Switching costs in Islamic banking: The impact on market power and financial stability

2020 ◽  
Vol 28 ◽  
pp. 100409
Author(s):  
Mohammad Dulal Miah ◽  
Md. Nurul Kabir ◽  
Md Safiullah
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Switching Costs ◽  
Islamic Banking ◽  
The Impact

scholarly journals Competition, performance and financial stability in US agricultural banking

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Madhav Regmi ◽  
Allen M. Featherstone
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Relationship Lending ◽  
Net Income ◽  
Bank Competition ◽  
Content Type ◽  
Linear Effect ◽  
And Performance ◽  
The Impact ◽  
Agricultural Banking

PurposeThe number of US commercial banks has declined by about 50% over the last two decades. This change could lead to a potential decline in competition and a potential increase in market power in the agricultural banking market. The focus of this study is to examine whether the risk of failure and the performance of agricultural banks has been affected by bank consolidations.Design/methodology/approachThe impact of bank competition on performance and financial stability of agricultural banks is studied using a Lerner index as a measure of market power. A Z-score is constructed to measure bank stability. Similarly, the return on assets (net income to total assets ratio), return on equity (net income to the total equity ratio), agricultural loan ratio and agricultural loan volume are used as performance measures for agricultural banks. Two-way fixed effect regression models are estimated to measure the impact of competition on financial stability and performance.FindingsResults indicate that bank competition has a U-shaped effect on the probability of default and an inverted U-shaped effect on volume and proportion of agricultural lending. There also exists evidence of a positive but non-linear effect of bank market power on the profitability of agricultural banks.Originality/valueThere is limited literature on the impact of bank competition on financial stability and performance of US agricultural banks. Agricultural banks hold more than 40% of US farm debt. A decrease in the number of banks or the level of competition in agricultural banking may cause an adverse effect on relationship lending. The key findings imply that bank regulatory strategies should focus on enhancing (reducing) competition in more (less) concentrated banking markets to improve the financial health and performance of agricultural banks.

COMPETITION-STABILITY RELATIONSHIP IN DUAL BANKING SYSTEMS: EVIDENCE FROM EFFICIENCY-ADJUSTED MARKET POWER

2021 ◽  
pp. 1-24
Author(s):  
MUDEER AHMED KHATTAK ◽  
OMAR ALAEDDIN ◽  
MOUTAZ ABOJEIB
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Banking Sector ◽  
Market Competition ◽  
Policy Implications ◽  
Islamic Banks ◽  
Banking Competition ◽  
Precise Measure ◽  
Conventional Banks ◽  
The Impact

This research attempts to explore the impact of banking competition on financial stability employing a more precise measure of market power. It was found that Islamic banks are less stable and are enjoying lower market power. The analysis shows that higher market competition makes the banking sector vulnerable to defaults, supporting the “competition-fragility view”. This research finds no difference in the relationship for Islamic banks indicates that Islamic banks might be involved in traditional banking activities as conventional banks. The results are consistent and robust to different estimation approaches and subsamples. This research carries regulatory and policy implications.

Market-power, stability and risk-taking: an analysis surrounding the riba-free banking

2019 ◽  
Vol 18 (1) ◽  
pp. 2-24 ◽  
Author(s):  
Awatef Louhichi ◽  
Salma Louati ◽  
Younes Boujelbene
Keyword(s):  
Market Power ◽  
Financial Stability ◽  
Banking Sector ◽  
System Analysis ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Policy Debate ◽  
Method Of Moment ◽  
Content Type ◽  
Conventional Banks

Purpose Analysis of the trade-off between competition and financial stability has been at the center of academic and policy debate for over two decades and especially since the 2007-2008 global financial crises. This study aims to provide particular attention to the Islamic banking system which principally involves with the riba-free instruments as compared to the conventional interest-based system. The results show that an increase in the concentration in the conventional banking sector can lead to the deterioration of stability through the increased prices. For Islamic banks, an increase of the market power can positively affect the banking stability. Design/methodology/approach Two complementary approaches, namely, one-step generalized method of moment (GMM) system analysis and panel vector autoregressive (PVAR) framework, were applied. Findings The results show the same effect of Islamic and conventional banks’ market power on banking soundness; yet, a different effect is displayed with non-performing loans (NPLs). In particular, the “competition–fragility” assumption for both banking industries is supported when considering z-score as the dependent variable. Including NPLs, this postulation is still approved for conventional banks; however, the “competition–stability” postulation is supported for Islamic banks. Originality/value The existent literature was scarcely interested in exploring the concept of competitivity in the context of Islamic banking sector as compared to the conventional one by applying two complementary approaches, namely, GMM and PVAR. This later allows to test the effect and the feedback effect of the competition and stability concepts.

scholarly journals Stability Analysis Of Islamic Banking: Indonesia, Malaysia And Pakistan

2021 ◽  
Vol 10 (1) ◽  
pp. 125-143
Author(s):  
Luqmanulhakim Luqmanulhakim ◽  
Ronald Rulindo ◽  
Saiful Anwar
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Global Economy ◽  
Banking System ◽  
Islamic Banking ◽  
2008 Financial Crisis ◽  
Stability Measurement ◽  
The 2008 Financial Crisis ◽  
The Stability ◽  
The Impact

Following the 2008 financial crisis, the global economy will continue to experience shock in the years to come. Therefore, it is vital to conduct research that can anticipate the impact of fluctuations in financial stability. This research examines the stability of the Islamic banking system in Indonesia, Malaysia, and Pakistan, using Z-Score as a proxy variable for stability measurement and Markov Switching VAR for the method. The objectives are to identify which Islamic banking has better resilience in facing crisis and identify the economic variables that have a significant effect on the stability of Islamic banking. The results showed that the stability of Indonesian Islamic banking was more stable compared to Malaysia and Pakistan. The crisis periods determined from the method show that in 2019 all countries studied entered the beginning of the crisis period, which means the world conditions tend to re-enter the crisis, repeating the 2008 financial crisis.

scholarly journals Market power and performance: An Islamic banking perspective

2018 ◽  
Vol 15 (3-1) ◽  
pp. 163-171
Author(s):  
Bahaa Sobhi AbdeLatif Awwad
Keyword(s):  
Market Power ◽  
Banking Sector ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Gcc Countries ◽  
Standard Models ◽  
And Performance ◽  
The Impact

This study aims to test the theories of market power and its role in interpreting the performance of Islamic banks in the GCC countries. Based on data from 22 Islamic banks for the period 2012-2017, using standard models, market power theories were unable to explain the returns of Islamic banks in the Gulf. Accordingly, these results deny the existence of an impact of monopoly in the structure of the Islamic banking sector in the performance of this sector, as well as the impact of traditional efficiency in its performance.

scholarly journals Competition and Financial Stability in the European Listed Banks

SAGE Open ◽  
2021 ◽  
Vol 11 (3) ◽  
pp. 215824402110326
Author(s):  
Maria Celia López-Penabad ◽  
Ana Iglesias-Casal ◽  
José Fernando Silva Neto
Keyword(s):  
Market Power ◽  
Risk Taking ◽  
Financial Stability ◽  
Banking System ◽  
Political Community ◽  
Bank Risk ◽  
Bank Competition ◽  
Banking Competition ◽  
The Impact ◽  
The Relationship

The analysis of the relationship between bank competition and financial stability remains a controversial issue and widely discussed in the academic and political community. Using a sample of 117 listed banks in 16 European countries for the years 2011 to 2018, the article explores the impact of market power, measured by the Lerner index, on the bank stability, measured by distance-to-default and Z score. Our results show that for the overall sample, higher market power in banking decreases the risky behavior of banks, confirming the “competition-fragility” view. We do not find any support for a U-shaped relationship between competition and bank risk-taking. However, our findings differ from previous studies pointing out that the relationship between bank competition and risk-taking is differentiated depending on whether the bank is based in a country with a more stable banking system or a less stable one. In countries with a less financially stable banking system, increased competition leads to increased bank risk-taking. In countries with a more stable banking system, market power seems not to influence banks’ financial stability. Public policies must guarantee banking competition but limiting excessive bank risk-taking, especially in countries with less financially sound banking systems. The consolidation of European banking can be a key element for achieving these policies.

Specifics of creating an effective system of project financing of innovation and investment activities of dairy subcomplex enterprises

2020 ◽  
Vol 26 (9) ◽  
pp. 1951-1969
Author(s):  
S.A. Chernikova
Keyword(s):  
Financial Stability ◽  
Current Model ◽  
Methodological Approach ◽  
Information Support ◽  
Competitive Advantages ◽  
Project Financing ◽  
Financing System ◽  
Management Of Innovation ◽  
Effective System ◽  
The Impact

Subject. The article considers the need to study the financing of investment and innovation processes and creating an effective system of project financing. Objectives. The purpose is to search for new opportunities to enhance the competitive advantages of enterprises of the dairy subcomplex, to ensure their financial stability and steady position in specialized agricultural food-product markets. Methods. The study draws on the theoretical and methodological approach to the impact of project management of innovation and investment activities on improving the efficiency of the project financing system and financial stability of enterprises operating in the dairy subcomplex. Results. The findings show that four levels can be distinguished in the formation and improvement of the system of project financing and the management of innovation and investment activities, depending on the depth of transformation. The principle that provides the integration of the said system with the current model of management of the dairy subcomplex enterprise is defined as a driver. The paper offers a number of levels of the system transformation to gain competitive advantages. Conclusions. I present a mechanism for creating and improving the system of project financing and the management of innovation and investment activities, and a mechanism for interaction of the network of automated information systems, intended to make management decisions, with the automation of information support to innovative solutions.

Financial Risks of the Bank: Assessment and Mechanism of Neutralization

2020 ◽  
Vol 22 (1) ◽  
pp. 6-12
Author(s):  
Nelia Volkova ◽  
◽  
Alina Mukhina ◽  
Keyword(s):  
Risk Assessment ◽  
Financial Stability ◽  
Financial Risk ◽  
Stable Operation ◽  
Financial Risks ◽  
Negative Consequences ◽  
Conceptual Approach ◽  
Relevant Today ◽  
Banking Institution ◽  
The Impact

Abstract. Introduction. The issue of financial risk management of commercial banks is quite relevant today, because the activity of banks is the most risky of all. The presence of risks in banking can lead to unexpected losses, namely the loss of own resources. That’s why for the stable operation of the bank without loss the priority is to assess the financial risks, which is the basis for their further neutralization. Purpose. The purpose of the article is to develop conceptual provisions for assessment financial risks and justifying the need to neutralize them. Results. The article analyzes the impact of risks on the financial stability of a banking institution. The main methods of bank risk assessment are considered. All these include the statistical method, the analytical method, the expert method, the analogue method and the combined method. The necessity of neutralization of financial risks in order to avoid negative consequences is substantiated. Also the methods of bank risks neutralization are considered. It should be noted that these methods of neutralization can not only be used, but also supplement the list with new methods must be done, which in the future will protect the bank from the influence of undesirable factors. A conceptual approach to the assessment and neutralization of financial risks is proposed. This conceptual approach aims to ensure effective assessment of the level of risk with their subsequent neutralization Conclusions. Use of a conceptual approach will allow an effective risk assessment and decision-making to avoid or accept risk. Thanks to using this approach, the banking institution will be able to react swiftly to the presence of financial risks and to prevent the occurrence of negative consequences, which may lead to a violation of the financial stability of the bank.

Influence of internal and external risks on sustainability of financial system of Аltai krai

2018 ◽  
Vol 35 (4) ◽  
pp. 133-136
Author(s):  
R. N. Ibragimov
Keyword(s):  
Sustainable Development ◽  
Financial Stability ◽  
Management Strategy ◽  
Financial System ◽  
Risk Management Strategy ◽  
The Sustainable Development ◽  
The Stability ◽  
The Impact

The article examines the impact of internal and external risks on the stability of the financial system of the Altai Territory. Classification of internal and external risks of decline, affecting the sustainable development of the financial system, is presented. A risk management strategy is proposed that will allow monitoring of risks, thereby these measures will help reduce the loss of financial stability and ensure the long-term development of the economy of the region.

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