Moderating effect of bank size on the relationship between financial soundness and financial performance

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peter Njagi Kirimi ◽  
Samuel Nduati Kariuki ◽  
Kennedy Nyabuto Ocharo
Keyword(s):  
Financial Performance ◽  
Commercial Banks ◽  
Management Practices ◽  
Banking Sector ◽  
Optimal Level ◽  
Moderating Effect ◽  
Content Type ◽  
Study Results ◽  
Financial Soundness ◽  
The Relationship

PurposeThis study analyzed the moderating effect of bank size on the relationship between financial soundness and financial performance of commercial banks in Kenya.Design/methodology/approachThe study employed data from 39 commercial banks for ten years from 2009 to 2018. Panel data regression model was used to analyze data.FindingsThe study results established a negative moderating effect of bank size on the relationship between commercial banks' financial soundness and net interest margin (NIM) and return on assets (ROA) with the results indicating a correlation coefficient of −0.1699 and −0.218, respectively. However, an absence of moderating effect was established when return on equity (ROE) was used as a measure of financial performance.Practical implicationsThe paper finding recommends that banks' management and other policy makers should consider the effect of bank size while devising financial soundness policies to ensure optimal level of banks' financial soundness aimed at improving banks' financial performance. In addition, bankers associations should come up with policies to standardize asset quality management practices to ensure continuous positive performance of the banking sector.Originality/valueThe study shows the contribution and applicability of the theory of production in the banking sector.

Merton-type default risk and financial performance: the dynamic panel moderation of firm size

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Mushafiq ◽  
Syed Ahmad Sami ◽  
Muhammad Khalid Sohail ◽  
Muzammal Ilyas Sindhu
Keyword(s):  
Financial Performance ◽  
Firm Size ◽  
Default Risk ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Dynamic Panel ◽  
Content Type ◽  
Nonfinancial Firms ◽  
The Relationship

PurposeThe main purpose of this study is to evaluate the probability of default and examine the relationship between default risk and financial performance, with dynamic panel moderation of firm size.Design/methodology/approachThis study utilizes a total of 1,500 firm-year observations from 2013 to 2018 using dynamic panel data approach of generalized method of moments to test the relationship between default risk and financial performance with the moderation effect of the firm size.FindingsThis study establishes the findings that default risk significantly impacts the financial performance. The relationship between distance-to-default (DD) and financial performance is positive, which means the relationship of the independent and dependent variable is inverse. Moreover, this study finds that the firm size is a significant positive moderator between DD and financial performance.Practical implicationsThis study provides new and useful insight into the literature on the relationship between default risk and financial performance. The results of this study provide investors and businesses related to nonfinancial firms in the Pakistan Stock Exchange (PSX) with significant default risk's impact on performance. This study finds, on average, the default probability in KSE ALL indexed companies is 6.12%.Originality/valueThe evidence of the default risk and financial performance on samples of nonfinancial firms has been minimal; mainly, it has been limited to the banking sector. Moreover, the existing studies have only catered the direct effect of only. This study fills that gap and evaluates this relationship in nonfinancial firms. This study also helps in the evaluation of Merton model's performance in the nonfinancial firms.

The moderating effects of a board of directors on FDI’s international diversification in Turkey

2015 ◽  
Vol 23 (1) ◽  
pp. 61-88 ◽  
Author(s):  
Kader Şahin ◽  
Seyfettin Artan ◽  
Seda Tuysuz
Keyword(s):  
Financial Performance ◽  
Board Of Directors ◽  
International Diversification ◽  
Moderating Effect ◽  
Moderating Effects ◽  
Outside Directors ◽  
Moderator Variable ◽  
Content Type ◽  
Board Characteristics ◽  
The Relationship

Purpose – This paper aims to investigate the moderating effects of a board of directors on foreign direct investment (FDI)’s international diversification in Turkey. Design/methodology/approach – A sample of Turkish multinational firms with FDI was used. Two different aspects of international diversification were considered: the relationship between international diversification and financial performance and the moderating effect of board composition on the relationship between international diversification and the firm’s financial performance. Firm-level data were obtained from the Istanbul Stock Exchange in Turkey. Findings – The findings reveal that international diversification leads to better financial performance according to market-based measures. On the other hand, this study indicates that the board characteristics have a moderating effect on international diversification and financial performance. Research limitations/implications – The study is based on a sample of publicly listed firms in Turkey, and this restriction limits the generalizability of the findings. Practical implications – The internalization efforts of Turkish FDI have led to better financial performance in terms of market-based measures. The results have stated that the interest of independent outside directors is aligned with lower-risk investment decisions. Independence of independent outside directors in Turkey is interrogated by practitioners or the Capital Markets Board of Turkey. The larger board size which a moderator variable is provided, the wider shareholder value in Turkey is. Social implications – One can understand that the development of market-supporting institutions provides the support for entry to an emerging economy which is inefficient or incomplete markets and highly concentrated family ownership. Originality/value – These findings provide important implications for corporate governance and highlight the need for further research on the role of governance in firm internationalization. This study not only helps to understand how board characteristics affect the choice of international diversification decisions, but the results also allow to assess the performance implications of these choices for a particular period.

scholarly journals Investigating the Market Interest Rate on Commercial Banks Financial Performance in Bangladesh

2021 ◽  
Vol 5 (1) ◽  
pp. 3-12
Author(s):  
Debashis Saha ◽  
Prodip Chandra Bishwas ◽  
Md. Mustofa Ahmed Sumon
Keyword(s):  
Interest Rate ◽  
Financial Performance ◽  
Commercial Banks ◽  
Financial Stability ◽  
Banking Sector ◽  
Time Series Data ◽  
Positive Impact ◽  
Series Data ◽  
Market Interest Rate ◽  
The Relationship

The banking sector is the most vital partner of development for countries' economies. It has a remarkable contribution to the country's Gross Domestic Product. This study investigates the relationship between the market interest rate and commercial banks' financial performance. As Bangladesh's banking industry is growing, it is vital to maintain a more robust profitability level for its financial stability and soundness. Banks have some determinants that have a significant impact on their performance. The convenience sampling method is used to select the targeted sample. The study includes the time series data of eight years of fifteen commercial banks listed on the Dhaka Stock Exchange in Bangladesh. Multiple variable linear regression and correlation analysis are performed to examine the relationship of market interest rate with banks' profitability with statistical software, IBM SPSS version 25, and Microsoft excel. The study explored that the market interest rate has a significant positive impact on banks' profitability. It is also found that the lending rate and interest rate spread are significantly correlated with the banks' financial performance. The study recommended that banks make their investment to make a higher profit margin to enhance their management and financial soundness efficiency.

Antecedents of small business financial performance: the role of human resource management practices and strategy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Willie Chinyamurindi ◽  
Janatti Bagorogoza Kyogabiirwe ◽  
Jolly Byarugaba Kabagabe ◽  
Samuel Mafabi ◽  
MTutuzeli Dywili
Keyword(s):  
Resource Management ◽  
Human Resource Management ◽  
Financial Performance ◽  
Human Resource ◽  
Small Businesses ◽  
Management Practices ◽  
Content Type ◽  
Human Resource Management Practices ◽  
The Relationship

PurposeThere is noted emphasis on the role of small businesses as conduits for economic development especially in emerging economies. Given this, there is need for constantly seeking for ways to assist small businesses achieve success. Calls exist in the literature to investigate the combined role that strategy and human resource management practices can play leading to efforts of financial success.Design/methodology/approachA structured questionnaire was utilised and data collected from 401 small businesses operating in the Eastern Province of South Africa. Pearson product–moment correlation and hierarchical regression were used in the data analysis.FindingsThe results confirm that a direct relationship exists between strategy and financial performance. Further, the relationship is made significant only through the mediation effect of human resource management practices.Practical implicationsTo fully realise the enactment of strategy within small businesses there is need to pay attention to the role that human resource management practices may potentially have on financial performance. Small business owner-managers need to ground their strategies with sound human resource management practices. Through this, firm financial performance can be attained.Originality/valueThe paper sheds light and presents a model that illustrates the mediating role of human resource management practices on the relationship between strategy and financial performance.

Bank regulation and credit crunch: evidence from MENA region commercial banks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chawki EL-Moussawi ◽  
Mohamad Kassem ◽  
Josse Roussel
Keyword(s):  
Commercial Banks ◽  
Banking Sector ◽  
Explanatory Power ◽  
Banking Regulation ◽  
Capital Requirements ◽  
Mena Region ◽  
Institutional Variables ◽  
Content Type ◽  
The Impact ◽  
The Relationship

PurposeThis paper focuses on the relationship between the regulatory capital requirements and the supply of credit for commercial banks that are operating in the MENA region from 1999 till 2017.Design/methodology/approachThe application of the Fixed Effects Model on a panel of commercial banks in the MENA region has shown a negative relationship between supply of credit and both the capital requirements and solvency ratios.FindingsThe results showed that the idiosyncratic, the macroeconomic and the institutional variables affect the supply of credit behavior of banks. The robustness tests using the Two-Stage Least Square method (2SLS) also led to a negative correlation between the growth of credit and capital requirements. Specific macroeconomic and institutional variables have revealed the expected sign and are significant regardless of the estimated specifications.Research limitations/implicationsThis work can be subjected to further future extensions. The explanatory power of our model can be improved by incorporating variables that reflect the corporate governance and structure of banking sector. Similarly, we can also include a variable that takes into account the increasing competition that could affect the stability of the banking sector and therefore the prudential banking regulation.Originality/valuePrevious studies that investigated only the relationship between capital level and risk-taking behavior of banks in the MENA region did not take into account neither the economic and institutional environment nor the impact of these regulations on credit (loans) supply.

The moderating effect of movie production efficiency on the relationship between eWOM and review helpfulness

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sangjae Lee ◽  
Joon Yeon Choeh
Keyword(s):  
Production Efficiency ◽  
Nearest Neighbor ◽  
Online Reviews ◽  
Moderating Effect ◽  
K Nearest Neighbor ◽  
Content Type ◽  
Online Word Of Mouth ◽  
Study Results ◽  
Review Helpfulness ◽  
The Relationship

Purpose This paper aims to intend to study the effect of movie production efficiency on eWOM and the moderating effect of efficiency on the relationship between eWOM and review helpfulness for movies. Design/methodology/approach Production efficiency is suggested by comparing the power of movie resources (e.g. the power of actors, directors, distributors, production companies) against box-office revenue through a data envelopment analysis (DEA). Findings The study results present that the number of reviews, the number of reviews by reviewers and review extremity are greater in an efficient subsample than in an inefficient subsample. For efficient movies, the review depth and the strength of the sentiments in the reviews are more positively related to review helpfulness. The prediction results for review helpfulness using the k-nearest neighbor method and automatic neural networks show that the efficient subsample provides a significantly lower prediction error rate than the inefficient subsample. The study results can support the effective facilitation of helpful online movie reviews. Originality/value As the numbers of online reviews are increasingly used to provide purchase decision support, it becomes crucial to understand which attributes represent average helpful reviews for movies. While previous studies have examined eWOM (online word-of-mouth) variables as predictors of helpfulness on movie websites, the role of the production efficiency of movies has not been examined considering the relationship between eWOM and review helpfulness for movies.

The impact of the brand management system on performance across service and product-oriented activities

2017 ◽  
Vol 26 (3) ◽  
pp. 294-311 ◽  
Author(s):  
Mathieu Dunes ◽  
Bernard Pras
Keyword(s):  
Financial Performance ◽  
Management System ◽  
Management Practices ◽  
Brand Management ◽  
Brand Performance ◽  
Content Type ◽  
Objective Performance ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to analyze the impact of brand management system (BMS) practices on subjective and objective performance in both service- and product-oriented sectors. Design/methodology/approach Based on a “grounded-in-practice” approach to BMS, a comprehensive formative BMS scale is developed and its validity is assessed. The impact of BMS on subjective brand performance (i.e. predictive validity) and on objective financial performance is assessed. Data are collected from a sample of 298 brand managers and marketing directors in five business sectors (cosmetics, convenience goods, industry, bank/insurance and media) and from a financial database. Path analysis and multigroup analysis are performed to test mediating and moderating effects. Findings The results reveal that subjective brand performance (perceived brand performance) mediates the relationship between the BMS and objective financial performance of the firm and on each of the three BMS dimensions; and product-oriented (vs service-oriented) sector positively moderates the relationship between the BMS and subjective brand performance. Research limitations/implications The paper offers insights into adapting brand management practices along all BMS dimensions to achieve better business performance and improve objective financial performance in product-oriented activities. It highlights the role of brand management implementation, as well as the role of brand management in hierarchical relationships, in improving performance in service activities. Practical implications The formative BMS scale offers a tool which can be used to improve strategic decisions and give practical guidance on product vs service sector specificities. The indirect impact of a BMS on financial objective performance reinforces the legitimacy of brand managers and marketing managers. Originality/value This paper shows the impact of the BMS on objective financial performance by using a “grounded-in-practice” BMS scale. It also affords explanation on sectoral effects of brand management practices and their consequences on subjective and objective performance.

Long-run dynamics between CFP and CSP in the GCC banking sector: estimation of non-stationary heterogeneous panels allowing for cross-sectional dependence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ismail Ben Douissa ◽  
Tawfik Azrak
Keyword(s):  
Financial Performance ◽  
Granger Causality ◽  
Banking Sector ◽  
Social Performance ◽  
Content Type ◽  
Long Run ◽  
Equilibrium Relationship ◽  
Corporate Social ◽  
The Relationship ◽  
Long Run Equilibrium

Purpose Causality between corporate financial performance (CFP) and corporate social performance (CSP) has been extensively debated in previous research works; however, little research has been done to investigate the long-run dynamics between these two constructs. The purpose of this paper is to enrich the CFP–CSP literature by estimating the long-run equilibrium relationship between financial performance and social performance in the banking sector in the Gulf Cooperation Council countries over the period 2009–2019. Design/methodology/approach The paper adopts an approach that is primarily used in financial economics: first, the authors perform panel long-run Granger causality following Canning and Pedroni’s procedure to indicate the direction of the causal relationship. Second, the authors estimate an error correction model using Chudik and Pesaran’s (2015) dynamic common correlated effects mean group estimator to determine the sign of the relationship. Findings The present research findings prove the existence of a long-run equilibrium relationship between CFP and CSP, while indicating at the same time that panel Granger causality runs positively from CSP to CFP, which means that changes in CSP produce lasting changes in CFP. Practical implications The findings of the paper would guide strategists to build fit for purpose corporate social responsibility (CSR) strategies in their firms and establish a continuous investment in CSR activities in the long run rather than harshly investing in CSR activities in the short run. Originality/value To the best of the authors’ knowledge, this paper is the first one to address heterogeneity in long-run Granger causality tests to estimate the relationship between CSP and CFP.

scholarly journals Intervening Effect of Financial Services on the Relationship Between Bank Restructuring and Financial Performance

2017 ◽  
Vol 13 (28) ◽  
pp. 121
Author(s):  
Angela Mucece Kithinji ◽  
Mirie Mwangi ◽  
Kate Litondo ◽  
Martin Ogutu
Keyword(s):  
Financial Performance ◽  
Financial Services ◽  
Commercial Banks ◽  
Study Results ◽  
Direct Association ◽  
Financial Restructuring ◽  
Research Philosophy ◽  
Asset Restructuring ◽  
Bank Restructuring ◽  
The Relationship

Previous studies on the relationship between bank restructuring and financial performance reveal conflicting results with few studies establishing the effect of financial services. Few studies have investigated the causality between bank restructuring and financial performance as intervened by deposits and customer loans. The positivism research philosophy and descriptive and inferential causal research design were used in this study. The hypothetical view of the study was that the relationship between bank restructuring and financial performance of commercial banks in Kenya is not intervened by deposits and customer loans. The 39 commercial banks that were consistently in business for the period 2002 to 2014 were included in the study. Bank restructuring was disaggregated into financial restructuring, capital restructuring, operational restructuring and asset restructuring. The empirical findings were as follows: There was a significant direct association between bank restructuring and financial performance which was intervened by deposits and customer loans as proxies for financial services. Deposits were found to be significant in intervening the relationship between bank restructuring and financial performance. Customer loans on the other had was not found to significantly intervene the relationship between bank restructuring and financial performance. A composite variable of financial services denoting the aggregate of the intervention of deposits and customer loans showed a significant intervening effect on the relationship between bank restructuring and financial performance. The study outcome therefore reveals that the hypothesis that the relationship between bank restructuring and financial performance is not intervened by financial services is rejected. The conclusion is that banks should focus more on deposits to caution against a decrease in financial performance. Additionally customer loans should not be ignored since the intervention though insignificant tends to negatively influence financial performance. The implication is that when banks focus more on the provision of financial services they are likely to compromise financial finance possibly because of the increased costs associated with providing financial services. Regulatory institutions such as the Central Bank of Kenya (CBK) and the Kenya Institute of Bankers can use the study results to enhance policy and prudential guidelines to increase profitability of the banks. The study recommends that there is need to increase financial services offered by banks to increase outreach other than improving profitability of banks.

The impact of operational stickiness on product quality: product diversification moderation

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yu Lin ◽  
Shuaishuai Zhang ◽  
Yingjie Shi
Keyword(s):  
Product Quality ◽  
Optimal Level ◽  
Moderating Effect ◽  
Product Diversification ◽  
Improve Product Quality ◽  
Content Type ◽  
Exporting Firms ◽  
Improve Product ◽  
The Impact ◽  
The Relationship

PurposeThe purpose of this paper is to examine the impact of operational stickiness on product quality. Particularly, it analyzes the moderating effect of product diversification on the relationship between operational stickiness and product quality of exporting firms from China.Design/methodology/approachUsing a sample of 3,567 exporting firms between 2002 and 2012 in China, this paper develops a fixed effect model to demonstrate the nonlinear relationship between operational stickiness and product quality.FindingsResults show that operational stickiness has an inverted U-shaped impact on product quality, while inventory stickiness, property, plant and equipment (PPE) stickiness and labor stickiness are used to measure operational stickiness. Furthermore, the impact of operational stickiness on product quality is found to be moderated by product diversification.Practical implicationsManagers can achieve an optimal level of product quality by adjusting the level of operational stickiness. Firms with excessive operational stickiness should appropriately reduce the degree of stickiness to improve product quality. Besides, managers who focus on product quality should be cautious in adopting the product diversification strategy and be wary of the loss of product quality this strategy may cause.Originality/valueThis paper is the first study that has empirically validated the inverted U-shaped relationship between operational stickiness and product quality, and confirmed the moderating effect of product diversification on the relationship between operational stickiness and product quality. It provides a new idea to improve product quality by operational management.

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