Identification of systemically important banks in India using SRISK

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Juhi Gupta ◽  
Smita Kashiramka
Keyword(s):  
Systemic Risk ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Balance Sheet ◽  
Data Set ◽  
Content Type ◽  
Long Run ◽  
Marginal Expected Shortfall ◽  
The Global Financial Crisis ◽  
Systemically Important Banks

Purpose Systemic risk has been a cause of concern for the bank regulatory authorities worldwide since the global financial crisis. This study aims to identify systemically important banks (SIBs) in India by using SRISK to measure the expected capital shortfall of banks in a systemic event. The sample size comprises a balanced data set of 31 listed Indian commercial banks from 2006 to 2019. Design/methodology/approach In this study, the authors have used SRISK to identify banks that have a maximum contribution to the systemic risk of the Indian banking sector. Leverage, size and long-run marginal expected shortfall (LRMES) are used to compute SRISK. Forward-looking LRMES is computed using the GJR-GARCH-dynamic conditional correlation methodology for early prediction of a bank’s contribution to systemic risk. Findings This study finds that public sector banks are more vulnerable to macroeconomic shocks owing to their capital inadequacy vis-à-vis the private sector banks. This study also emphasizes that size should not be used as a standalone factor to assess the systemic importance of a bank. Originality/value Systemic risk has attracted a lot of research interest; however, it is largely limited to the developed nations. This paper fills an important research gap in banking literature about the identification of SIBs in an emerging economy, India. As SRISK uses both balance sheet and market-based information, it can be used to complement the existing methodology used by the Reserve Bank of India to identify SIBs.

Financial distress determinants among SMEs: empirical evidence from Sweden

2020 ◽  
Vol 47 (3) ◽  
pp. 547-560 ◽  
Author(s):  
Darush Yazdanfar ◽  
Peter Öhman
Keyword(s):  
Financial Crisis ◽  
Financial Distress ◽  
Large Scale ◽  
Global Financial Crisis ◽  
Binary Logistic Regression ◽  
Data Availability ◽  
Cross Sectional ◽  
Data Set ◽  
Content Type ◽  
The Global Financial Crisis

PurposeThe purpose of this study is to empirically investigate determinants of financial distress among small and medium-sized enterprises (SMEs) during the global financial crisis and post-crisis periods.Design/methodology/approachSeveral statistical methods, including multiple binary logistic regression, were used to analyse a longitudinal cross-sectional panel data set of 3,865 Swedish SMEs operating in five industries over the 2008–2015 period.FindingsThe results suggest that financial distress is influenced by macroeconomic conditions (i.e. the global financial crisis) and, in particular, by various firm-specific characteristics (i.e. performance, financial leverage and financial distress in previous year). However, firm size and industry affiliation have no significant relationship with financial distress.Research limitationsDue to data availability, this study is limited to a sample of Swedish SMEs in five industries covering eight years. Further research could examine the generalizability of these findings by investigating other firms operating in other industries and other countries.Originality/valueThis study is the first to examine determinants of financial distress among SMEs operating in Sweden using data from a large-scale longitudinal cross-sectional database.

How firms borrow in international bond markets

2018 ◽  
Vol 26 (1) ◽  
pp. 135-169
Author(s):  
Alberto Fuertes ◽  
Jose María Serena
Keyword(s):  
Emerging Economies ◽  
Design Methodology ◽  
Choice Behavior ◽  
Global Financial Crisis ◽  
Securities And Exchange Commission ◽  
Bond Markets ◽  
Data Set ◽  
Content Type ◽  
Parametric Analyses ◽  
The Global Financial Crisis

Purpose This paper aims to investigate how firms from emerging economies choose among different international bond markets: global, US144A and Eurobond markets. The authors explore if the ranking in regulatory stringency –global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – leads to a segmentation of borrowers. Design/methodology/approach The authors use a novel data set from emerging economy firms, treating them as consolidated entities. The authors also obtain descriptive evidence and perform univariate non-parametric analyses, conditional and multinomial logit analyses to study firms’ marginal debt choice decisions. Findings The authors show that firms with poorer credit quality, less ability to absorb flotation costs and more informational asymmetries issue debt in US144A and Eurobond markets. On the contrary, firms issuing global bonds – subject to full Securities and Exchange Commission requirements – are financially sounder and larger. This exercise also shows that following the global crisis, firms from emerging economies are more likely to tap less regulated debt markets. Originality/value This is, to the authors’ knowledge, the first study that examines if the ranking in stringency of regulation – global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – is consistent with an ordinal choice by firms. The authors also explore if this ranking is monotonic in all determinants or there are firm-specific features which make firms unlikely to borrow in a given market. Finally, the authors analyze if there are any changes in the debt-choice behavior of firms after the global financial crisis.

Shadow prices of non-performing loans and the global financial crisis

2019 ◽  
Vol 20 (5) ◽  
pp. 411-434
Author(s):  
Ameni Tarchouna ◽  
Bilel Jarraya ◽  
Abdelfettah Bouri
Keyword(s):  
Financial Crisis ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Shadow Price ◽  
Market Price ◽  
Shadow Prices ◽  
Content Type ◽  
Managerial Implications ◽  
Bad Loans ◽  
The Global Financial Crisis

Purpose This paper aims to determine the opportunity cost borne by US commercial banks to reduce non-performing loans (NPLs) by one unit within the global financial crisis framework. Design/methodology/approach To achieve this aim, the authors use the directional output distance function to estimate the technical efficiency while considering NPLs as undesirable output. Then, they estimate the shadow prices of NPLs by using the envelope theorem and solving the revenue function. Findings The results indicate that medium-sized banks are the most efficient, while small banks are the most inefficient ones. Moreover, the shadow prices of NPLs of large banks are higher than those of small and medium-sized banks. This implies a more elevated cost when lessening bad loans in large banks. This is more prominent during the crisis given that the shadow prices of NPLs of large banks have risen sharply over that period. Practical implications Shadow prices have important managerial implications given that they display the amounts of required reduced revenues to lessen NPLs. Accordingly, banks’ managers are called to reduce these loans by paying more attention when choosing their customers. Originality/value With the absence of an observable market price for bad loans in financial literature, the shadow price notion offers an adequate measure to evaluate them. To the best of authors’ knowledge, this is the first study that provides an estimation of the shadow price of NPLs in the US banking sector.

scholarly journals Burning the buffer: New Zealand's budgetary response to COVID-19

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ian Ball
Keyword(s):  
New Zealand ◽  
Financial Management ◽  
Global Financial Crisis ◽  
Balance Sheet ◽  
Content Type ◽  
Net Worth ◽  
Fiscal Impacts ◽  
Financial Management System ◽  
The Global Financial Crisis

PurposeThe New Zealand Government has progressively strengthened its balance sheet position since the mid-1990s, other than for the four years immediately following the global financial crisis and the Canterbury earthquakes. This paper describes the nature and the forecast and actual fiscal impacts of the COVID-19 response, and identifies the transparency mechanisms which reveal these impacts. It also expresses a viewpoint on the implications of the COVID-19 response for the future resilience of the Government's fiscal position.Design/methodology/approachThe paper draws on the suite of official budgetary documents to demonstrate both the transparency of the disclosures on the COVID-19 impact and the substance of the forecast and actual fiscal impacts.FindingsThe paper reveals the change in the long-term fiscal aspirations of the New Zealand Government from one of achieving and maintaining a significant net worth buffer, to one which accommodates in the long-term a markedly smaller buffer and lower level of net worth.Originality/valueThe public financial management system in New Zealand is notable for its transparency. The Government's response to the pandemic is used to illustrate the nature and extent of that transparency.

scholarly journals Systemic Risk Contribution and Contagion of Industrial Sectors in China: From the Global Financial Crisis to the COVID-19 Pandemic

2021 ◽  
Vol 2021 ◽  
pp. 1-16
Author(s):  
Jianxu Liu ◽  
Yangnan Cheng ◽  
Yefan Zhou ◽  
Xiaoqing Li ◽  
Hongyu Kang ◽  
...  
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Systemic Risk ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Spillover Effect ◽  
Industrial Sectors ◽  
Risk Contribution ◽  
The Global Financial Crisis ◽  
Over Time

This paper investigates the risk contribution of 29 industrial sectors to the China stock market by using one-factor with Durante generator copulas (FDG) and component expected shortfall (CES) analyses. Risk contagion between the systemically most important sector and other sectors is examined using a copula-based ∆CoVaR approach. The data cover the 2008 global financial crisis and the beginning of the COVID-19 pandemic. The empirical results show that the banking sector contributed most to systemic risk before and during the global financial crisis. Nonbank finance became equally important in 2020, and the COVID-19 pandemic promoted the position of the computer and pharmaceuticals sectors. The spillover effect diminishes over time, but there remains risk contagion between sectors. The risk spillover trend is consistent with that of systemic risk.

scholarly journals Inefficiency patterns in family-owned banks in Bangladesh

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mette Asmild ◽  
Dorte Kronborg ◽  
Tasmina Mahbub ◽  
Kent Matthews
Keyword(s):  
Financial Crisis ◽  
Business Models ◽  
Global Financial Crisis ◽  
Time Window ◽  
Management Practice ◽  
Data Set ◽  
Content Type ◽  
Empirical Results ◽  
The Difference ◽  
The Global Financial Crisis

PurposeMulti-directional efficiency analysis (MEA) is an alternative methodology to data envelopment analysis (DEA) that investigates the improvement potentials in each input and output dimension and identifies a benchmark proportional to these potential improvements. This results in a more nuanced picture of the sources of the inefficiency providing opportunities for additional conclusions about which variables the inefficiency is mainly located on. MEA provides insights into not only the level of the inefficiency but also the patterns within the inefficiency, i.e. its sources and location. This paper applies this methodology to Bangladeshi banks to understand the differences in the inefficiency patterns between different subgroups.Design/methodology/approachThis paper analyses the difference in the pattern of inefficiency between the older family-dominated banks and the newer non-family-owned banks in Bangladesh using the recently developed MEAs technology, which enables analysis of patterns within inefficiencies rather than only levels of (in)efficiency. The empirical results show that whilst there are few significant differences in the levels of variable-specific efficiency scores between the two subgroups, there are clearer differences on the inefficiency contributions from particular outputs in most of the study period and also on most variables in the time window of 2007–2009. This finding provides clues to differences in business models and management practice between the two types of banks in Bangladesh.FindingsThe empirical results show that whilst there are few significant differences in the levels of variable-specific efficiency scores between the two subgroups (older family-dominated banks and the newer non-family-owned banks), there are clearer differences on the inefficiency contributions from particular outputs in most of the study period and also on most variables in the time window of 2007–2009, during the Global Financial Crisis (GFCs). This finding provides clues to differences in business models and management practice between the two types of banks in Bangladesh.Practical implicationsDEA is a conventional tool for benchmarking in management science. However, conventional benchmarking exercises based on DEA do not reveal significant differences in the sources of inefficiency that show differences in business models. While DEA remains the most utilized technique in the efficiency literature, we think that a more flexible and deeper analysis requires something like MEA.Originality/valueThe contribution is twofold. First, examination of performances of family-owned firms is a well-established but analysis of performances of family-dominated banks is relative scarce. Secondly, isolating the sources of inefficiency which differs between types of banks even if there is no difference in inefficiency levels is absolutely new for a complete data set of conventional banks in Bangladesh. It turns out that there are few (significant) differences between the groups in terms of the inefficiency levels, whereas clear patterns emerge in terms of differences in inefficiency contributions between family-dominated and non-family-owned banks, during the Global Financial Crisis

Establishing finance-growth linkage for India: a financial conditions index (FCI) approach

2019 ◽  
Vol 14 (5) ◽  
pp. 1032-1059 ◽  
Author(s):  
A.K. Giri ◽  
Deven Bansod
Keyword(s):  
Economic Growth ◽  
Global Financial Crisis ◽  
Gdp Growth ◽  
Data Sets ◽  
Content Type ◽  
Real Gdp ◽  
Financial Conditions ◽  
Multiple Markets ◽  
Long Run ◽  
The Global Financial Crisis

Purpose The global financial crisis of 2008 emphasized the need for monetary policy authorities to have a more comprehensive view of the conditions prevailing in the economy before deciding their policy stance. The purpose of this paper is to outline the construction of a financial conditions index (FCI) and investigate the possible co-integrating relationship between the economic growth and FCI. Design/methodology/approach The study employs the PCA methodology, with appropriate augmentations to handle the unbalanced panel data-sets and constructs a FCI for India. It tests the growth-predicting power of FCI by applying the auto regressive distributed lags approach to co-integration and verifies if the FCI is co-integrated with real GDP growth. It also discusses construction of a financial development index (FDI) which tracks the financial markets through M3, market capitalization and credit amount to residents. Findings The constructed FCI has a quarterly frequency and is available starting 1998q2. The long-run coefficient of FCI while predicting the real GDP growth is significant at 10 percent. The results confirm that a more-broader index FCI outperforms a narrower index FDI in growth prediction. Research limitations/implications By showing that FCI is a better growth predictor than FDI, the study establishes the importance of including the foreign exchange markets, bond markets and stock markets while summarizing the conditions in the economy. The authors hope that the FCI would be helpful to the monetary authorities in their policy decisions. Originality/value The paper adds to the few existing studies studies dealing with FCI for Indian economy and constructs a more comprehensive index which tracks multiple markets simultaneously. It also fills the gap in literature by evaluating the correlating relationship between FCI and economic growth.

Banking stability in the MENA region during the global financial crisis and the European sovereign debt debacle

2017 ◽  
Vol 18 (4) ◽  
pp. 381-397 ◽  
Author(s):  
Naama Trad ◽  
Houssem Rachdi ◽  
Abdelaziz Hakimi ◽  
Khaled Guesmi
Keyword(s):  
Global Financial Crisis ◽  
Islamic Banks ◽  
Mena Region ◽  
Data Set ◽  
Content Type ◽  
Negative Effect ◽  
Macroeconomic Effect ◽  
Conventional Banks ◽  
The Global Financial Crisis ◽  
Conventional And Islamic Banks

Purpose This paper aims to focus on the main determinants of the performance and stability-banking sector in the Middle East and North Africa (MENA) region during the global financial crisis. Using a data set of 13 countries with both of 77 Islamic and 101 conventional banks during the period 2006-2013, empirical results show that specific variables allow explaining the change in the level of performance and stability for conventional and Islamic banks. However, the effect of some banks’ characteristics is not the same for the two bank groups. For the macroeconomic effect, it is observed that inflation exerts a negative effect on the bank performance except for conventional banks when it increases the profitability. Design/methodology/approach Using a data set of 13 countries with both of 77 Islamic and 101 conventional banks (CvB) during the period 2006-2013 and performing the generalized method of moments (GMM) method, the findings provide comprehensive evidence for the bank systems studied which are of interest also to policy makers and practitioners. Findings The main finding is that after the international financial crises of 2008, many worldwide banks have been experiencing crises in contrast to Islamic banks (IsB) which remain Gen more stable and more profitable. Foreign banks had a higher degree of exposure to risk, given their higher number of subsidiaries in the developed economies. As for the determinants of profitability, the bank-specific variables allow to explain the change in the level of performance and stability for conventional and Islamic banks. However, the effect of some banks characteristics is not the same for the two bank groups. For the macroeconomic effect, it is observed that inflation exerts a negative effect on the bank performance except for CvB when it increases the profitability measured by the return on assets (ROA). It is also found that the growth rate acts positively when the dependent variable is the ROA and negatively when the performance is measured by return on equity. Originality/value The inflation rate exerts a negative effect only on the ROA. This study differs from previous contributions in that it is tested the hypothesis of determinants of bank profitability and stability for both conventional and Islamic banks in the MENA region. It is of great interest to both policymakers and investors, with respect to regional development policies and dedicated portfolio investment strategies in each emerging region respectively. The authors adopted several ratios from the empirical literature on bank profitability and stability. Using a data set of 13 countries with both of 77 Islamic and 101 CvB during the period 2006-2013 and performing the GMM method, the findings have significant contributions to the literature by comprehensively clarifying and critically analyzing the current state of profitability and stability for both banks.

Volatility of Malaysian conventional and Islamic indices: does financial crisis matter?

2020 ◽  
Vol 11 (1) ◽  
pp. 1-11 ◽  
Author(s):  
Muhamad Abduh
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Stock Exchange ◽  
Composite Index ◽  
Least Square ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
The Global Financial Crisis ◽  
The Impact

Purpose This study aims to investigate the volatility of conventional and Islamic indices and to explore the impact of the global financial crisis toward the volatility of both markets in Malaysia. Design/methodology/approach The data consist of financial times stock exchange group (FTSE) Bursa Malaysia Kuala Lumpur Composite Index and FTSE Bursa Malaysia Hijrah-Shari‘ah Index covering the period January 2008-October 2014. Generalized autoregressive conditional heteroskedasticity is used to find the volatility of the two markets and an ordinary least square model is then used to investigate the impact of the crisis toward the volatility of those markets. Findings Interestingly, the result shows that Islamic index is less volatile during the crisis compared to the conventional index. Furthermore, the crisis is proven to significantly affect the volatility of conventional index in the short run and Islamic index in the long run. Originality/value This study explores the volatility–financial crisis nexus, especially for the Islamic financial markets, which to the best of the author’s knowledge, is still lacking empirical research which may improve the understanding upon this issue.

Maturity transformation risk factors in Islamic banking

2018 ◽  
Vol 44 (6) ◽  
pp. 787-808
Author(s):  
Haroon Mahmood ◽  
Christopher Gan ◽  
Cuong Nguyen
Keyword(s):  
Financial Services ◽  
Global Financial Crisis ◽  
Generalized Method Of Moments ◽  
Balance Sheet ◽  
Islamic Banking ◽  
Annual Data ◽  
Basel Iii ◽  
Islamic Banks ◽  
Data Set ◽  
Content Type

Purpose Maturity transformation risk is one of the leading causes of the global financial crisis. While endorsing the new Basel III liquidity reforms, the Islamic Financial Services Board has suggested a modified NSFR ratio as a structural measure for the maturity transformation function of Islamic banks, allowing for their unique balance sheet structure. The purpose of this paper is to analyze various firm-specific and macroeconomic factors that may significantly affect the maturity transformation risk of these banks. Design/methodology/approach Using an annual data set of 55 full-fledged Islamic banks from 11 different countries over a period from 2006-2015, this study utilizes a two-step system generalized method of moments estimation technique on an unbalanced panel data. Findings The empirical results reveal bank size, capital, less-risky liquid assets, risky liquid assets, external funding dependence and market power as significant bank-specific factors in determining maturity transformation risk. However, the authors find no evidence for the effect of bank credit risk on maturity transformation risk in Islamic banking system. Originality/value This is the first study that focuses on the measurement of maturity transformation risk and its determinants in Islamic banks in a cross-country context, with regards to new liquidity regulatory requirements as proposed by Islamic Financial Services Board (IFSB) in conjunction with Basel III.

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