries, agriculture and micro and small businesses. The FMOLS displays robustness results that are qualitatively similar to the baseline result.
Practical implications
Based on the study's findings about the patterns of non-performing assets originating from these specific industries, banks might improve the way in which these advanced loans are managed.
Originality/value
There has not been much research done on the subject of sub-sector-specific non-performing assets and how they affect total gross non-performing assets across the three sector banks. The study's primary focus will be on the issue of non-performing assets in the priority’s and non-priority’s sub-sectors, namely, agricultural, micro and small businesses, food credit, industries, services, retail loans and other priority and non-priority sectors.
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This study aims to explore the relationship between risk governance characteristics (chief risk officer [CRO], chief financial officer [CFO] and senior directors [SENIOR]) and…
Abstract
Purpose
This study aims to explore the relationship between risk governance characteristics (chief risk officer [CRO], chief financial officer [CFO] and senior directors [SENIOR]) and regulatory adjustments (RAs) in Organization for Economic Cooperation and Development public commercial banks.
Design/methodology/approach
Using principal component analysis (PCA) and regression models, the research analyzes a representative data set of these banks.
Findings
A significant negative correlation between risk governance characteristics and RAs is found. Sensitivity analysis on the regulatory Tier 1 capital ratio and the total capital ratio indicates mixed outcomes, suggesting a complex relationship that warrants further exploration.
Research limitations/implications
The study’s limited sample size calls for further research to confirm findings and explore risk governance’s impact on banks’ capital structures.
Practical implications
Enhanced risk governance could reduce RAs, influencing banking policy.
Social implications
The study advocates for improved banking regulatory practices, potentially increasing sector stability and public trust.
Originality/value
This study contributes to understanding risk governance’s role in regulatory compliance, offering insights for policymaking in banking.
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Muhammad Adeel Ashraf and Ahcene Lahsasna
Customers of Islamic banking industry continue to be skeptical on Sharīʿah compliance of Islamic banks despite receiving fatwa from the competent authorities. The purpose of this…
Abstract
Purpose
Customers of Islamic banking industry continue to be skeptical on Sharīʿah compliance of Islamic banks despite receiving fatwa from the competent authorities. The purpose of this paper is to quantify the Sharīʿah risk taken by Islamic banks, so that customers are better informed on the level of Sharīʿah compliance that will help in removing the persistent level of skepticism toward Sharīʿah compliance.
Design/methodology/approach
This research has used the scorecard based modeling approach to build the Sharīʿah risk rating model, which consists of 14 factors that capture Sharīʿah risk and are grouped in 5 major areas revolving around regulatory support, quality of Sharīʿah supervision, business structure, product mix and treatment of capital adequacy ratio. The score calculated by applying the model is grouped into 4 tiers reflecting the level Sharīʿah compliance at bank as non-compliant, weak compliance, satisfactory compliance and high level of Sharīʿah compliance. Three case studies were conducted by applying the model to Islamic banks from Malaysia, Pakistan and Saudi Arabia.
Findings
The final Sharīʿah risk scores calculated by the model clearly differentiate the 3 banks on basis of their Sharīʿah risk. The underlying scores also highlighted the areas where banks need to improve to reduce their Sharīʿah risk.
Originality/value
This model can be applied by customers of Islamic banks who are interested in understanding Sharīʿah-related aspects of Islamic banking industry. This model can be applied on standalone basis or as an extension to the conventional counter party risk rating models. This model can benefit management of Islamic banks toward allocation of capital against Sharīʿah risk under Basel III, and regulators can apply the model to measure industry wide risk of Sharīʿah non-compliance.
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Ameni Ghenimi, Hasna Chaibi and Mohamed Ali Omri
The aim of this study is to conduct a comparative analysis between Islamic and conventional banks in terms of whether Islamic banks was more or less resilient/risky than…
Abstract
Purpose
The aim of this study is to conduct a comparative analysis between Islamic and conventional banks in terms of whether Islamic banks was more or less resilient/risky than conventional counterparts to the pandemic shock. It also examines the role of capital in improving the performance and stability within the two banking systems.
Design/methodology/approach
This study uses 82 banks from MENA (Middle East and North Africa) region for periods across 2011–2020, and employs a dynamic panel data approach to examine the resilience within both banking systems during the Covid-19 pandemic.
Findings
The results show that the Covid-19 pandemic has a negative impact on conventional banks' stability. However, Islamic banks performed better and were less risky than conventional ones. Banks with high-quality capital are more effective at controlling their risks and improving their performance during the pandemic.
Practical implications
The results offer important financial observations and policy implications to many stakeholders engaging with banks. Actually, the findings of this study facilitate to the stakeholders and bankers to have an alluded picture about determinants of risk and performance. The results can be used by bankers’ policy decision-makers to improve and enhance their consideration for risk management, taking into consideration the type of banking systems.
Originality/value
Compared to the various studies on the stability of Islamic and conventional banks, researchers have not sufficiently addressed the effect of the Covid-19 pandemic on risk and performance. Moreover, none of these studies has examined if Islamic banks was more or less resilient/risky than conventional counterparts to the pandemic shock. This leads the authors to identify the similarities and differences between two types of banks in the MENA region in a pandemic shock context.
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Wasim Ul Rehman, Omur Saltik, Suleyman Degirmen, Meti̇n Ocak and Hina Shabbir
The purpose of this study is to examine the dynamic relationship between intellectual capital (IC) and its components on financial performance of banks within the selected eight…
Abstract
Purpose
The purpose of this study is to examine the dynamic relationship between intellectual capital (IC) and its components on financial performance of banks within the selected eight countries of Association of Southeast Asian Nations (ASEAN).
Design/methodology/approach
The study utilizes the balanced panel data of 37 publicly listed banks from eight leading ASEAN economies for the period of 2017–2021. In this sense, the authors applied the Ante Pulic's typology, i.e. value-added intellectual coefficient (VAIC™) to evaluate the efficiency of intangible and tangible assets. While, investigating the dynamic nature of relationship, the authors employed the generalized system method of moments because of its power to account for the problem of endogeneity and heteroscedasticity.
Findings
The results of the study demonstrate that banks in ASEAN countries shed a varied degree of a spotlight on VAIC™ and its components to create value. The findings revealed that structural capital efficiency is significantly associated with earning per share (EPS), return on assets (ROA) and return on equity (ROE), compared to human capital efficiency (HCE) and capital employed efficiency of ASEAN banks. These results endorse the importance of resource- and knowledge-based views of organizations to leverage the financial performance of banks. However, contrary to theoretical expectations, this study found no positive relationship between HCE with ROA and ROE. Whereas, the relationship of VAIC™ is positive and significant with EPS and ROE but it remains statistically very marginal.
Research limitations/implications
There are some inherent limitations in this study that could be opportunities for future research. The current study uses the VAIC™ typology, but future researchers can use the modified value-added intellectual coefficient (MVAIC) or triangulation approach to enhance the validity and reliability of the study. Additionally, future research can investigate the similarities and differences among countries in terms of their cultural backgrounds and regulatory frameworks regarding the disclosure of intangibles. Furthermore, future research can increase the length and sample size of the study to enhance its generalizability.
Practical implications
The robust empirical findings extend the academic debate on IC by unveiling the dynamic nature of relationship between IC and financial performance in context of ASEAN banking sector. The findings provide plausible recommendations for policy makers (managers, regulators and stakeholders) to understand how to increase the IC efficiently, especially human capital as a source to evaluate the firms’ ability in determining value-added and financial performance. Further, findings of this study also suggest that how can policy makers get the benefit by investing more on structural capital as a valuable strategic source to guarantee the optimal performance returns.
Originality/value
Prior studies on IC have been country- and firm-specific, utilizing cross-sectional research designs. However, this research contributes to the limited literature by investigating the dynamic nature of the relationship between IC and financial performance of banks in the context of ASEAN countries using micro-panel data.
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Paola Ferretti, Cristina Gonnella and Pierluigi Martino
Drawing insights from institutional theory, this paper aims to examine whether and to what extent banks have reconfigured their management control systems (MCSs) in response to…
Abstract
Purpose
Drawing insights from institutional theory, this paper aims to examine whether and to what extent banks have reconfigured their management control systems (MCSs) in response to growing institutional pressures towards sustainability, understood as environmental, social and governance (ESG) issues.
Design/methodology/approach
The authors conducted an exploratory study at the three largest Italian banking groups to shed light on changes made in MCSs to account for ESG issues. The analysis is based on 12 semi-structured interviews with managers from the sustainability and controls areas, as well as from other relevant operational areas particularly concerned with the integration process of ESG issues. Additionally, secondary data sources were used. The Malmi and Brown (2008) MCS framework, consisting of a package of five types of formal and informal control mechanisms, was used to structure and analyse the empirical data.
Findings
The examined banks widely implemented numerous changes to their MCSs as a response to the heightened sustainability pressures from regulatory bodies and stakeholders. In particular, with the exception of action planning, the results show an extensive integration of ESG issues into the five control mechanisms of Malmi and Brown’s framework, namely, long-term planning, cybernetic, reward/compensation, administrative and cultural controls.
Practical implications
By identifying the approaches banks followed in reconfiguring traditional MCSs, this research sheds light on how adequate MCSs can promote banks’ “sustainable behaviours”. The results can, thus, contribute to defining best practices on how MCSs can be redesigned to support the integration of ESG issues into the banks’ way of doing business.
Originality/value
Overall, the findings support the theoretical assertion that institutional pressures influence the design of banks’ MCSs, and that both formal and informal controls are necessary to ensure a real engagement towards sustainability. More specifically, this study reveals that MCSs, by encompassing both formal and informal controls, are central to enabling banks to appropriately understand, plan and control the transition towards business models fully oriented to the integration of ESG issues. Thereby, this allows banks to effectively respond to the increased stakeholder demands around ESG concerns.
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Sarit Biswas, Sharad Nath Bhattacharya, Justin Y. Jin, Mousumi Bhattacharya and Pradip H. Sadarangani
This paper empirically investigates whether trade openness (TO) in Brazil, Russia, India, China and South Africa (BRICS) countries affects how banks might employ loan loss…
Abstract
Purpose
This paper empirically investigates whether trade openness (TO) in Brazil, Russia, India, China and South Africa (BRICS) countries affects how banks might employ loan loss provisions (LLPs) to smooth out their earnings and how adopting the International Financial Reporting Standards (IFRS) can mitigate it.
Design/methodology/approach
The analysis includes 78 commercial banks from five BRICS nations and spans 2014 through 2020. To test these hypotheses, the authors utilized a fixed-effect and two-step system panel generalized methods of moments (GMM) estimator.
Findings
TO positively affects income smoothing (earnings management) across BRICS commercial banks. The effect is clearer in banks that make financial reports under the IFRS. Path analysis reveals that the effect of TO is driven by nonperforming loans (NPLs). Additionally, the IFRS restricts earnings management in the BRICS banking sector when a better institutional environment is present. The authors found that accounting rules (IFRS) and enforcement (better institutional settings) interact to enhance earnings’ quality.
Practical implications
The relationship between TO and bank earnings management practices is important for understanding the complex interplay between trade and finance and ensuring financial stability, investor confidence and regulatory compliance. This study recommends better regulations and governance mechanisms for financial reports in emerging nations like BRICS. Additionally, macro-prudential regulators and banking supervisors should work closely to ensure transparent TO decisions with improved discipline, institutional quality and regulatory support to enhance bank stability.
Originality/value
The study finds evidence of bank income smoothing in the BRICS and introduces TO as a determinant. It also identifies the evolving role of IFRS in the presence of higher institutional quality and TO, thereby expanding the financial reporting literature.
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Anwar Puteh, Muhammad Rasyidin and Nurul Mawaddah
Purpose – The purpose of the research is to analyze the efficiency of Islamic banks in Indonesia. The data used in this research are panel data observed from 2012 until 2016. The…
Abstract
Purpose – The purpose of the research is to analyze the efficiency of Islamic banks in Indonesia. The data used in this research are panel data observed from 2012 until 2016. The sampling of this research is conducted on five Sharia banks in Indonesia, that is, Bank Muamalat, Bank SyariahMandiri, BukopinSyariah, BRI Syariah, and Bank Mega Syariah.
Design/Methodology/Approach – The study uses a quantitative method to analyze the efficiency of Sharia banking with formulation of comparison of operating expenses to operating revenues (BOPO).
Finding – The result of this research concludes that Sharia banking in Indonesia has not been efficient during the last five years, that is, 2012–2016. This can be seen from the range of banking efficiency ratio. The average level of Islamic banking efficiency ranges between 89.73% and 94.16%. Bank Muamalat whose range is 94.16% shows the highest average efficiency ratio compared to other Sharia banks. Meanwhile, Bank Mega Syariah maintains the lowest average efficiency ratio that is 89.37%. The five Sharia banks have a high efficiency ratio of over 80%. This shows that Sharia banking in Indonesia is inefficient
Originality/Value – The bank should be able to balance between cost (cost) and revenue. Sharia banks must also be able to create good product innovation in order to increase the collection of funds from the community, such as for competitive outcomes, prizes, or other programs that raise public interest to use the services of Sharia banking.
Research Limitations/Implications – This inefficiency is due to the high bank operating costs compared to the bank’s operating income.
Albulena Shala, Peterson K. Ozili and Skender Ahmeti
This study examines the impact of competition and concentration on bank income smoothing in Central and Eastern European (CEE) countries.
Abstract
Purpose
This study examines the impact of competition and concentration on bank income smoothing in Central and Eastern European (CEE) countries.
Design/methodology/approach
The two-step system GMM method was used to analyse the impact of competition and concentration on bank income smoothing in 17 CEEs from 2004 to 2015.
Findings
Loan loss provisions (LLPs) are negatively related to bank competition and concentration. The authors find no evidence for income smoothing using LLPs in a high-competition or high-concentration environment.
Research limitations/implications
A limitation of the study is that the analysis was restricted to commercial banks. The authors did not examine investment banks or microfinance banks in this study. Also, not having access to databases does not allow them to include recent years in the study.
Practical implications
CEE commercial banks will likely keep fewer provisions or engage in under-provisioning when they face intense competition, and this can expose them to credit risk, which may threaten their stability.
Originality/value
This study is the first to investigate the effect of concentration and competition on income smoothing among CEE banks.
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