Financial penalties and banks’ systemic risk

2018 ◽  
Vol 19 (2) ◽  
pp. 154-173 ◽  
Author(s):  
Hannes Köster ◽  
Matthias Pelster
Keyword(s):  
Systemic Risk ◽  
Fixed Effects ◽  
Banking Sector ◽  
Risk Exposure ◽  
Content Type ◽  
Upper Management ◽  
Positive Effects ◽  
External Monitoring ◽  
The Stability ◽  
The Impact

Purpose The purpose of this paper is to analyze the impact of financial penalties on the stability of the banking sector. Design/methodology/approach A unique database of 671 financial penalties imposed on 68 international listed banks between 2007 and 2014 and a fixed-effects panel data approach were used. Findings The results show that financial penalties increase banks’ systemic risk exposure but do not significantly affect banks’ contribution to systemic risk. Additionally, the link between financial penalties and systemic risk exposure is weaker in regulatory and supervisory systems with more prompt corrective power among national authorities. By contrast, supervisory authorities’ stronger power to declare insolvency and a greater external monitoring culture exacerbate the positive effects of financial penalties on systemic risk exposure. Practical implications The punishment of misconduct should correct the social harm and prevent future misconduct while ensuring the banking system’s stability. Therefore, authorities should punish misconduct by implementing penalties against the financial institutions at a specific amount that offsets the damages of misconduct but does not threaten systemic stability. Penalties against institutions may be complemented by financial penalties against upper management to induce a more responsible culture in banks. Originality/value This paper is the first to study the effect of financial penalties on the stability of the financial system. The results contribute to the ongoing debate on the appropriateness of financial penalties and address the question of whether bank regulators reduce or contribute to banks’ systemic risk.

scholarly journals Relevance of corporate boards in driving performance in the period that covers financial crisis

2019 ◽  
Vol 19 (2) ◽  
pp. 321-338 ◽  
Author(s):  
Geeta Rani Duppati ◽  
Frank Scrimgeour ◽  
Albert Sune
Keyword(s):  
Financial Crisis ◽  
Fixed Effects ◽  
Global Financial Crisis ◽  
Gender Diversity ◽  
Negative Relationship ◽  
Board Size ◽  
Content Type ◽  
Positive Effects ◽  
And Performance ◽  
The Impact

Purpose This paper aims to examine the relevance of boards in driving firm level performance. For this purpose, it considers firms listed on Ireland and Spain stock exchanges for the period 2005 to 2014, over a period that includes the global financial crisis. Design/methodology/approach This study uses panel data regression analysis to analyse the effects of board characteristics on performance and also uses alternate model specifications to test the significance of robustness of relationships. Findings The impact of board size on performance is negative and significant for Irish and Spanish firms for the study period. In general, the board independence has a positive effect on the performance of Spanish firms for the complete study period and suggests consistency with the resource dependency theory. Research limitations/implications The analysis suggests that in general, the non-executive and the board size do not affect the corporate performance of Irish and Spanish firms during the financial crisis. The fixed effects model suggests positive effects of gender diversity on performance for Spanish firms, while the random effects indicates negative relationship between gender diversity and performance for Irish companies. Practical implications The evidence on the Spanish firms suggests that female representation on the boards may be critical during the financial crisis Social implications The quota legislation on female board representation in Spain is yielding superior results over the soft law approach by Irish firms during the times of financial crisis period. Originality/value This study contributes to the literature on the corporate governance practices and performance of two countries that were strongly affected by the crisis in the European Union. As governments increasingly contemplate board gender diversity policies, this study offers useful empirical insights on Spanish and Irish firms.

scholarly journals Should bankers be concerned with Intellectual capital? A study of the Thai banking sector

2018 ◽  
Vol 19 (5) ◽  
pp. 897-914 ◽  
Author(s):  
Dai Binh Tran ◽  
Duc Hong Vo
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Fixed Effects ◽  
Banking Sector ◽  
Causal Effect ◽  
Generalized Method Of Moments ◽  
Value Added ◽  
Bank Profitability ◽  
Content Type ◽  
Positive Effects

Purpose The purpose of this paper is to examine the causal effect of intellectual capital (IC) performance on financial performance at Thai listed banks. Design/methodology/approach Data are collected from 16 listed banks in Thailand for the period 1997–2016. This paper uses the value-added intellectual coefficient methodology suggested by Pulic (1998, 2004) to measure IC. This study employs a fixed-effects and random-effects model and generalized method of moments (GMM) estimator to investigate the causal effect of IC on financial performance. Findings The results show that bank profitability is driven mainly by capital employed efficiency to make a profit. However, human capital efficiency marginally reduces bank profitability in the current period but has positive effects on future profitability. Research limitations/implications First, this study does not cover data on foreign banks, which reduces the generalizability of the results. Second, financial statements can be manipulated through accounting adjustments. Lastly, subsequent research should control for more bank characteristics, such as bank ownership, the non-performing loan ratio and R&D expenditure. Practical implications To achieve higher future profitability, banks should not only manage their physical and financial capital effectively but also improve employee efficiency. Originality/value This paper contributes to the literature on IC in the banking sector in emerging countries. Moreover, this paper is the first to employ the GMM method in the banking context to address possible endogeneity problems.

Risk and capital in Indonesian large banks

2018 ◽  
Vol 10 (1) ◽  
pp. 165-184 ◽  
Author(s):  
Arisyi Fariza Raz
Keyword(s):  
Systemic Risk ◽  
Financial Distress ◽  
Banking Sector ◽  
Risk Measures ◽  
Bank Risk ◽  
Policy Debate ◽  
Content Type ◽  
Systemic Risks ◽  
Using Data ◽  
The Impact

Purpose The purpose of this paper is to examine the behavior of banking risk in the emerging economies, particularly Indonesia and contribute to the discussion on the existing policy debate regarding the impact of capital on bank risk. Design/methodology/approach This study investigates the relationship between bank risk and capital using data on 15 Indonesian large banks between 2008 and 2015, using z-score and Delta-CoVaR to measure both idiosyncratic and systemic risks. Findings The empirical investigation suggests that capital has a negative and significant relationship with these risk measures. The authors also find that higher systemic risk encourages banks to increase their capital. However, similar evidence is not found in the idiosyncratic risk models. Finally, the role of capital in reducing risk is considered robust only during the normal periods, as banks may increase their assets risk during times of financial distress. Originality/value Systemic risk (CoVaR) is used to represent bank risk. This study focuses on the Indonesian banking sector (capture institutional arrangements and regulatory environment). It covers the period of 2008 GFC and post-crisis period.

Efficiency and bank margins: a comparative analysis of Islamic and conventional banks in Yemen

2019 ◽  
Vol 10 (1) ◽  
pp. 50-72
Author(s):  
Fekri Ali Shawtari ◽  
Mohamed Ariff ◽  
Shaikh Hamzah Abdul Razak
Keyword(s):  
Fixed Effects ◽  
Banking Sector ◽  
Influential Factor ◽  
Islamic Banks ◽  
Data Set ◽  
Content Type ◽  
Significant Difference ◽  
Conventional Banks ◽  
The Impact ◽  
Non Parametric

PurposeThe purpose of this paper is to examine the determinants of bank margins in the Yemeni banking sector for Islamic and conventional banks. The first objective is to investigate whether there is a significant difference between the margins of conventional and Islamic banks. The second objective is to examine whether efficiency represents an influential factor in determining bank margins for Islamic and conventional banks controlling for other micro and macro variables.Design/methodology/approachUsing a data set of banks in Yemen for the post-liberalisation period from 1996 to 2011, the study utilises panel data with unbalanced observations for 16 banks, of which four are Islamic banks and the remainder conventional banks. Parametric and non-parametric techniques are complemented by dummy variable regression using random effects. Panel fixed effects regression was also undertaken as a robustness check.FindingsThe paper finds that the overall bank margin in Yemen has steadily decreased during the observation period with the exception of the year 2011. The parametric and non-parametric results show that the bank margins are significantly higher for conventional banks than for Islamic banks. The results provide evidence that bank margins are related to neither types of efficiency, but are affected by capitalisation, size, the opportunity cost of the reserve and liquidity, although the impact is shaped differently for Islamic and conventional banks.Practical implicationsThe paper provides a basis for regulators and bankers for assessing the viability of the banking sector and proposes policies to restructure the industry to enhance its performance.Originality/valueThis paper adds value to the literature for the Yemeni banking sector and extends the previous research on the determinants of bank margins by focusing on the impact of efficiency on bank margins. Also, it compares the Islamic banks with different types of conventional banks in Yemen in their margins trend.

scholarly journals The impact of entrepreneurship on knowledge economy in Africa

2016 ◽  
Vol 8 (1) ◽  
pp. 101-131 ◽  
Author(s):  
Simplice A. Asongu ◽  
Vanessa S. Tchamyou
Keyword(s):  
Knowledge Economy ◽  
Value Chain ◽  
Fixed Effects ◽  
Agricultural Practices ◽  
Value Added ◽  
High Tech ◽  
African Countries ◽  
Content Type ◽  
Positive Effects ◽  
The Impact

Purpose – This paper aims to assess how entrepreneurship affects knowledge economy (KE) in Africa. Design/methodology/approach – Entrepreneurship is measured by indicators of starting, doing and ending business. The four dimensions of the World Bank’s index of KE are used. Instrumental variable panel-fixed effects are applied on a sample of 53 African countries for the period of 1996-2010. Findings – The following are some of the findings. First, creating an enabling environment for starting business can substantially boost most dimensions of KE. Second, doing business through mechanisms of trade globalization has positive effects from sectors that are not information and communication technology (ICT) and high-tech oriented. Third, the time required to end business has negative effects on KE. Practical implications – The findings confirm the narrative that the technology in African countries at the moment may be more imitative and adaptive for reverse engineering in ICTs and high-tech products. Given the massive consumption of ICT and high-tech commodities in Africa, the continent has to start thinking of how to participate in the global value chain of producing what it consumes. Originality/value – This paper has a twofold motivation. First, given the ambitions of African countries of moving towards knowledge-based economies, the line of inquiry is timely. Second, investigating the nexus may have substantial poverty mitigation and sustainable development implications. These entail, inter alia, the development of technology with value-added services; enhancement of existing agricultural practices; promotion of conditions that are essential for competitiveness; and adjustment to globalization challenges.

scholarly journals Determinants of non-performing loans in the banking sector in developing state

2020 ◽  
Vol 5 (1) ◽  
pp. 135-145 ◽  
Author(s):  
Muhammad Asif Khan ◽  
Asima Siddique ◽  
Zahid Sarwar
Keyword(s):  
Fixed Effects ◽  
Banking Sector ◽  
Developing Economies ◽  
Stock Exchange ◽  
Negative Association ◽  
Capital Adequacy ◽  
Operating Efficiency ◽  
Income Diversification ◽  
Content Type ◽  
The Stability

PurposeThe size of non-performing loans (NPLs) plays a key role in the stability of the banking sector of a country. The factors that explain the NPLs contain very important information for banks. Studies in this regard with respect to developing states such as Pakistan have received little attention. This study aimed to scrutinize the determinants of NPLs observing a case of the banking sector in Pakistan over the period from 2005 to 2017.Design/methodology/approachThe sample consists of the banking sector (i.e., commercial banks) listed in Pakistan Stock Exchange over the period of 2005–2017. The banking factors, including profitability, operating efficiency, capital adequacy and income diversification, were evaluated. The estimations were done by regression modeling using random and fixed effects through STATA software.FindingsResults show that the operating efficiency and profitability indicators have a negative association with NPLs but were statistically significant, while capital adequacy and income diversification have a negative association with NPLs but were statistically insignificant.Research limitations/implicationsThe present study has considered limited banking indicators as determinants of NPLs and was limited to a specific time period from 2005 to 2017.Originality/valueThe study is an attempt to investigate various banking factors that affect the NPLs with respect to developing economies such as Pakistan.

scholarly journals How Do the Timing and Duration of Courses Affect Participation in Adult Learning and Education? A Panel Analysis

2021 ◽  
pp. 074171362110190
Author(s):  
Fabian Rüter ◽  
Andreas Martin
Keyword(s):  
Adult Education ◽  
Adult Learning ◽  
Fixed Effects ◽  
Research Literature ◽  
Temporal Organization ◽  
Educational Institutions ◽  
Positive Effects ◽  
Matching Process ◽  
Education Participation ◽  
The Impact

Participation in adult learning and education requires the availability of, and accessibility to, learning opportunities provided by educational institutions. One fundamental element is time. Adult learning and education participation can only be realized by successfully matching individual time-availabilities with the temporal organization of provided courses. To address this required matching process, this study contributes to research literature as one of the first studies that investigates the impact of timing and course duration on participation counts (longitudinally). For this, we use organizational data from public adult education centers ( Volkshochschulen—VHS; the main adult education providers in Germany) from 2007 to 2017. Methodologically, random- and fixed-effects models are applied. We find significant positive effects on participation counts between increasing program breadth in terms of temporal formats and increasing average course duration.

Farm wages and public works

2015 ◽  
Vol 8 (1) ◽  
pp. 19-72 ◽  
Author(s):  
Kanika Mahajan
Keyword(s):  
Theoretical Model ◽  
Wage Rate ◽  
Fixed Effects ◽  
Positive Impact ◽  
Wage Growth ◽  
State Level ◽  
Random Allocation ◽  
Farm Sector ◽  
Content Type ◽  
The Impact

Purpose – The purpose of this paper is to examine the impact of National Rural Employment Guarantee Scheme (NREGS) on farm sector wage rate. This identification strategy rests on the assumption that all districts across India would have had similar wage trends in the absence of the program. The author argues that this assumption may not be true due to non-random allocation of districts to the program’s three phases across states and different economic growth paths of the states post the implementation of NREGS. Design/methodology/approach – To control for overall macroeconomic trends, the author allows for state-level time fixed effects to capture the differences in growth trajectories across districts due to changing economic landscape in the parent-state over time. The author also estimates the expected farm sector wage growth due to the increased public work employment provision using a theoretical model. Findings – The results, contrary to the existing studies, do not find support for a significantly positive impact of NREGS treatment on private cultivation wage rate. The theoretical model also shows that an increase in public employment work days explains very little of the total growth in cultivation wage post 2004. Originality/value – This paper looks specifically at farm sector wage growth and the possible impact of NREGS on it, accounting for state specific factors in shaping farm wages. Theoretical estimates are presented to overcome econometric limitations.

Market orientation, innovation commercialization capability and firm performance relationships: the moderating role of supply chain influence

2017 ◽  
Vol 32 (7) ◽  
pp. 913-924 ◽  
Author(s):  
Jeen-Su Lim ◽  
William K. Darley ◽  
David Marion
Keyword(s):  
Supply Chain ◽  
Firm Performance ◽  
Market Orientation ◽  
Innovation Management ◽  
Strategy Formulation ◽  
Content Type ◽  
Positive Effects ◽  
The Impact ◽  
Moderating Role

Purpose The study aims to explore supply chain influence (SCI) on the linkages among market orientation, innovation capabilities and firm performance (FP), using the resource-based view as a theoretical backdrop. Design Survey data from 182 top managers who are involved in strategy formulation and innovative direction of their companies was collected and analyzed using moderated multiple regression analysis. Findings Results revealed a moderating role of the SCI in that the proactive market orientation (PMO) and FP relationship is stronger when SCI is high, and innovation commercialization capability (ICC) and FP relationship is stronger when SCI is low. Practical implications Firms pursuing high PMO strategy must collaborate with supply chain function to achieve the full effect of PMO. Additionally, as supply chain is critical to meeting customers’ needs, these firms should allow supply chain to exert greater influence to enjoy the positive effects of PMO in addition to ensuring full integration into marketing strategy implementation. Also, firms with high ICC need to limit SCI to maximize the benefit of ICC on FP, just as innovation management needs to be cognizant of other functional areas. Originality/value The study investigates the potential moderating role of SCI on the relationships among market orientation, ICC and FP. The study fills a gap in the understanding of the nature and role of supply chain in the marketing–supply chain interaction, and the impact on FP.

The impact of globalization on the performance of Banks in South Africa

2016 ◽  
Vol 26 (4) ◽  
pp. 517-542 ◽  
Author(s):  
Fadzlan Sufian ◽  
Fakarudin Kamarudin
Keyword(s):  
South Africa ◽  
Host Country ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Estimation Method ◽  
Bank Performance ◽  
Content Type ◽  
Multinational Banks ◽  
Dynamic Panel Regression ◽  
The Impact

Purpose This paper aims to provide empirical evidence for the impact globalization has had on the performance of the banking sector in South Africa. In addition, this study also investigates bank-specific characteristics and macroeconomic conditions that may influence the performance of the banking sector. Design/methodology/approach The authors use data collected for all commercial banks in South Africa between 1998 and 2012. The ratio of return on assets was used to measure bank performance. They then used the dynamic panel regression with the generalized method of moments as an estimation method to investigate the potential determinants and the impact of globalization on bank performance. Findings Positive impact of greater economic integration and trade movements of the host country, while greater social globalization in the host country tends to exert negative influence on bank profitability. The results show that banks originating from the relatively more economically globalized countries tend to perform better, while banks headquartered in countries with greater social and political globalizations tend to exhibit lower profitability levels. Originality/value An empirical model was developed that allows for the performance of multinational banks to depend on internal and external factors. Moreover, unlike the previous studies on bank performance, in this empirical analysis, we control for the different dimensions of globalizations while taking into account the origins of the multinational banks. The procedure allows us to test for the home field, the liability of foreignness and global advantage hypotheses to deduce further insights into the prospects of banking across borders.

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