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Purpose - This study aims to extend the literature by simultaneously investigating the relationship between risk, efficiency and capital in the Gulf Cooperation Council (GCC) dual banking system. Design/methodology/approach - The ...
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Purpose - This study aims to extend the literature by simultaneously investigating the relationship between risk, efficiency and capital in the Gulf Cooperation Council (GCC) dual banking system. Design/methodology/approach - The study employs the simultaneous-equation modeling technique with a three-stage least square estimator on 60 listed GCC commercial banks from 2005 through 2018. Findings - Although GCC Islamic banks are more capitalized and liquid, they are riskier and less efficient than GCC conventional banks. Moreover, a higher level of capital reduces the insolvency and credit risk of GCC banks for both types of banks. However, it enhances the cost efficiency of GCC conventional banks only. GCC conventional banks also exhibit skimping behavior, while for GCC Islamic banks, cost efficiency is negatively associated with bank risk. This implies that the risk-taking behavior in Islamic banks is prompted by the incentives of the shareholders following the risk-sharing nature of Islamic banking. Originality/value - This study differs from previous studies in many aspects. First, it relies on a recent long data set that covers the implementation of the accords of Basel Ⅱ (introduced in 2004) and Basel Ⅲ (introduced in 2010). Second, it estimates the efficiency of GCC banks based on separate frontiers for Islamic and conventional banks, ensuring the robustness of the results. In conclusion, to the best of the author's knowledge, this is the first study to investigate the intertemporal relationship between risk, efficiency and capital in the GCC dual banking industry.
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This paper analyses the efficiency of Malaysian commercial banks between 1996 and 2002 and finds that while the East Asian financial crisis caused a short-term increase in efficiency in 1998 primarily due to cost-cutting, increase...
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This paper analyses the efficiency of Malaysian commercial banks between 1996 and 2002 and finds that while the East Asian financial crisis caused a short-term increase in efficiency in 1998 primarily due to cost-cutting, increases in non-performing loans after the crisis caused a more sustained decline in bank efficiency. It is also found that mergers, fully Islamic banks, and conventional banks operating Islamic banking windows are all associated with lower efficiency. The paper estimates suggest mild decreasing returns to scale, and an average productivity change of 2.37% that is primarily attributable to technical change, which has nonetheless declined over time. Finally, while Islamic banks have been moderately successful in developing new products and technologies, the results suggest that the potential for Islamic banks to overcome their relative inefficiency is limited.
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This paper examines market concentration and competition in the South Korean and Chinese commercial banking markets for the period of 1992–2008. This study empirically investigates whether changes in bank concentration have affec...
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This paper examines market concentration and competition in the South Korean and Chinese commercial banking markets for the period of 1992–2008. This study empirically investigates whether changes in bank concentration have affected the degree of competition in the Korean and Chinese commercial banking industries by estimating the H statistic of the Panzar-Rosse model. We also used the Boone Indicator model to confirm the results from the Panzar-Rosse model. The Korean banking industry has been monopolistically competitive for the entire sample period while the Wald test of the H statistic shows competition in the Korean banking actually increased to the level of perfect competition during the crisis period temporarily. Compared to the banking industry of Korea and other countries, the Chinese banking industry is still highly concentrated and its level of competition is closer to oligopoly.
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We examine the efficiency differences between EU and U.S banks over 2000-2018. European banks are lagging behind the U.S in terms of technical efficiency both before and after the crisis. European banks lag in terms of efficiency ...
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We examine the efficiency differences between EU and U.S banks over 2000-2018. European banks are lagging behind the U.S in terms of technical efficiency both before and after the crisis. European banks lag in terms of efficiency yet the European sector has actually grown by 16% since the period prior to the crisis, with the U.S posting a more modest 6% increase in efficiency. Our results are robust and further backed by the Tobit and Differences-in-Differences estimations with the overall efficiency difference between the two sets being the intensity of their trans-variation. Larger banks achieve higher technical efficiency by increasing their credit risk while smaller banks by reducing their risk exposure further exacerbating the too-big-tofail divide. Our results are of interest to investors, banking practitioners and regulators since the lack of common regulatory standards between EU/US banks could affect both the competitiveness and the stability of the financial system.
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Sustainable development efforts, initiated by the SDGs and the Paris Agreement on climate change, are bringing banking to the center of the debate, which calls for, among other things, sustainable banking. In the current academic ...
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Sustainable development efforts, initiated by the SDGs and the Paris Agreement on climate change, are bringing banking to the center of the debate, which calls for, among other things, sustainable banking. In the current academic discussion, sustainable banking is described as a terminological jungle that is subject to change over time. Using Webster and Watson’s conceptual model, this review analyzes the definitions and conceptual descriptions used in academia to present a consolidated result. The definition analysis conducted in this paper shows that definitions used mostly refer to the implementation of social, environmental aspects in the respective business strategies and / or to the offering of sustainably labeled products. This paper also shows that the various forms of the definition have a purely descriptive character and that measurability and comparability are hardly possible due to the lack of a generally accepted sustainability index.
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This paper investigates banks' reporting choices in the context of bank runs. A fundamental-based run imposes market discipline on insolvent banks, but a panic-based run closes banks that could have survived with better coordinati...
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This paper investigates banks' reporting choices in the context of bank runs. A fundamental-based run imposes market discipline on insolvent banks, but a panic-based run closes banks that could have survived with better coordination among creditors. We augment a bank-run model with the bank's reporting choices. We show that banks with intermediate fundamentals have stronger incentive to misreport than those in the two tails. Moreover, reporting discretion reduces panic-based runs, but excessive discretion also reduces fundamental-based runs. The optimal amount of reporting discretion increases in the bank's vulnerability to panic-based runs. Finally, a given bank's opportunistic use of reporting discretion exerts a negative externality on other banks. Our paper answers the call by Armstrong et al. (2016) and Bushman (2016) to understand better the effects of banks' special features on their reporting choices. (C) 2017 Elsevier B.V. All rights reserved.
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Purpose - This study aims to shed light on the evolving nature of banks in the digital era and the implications for bank marketing and management. The research addresses the need for a comprehensive typology of banks that integrat...
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Purpose - This study aims to shed light on the evolving nature of banks in the digital era and the implications for bank marketing and management. The research addresses the need for a comprehensive typology of banks that integrates fintech and explores how traditional and app-only banks strategically position their brands. The key argument is that understanding the changing landscape of banking and the impact of technological advancements is crucial for banks to navigate the challenges and opportunities presented by fintech and digital transformation. Design/methodology/approach - This study examines literature and practices to develop a typology of banks, describing their characteristics, strengths, weaknesses and providing examples. It also proposes new research agendas for scholars and practitioners in the field. Findings - This paper introduces a typology of banks based on their adoption of fintech and digital technologies. Three distinct types of banks are identified: Traditional banks adopting FinTech (TBAF), Traditionally Driven Neo Banks (TDNBs) and Digitally Driven Neo Banks (DDNBs). TBAF are traditional banks that have embraced fintech solutions to enhance their operations and customer experiences. TDNBs represent a hybrid model, combining the trusted brand and infrastructure of traditional banks with the digital capabilities and agility of neo banks. DDNBs are purely digital banks that operate exclusively online, offering innovative and user-friendly banking services. Originality/value - This study is a pioneering work that classified banks based on their utilization of fintech and digital technologies. The study provides a typology of banks based on fintech adoption, offering valuable insights for bank managers, policymakers and researchers. The research also outlines a research agenda, suggesting future investigations to further enhance understanding of the evolving banking landscape and its implications.
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The performance of commercial banks and government-owned specialized banks in Thailand is estimated after the 1997 East Asian financial crisis. Commercial banks exhibit increasing returns to scale, whereas government-owned special...
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The performance of commercial banks and government-owned specialized banks in Thailand is estimated after the 1997 East Asian financial crisis. Commercial banks exhibit increasing returns to scale, whereas government-owned specialized banks exhibit decreasing returns to scale, implying further increases in bank size and market concentration in the commercial bank sector but not for government specialized banks. Cost inefficiency varies by bank and is a function of the ratio of nonperforming loans (NPLs) to total loans, equity to total assets and liquid assets to total assets, as well as the number of branches. On average, banks with fewer NPLs, that are well capitalized and with adequate liquidity are efficient. Thus, stricter rules to regulate credit risk management and ensure capital and liquidity adequacy would enhance efficiency in the banking sector. Although estimated input substitutability appears to be low, labour and loanable fund are substitutes. However, labour and physical capital as well as physical and loanable funds are complements in commercial banks. All the three inputs of labour, physical capital and loanable funds are substitutes for the government specialized banks.
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Purpose - The purpose of this paper is to examine whether branch expansions have realized efficiency gains by focussing on regional banks in Japan. Design/methodology/approach - The authors use a single-step estimation procedure, ...
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Purpose - The purpose of this paper is to examine whether branch expansions have realized efficiency gains by focussing on regional banks in Japan. Design/methodology/approach - The authors use a single-step estimation procedure, where both cost frontier parameters and inefficiency effects are addressed simultaneously, and examine the impact of expanding branch networks on bank performance. Findings - The findings show that regional banks expanding their branch networks to certain levels exhibit lower cost inefficiencies. Robustness results are also obtained from the samples, excluding the regional banks located in urban regions. Originality/value - The findings suggest that adequate levels of branch expansion have beneficial impacts for regional banks, although this result is contrary to the current region-based relationship banking policy promoted by Japan's financial regulators.
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