Do market competition and development indicators matter for banks’ risk, capital, and efficiency relationship?

2017 ◽  
Vol 04 (02n03) ◽  
pp. 1750027 ◽  
Author(s):  
Changjun Zheng ◽  
Anupam Das Gupta ◽  
Syed Moudud-Ul-Huq
Keyword(s):  
Emerging Economies ◽  
Risk Taking ◽  
Stochastic Frontier Analysis ◽  
Financial Institution ◽  
Market Competition ◽  
Positive Association ◽  
Gdp Growth ◽  
Risk Capital ◽  
Frontier Analysis ◽  
Development Indicators

This study investigates the effect of market competition and development indicators on bank risk-taking behavior, capital regulation, and efficiency of banks in Asian emerging economies in light of their recent financial liberalization. Using stochastic frontier analysis (SFA) for measuring cost and profit inefficiency and regressed simultaneous equations by following the approach of generalized methods of the moment (GMM) the study covers a sample of 191 banks for the period between 2000 and 2014 in three Asian emerging economies such as Bangladesh, China, and India. The robust empirical results of GMM panel estimator reveal three core findings: first, intense competition of Asian banks has a positive association with risk-taking but has a negative correlation with regulatory capital and inefficiency. Second, it provides evidence that in economic progression, sample banks having a strong tendency of taking the risk. But no significant relationship found between GDP growth and capital, and GDP growth and inefficiency. This paper thus provides compelling insights to the policy makers and bank managers in setting appropriate strategy for a financial institution in the region.

Competition and efficiency in the non-life insurance market in South Africa

2016 ◽  
Vol 43 (6) ◽  
pp. 882-909 ◽  
Author(s):  
Abdul Latif Alhassan ◽  
Nicholas Biekpe
Keyword(s):  
Life Insurance ◽  
Fixed Effects ◽  
Stochastic Frontier Analysis ◽  
Market Competition ◽  
Empirical Relationship ◽  
Insurance Market ◽  
Profit Efficiency ◽  
Content Type ◽  
Frontier Analysis ◽  
Regulatory Policies

Purpose The purpose of this paper is to examine the empirical effect of competition on cost and profit efficiency in the South African non-life insurance market in a three-stage analysis. Design/methodology/approach Using annual firm level data on 80 non-life insurance companies from 2007 to 2012, the authors first employ the stochastic frontier analysis (SFA) to estimate cost and profit efficiency scores. In the second stage, the authors measure insurance market competition using the Panzar-Rosse (P-R) H-statistics. In the final stage, the authors estimate a fixed-effects panel regression model which controls for heteroskedasticity to examine the effect of competition on the estimated efficiency scores. Firm size, diversification, age, risk, reinsurance and leverage are employed as control variables. Findings From the SFA, the authors find average cost and profit efficiency of 80.08 and 45.71 per cent, respectively. This suggests that non-life insurers have high levels of efficiency in cost and low efficiency in profit. The annual estimates of the P-R H-statistics also suggest that firms in the market earn revenues under conditions of monopolistic competition. The authors find a positive effect of competition on cost and profit efficiency to validate the “quiet-life” hypothesis which posits that competition improves efficiency. Practical implications Regulatory policies should be directed towards enhancing competition to improve on the low profit earning potential of firms in the non-life market. Originality/value To the best of the authors’ knowledge, this study presents the first application of a non-structural measure of competition to examine the empirical relationship between competition and efficiency in insurance markets.

Why Tax Effort Falls Short of Tax Capacity in Indian States

2016 ◽  
Vol 45 (2) ◽  
pp. 232-259 ◽  
Author(s):  
Sandhya Garg ◽  
Ashima Goyal ◽  
Rupayan Pal
Keyword(s):  
Stochastic Frontier Analysis ◽  
Political Competition ◽  
Stochastic Frontier ◽  
Positive Association ◽  
Negative Association ◽  
Intergovernmental Transfers ◽  
Indian States ◽  
Frontier Analysis ◽  
Tax Effort ◽  
Tax Capacity

This article attempts to measure tax capacity and tax effort of fourteen major Indian states from 1991–1992 to 2010–2011 using stochastic frontier analysis. It shows that the variation across states in tax effort is wide and increasing over time. While per capita gross state domestic product, literacy rate, and labor force participation have positive association with tax capacity, a greater share of agriculture has negative association. Furthermore, intergovernmental transfers, given tax capacity, have negative association with tax effort of states. Expenditure on debt repayment is also adversely associated with tax effort but to a lower extent than outstanding liabilities. Enactment of Fiscal Responsibility and Budget Management Act is associated with improvement in states’ tax effort. Both within-state political competition and governance indicators have positive association on tax effort.

scholarly journals Does foreign direct investment cause financial sector development – evidence from an emerging economy

2019 ◽  
Vol 12 (1) ◽  
pp. 33-55
Author(s):  
John Kwaku Amoh ◽  
Abdul-Mumuni Abdallah ◽  
Richard Amankwa Fosu
Keyword(s):  
Foreign Direct Investment ◽  
Emerging Economies ◽  
Direct Investment ◽  
Structural Equation ◽  
Financial Institution ◽  
Exploratory Research ◽  
Investment Climate ◽  
Fdi Inflows ◽  
Cascading Effects ◽  
Development Indicators

AbstractThe aim of this exploratory research is to examine the foreign direct investment (FDI) – financial development (FD) nexus and to analyse the strength of relationships among FDI measures. The study employed structural equation modelling (SEM) on selected data from the World Development Indicators (WDI) from 1979 to 2016 to achieve the modest goal of this paper. The study established that FDI inflows are precursors of a vibrant and well-developed financial institution in emerging economies. We also found positive and negative correlations amongst the FDI measures, which suggest they move pari passu in stimulating the FD of an economy. A notable feature of this study is in the employment of SEM empirical strategy to shed light on the FDI-FI nexus. The study concluded that emerging economies must focus on the creation of a congenial investment climate to attract FDI inflows, which pivots robust financial institutions because of their cascading effects on the overall economy.

scholarly journals Market Imperfections within the European Wheat Value Chain: The Case of France and the United Kingdom

Agriculture ◽  
2021 ◽  
Vol 11 (9) ◽  
pp. 838
Author(s):  
Lukáš Čechura ◽  
Tinoush Jamali Jaghdani
Keyword(s):  
United Kingdom ◽  
Value Chain ◽  
Stochastic Frontier Analysis ◽  
Stochastic Frontier ◽  
Positive Association ◽  
Market Imperfections ◽  
Niche Markets ◽  
Frontier Analysis ◽  
The United Kingdom ◽  
Two Stages

The focus of this paper is on the analysis of market imperfections in the French and U.K. wheat value chains. We used mark-up and mark-down models and stochastic frontier analysis to estimate the degree of market imperfections in two completely different wheat-to-bread chains for two stages/sectors—milling and baking. Our results reveal some degree of market imperfections within the input and output markets for both the milling and baking sectors in France and the United Kingdom. However, the abuse of bargaining power is especially pronounced in the input market for the second stage of wheat processing, particularly in the French baking sector. However, we did not observe the expected positive association between the degree of market imperfections and company size except for a group of middle, large, and very large companies within the millers’ input market. Small companies indicate considerably high values of “Lerner”/Lerner indices, suggesting a benefit from other sources of competitive advantage (such as quality, niche markets, etc.).

Do competition and revenue diversification have significant effect on risk-taking? Empirical evidence from BRICS banks

2020 ◽  
Vol 07 (01) ◽  
pp. 2050007
Author(s):  
Anupam Das Gupta ◽  
Syed Moudud-Ul-Huq
Keyword(s):  
Risk Taking ◽  
Market Competition ◽  
Positive Association ◽  
Dynamic Panel Data ◽  
Revenue Diversification ◽  
Significant Positive Association ◽  
Investment Theory ◽  
Generalized Methods Of Moments ◽  
Heterogeneous Effect ◽  
Methods Of Moments

This study of two-step system generalized methods of moments (2GMM) of dynamic panel data addresses some critical insights of competition and revenue diversification of BRICS banks. The key findings are: (i) There is a significant positive association of market competition in risk-taking. (ii) Revenue diversification of banks supports the portfolio investment theory in risk management, which means that diversified sources of income have apparent influence in risk. (iii) Size has found a heterogeneous effect on risk-taking in the competitive market. (iv) Although, country-wise results of each country are in line with BRICS results in most of the cases, however, few exceptions are also observed in the examination of competition, revenue diversification and size in credit risk and stability of banks. Finally, the study evidences the nonlinear relationship of competition, revenue diversification, and risk.

scholarly journals The Effects of Reverse Knowledge Spillover on China’s Sustainable Development: Sustainable Development Indicators Based on Institutional Quality

2021 ◽  
Vol 13 (4) ◽  
pp. 1628
Author(s):  
Xiaoxu Dong ◽  
Cheon Yu ◽  
Yun Seop Hwang
Keyword(s):  
Sustainable Development ◽  
Emerging Economies ◽  
Institutional Quality ◽  
Knowledge Spillover ◽  
Simultaneous Equation ◽  
Equation Model ◽  
Environmental Aspects ◽  
Development Indicators ◽  
Developed Economies ◽  
The One

This study investigates how reverse knowledge spillover (RKS) generated through outward foreign direct investment (OFDI) promotes sustainable development in an investment home country. Economic, social, and environmental dimensions are the pillars of sustainable development and their indicators are developed upon the concept of institutional quality. To this end, we use a balanced panel of 30 Chinese Mainland provinces from 2003 to 2016 and employ a simultaneous equation model to analyze the data in order to observe the direct and indirect effects of OFDI-induced RKS on sustainable development. The current study adopts several indicators to capture the economic, social, and environmental aspects of sustainable development. Additionally, we classify RKS into two types, given the investment destinations in terms of developed economies and emerging economies. On the one hand, our findings confirm that OFDI-induced RKS from developed economies facilitates domestic innovation but negatively affects progress on social and environmental development. On the other hand, OFDI-induced RKS from emerging economies is not conducive to domestic innovation, but it directly fosters sustainable development.

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