scholarly journals The effect of revenue diversification on the firm value and stability of banks: A comparative study of Nigerian and Malaysian banks

2021 ◽  
Vol 16 (3) ◽  
pp. 141-151
Author(s):  
Oluwaseyi Olalere ◽  
Md. Aminul Islam ◽  
Marniati ◽  
Nurulul Rahmi
Keyword(s):  
Firm Value ◽  
Financial Stability ◽  
Emerging Market ◽  
Empirical Literature ◽  
Current Debate ◽  
Gdp Growth ◽  
Revenue Diversification ◽  
Interest Income ◽  
Net Interest Margin ◽  
Administrative Expenses

This study contributes to the current debate on the downsides and benefits of revenue diversification. Diversification may affect banks when they invest in riskier activities with lower returns, while they benefit from diversified activities that are less risky but have higher returns. The study offers extended implications in the empirical literature using a different measure of revenue diversification from an emerging market perspective. The study uses recent financial data from 26 Malaysian and Nigerian banks for the period 2009–2017, totaling 234 observations. The GMM estimation technique is employed to test the relationship. The results show that revenue diversification – non-interest income/gross revenue ratio (NII), fee and commission income/revenue ratio (NII1), and non-interest income/total assets ratio (NIITA) – significantly affect the firm value and stability of Nigerian banks. Liquidity, administrative expenses, net interest margin (NIM), non-performing loans (NPL), size, GDP growth rate and inflation also affect the firm value and stability of a bank. For Malaysian banks, diversification variables do not significantly affect firm value of a bank, while liquidity, administrative expenses, NIM and size significantly affect firm value. Diversification (NII and NIITA), liquidity, administrative expenses, NIM, NPL, size, GDP growth and inflation rate has a significant impact on the stability of Malaysian banks. The study concludes that revenue diversification affects both the firm value and stability of banks, and to achieve sound financial stability, banks that focus on interest-generating activities may diversify into non-interest-generating activities.

scholarly journals KEY FACTORS OF NON-PERFORMING LOANS IN BALTIC AND SCANDINAVIAN COUNTRIES: LESSONS LEARNED IN THE LAST DECADE

Ekonomika ◽  
2017 ◽  
Vol 96 (2) ◽  
pp. 43-55
Author(s):  
Kazys Kupčinskas ◽  
Arvydas Paškevičius
Keyword(s):  
Financial Stability ◽  
Banking Industry ◽  
Lessons Learned ◽  
Gdp Growth ◽  
Baltic Countries ◽  
Country Level ◽  
Net Interest Margin ◽  
Financial Soundness ◽  
The Baltic ◽  
Major Factors

A cross-country panel data regression was performed for non-performing loans (NPL) in Denmark, Estonia, Finland, Latvia, Lithuania and Sweden covering a period of years 1998-2014. The main objective was to determine the major factors that were driving the NPL in the selected countries. Also, we expected to draw the differences in the banking industry between emerging economies in the Baltic countries and Western economies in the Scandinavian region. The selected variables were banking industry-related (net interest margin, ROA, ROE) and macroeconomic variables (GDP growth, RE prices, Unemployment), of which the majority is included as the Financial Soundness Indicators by the IMF. Key findings of the research show that NPL in both regions were mostly dependent on GDP growth and Unemployment, whereas the banking industry variable ROA had a very moderate effect only on a country level. The research is contributing to a better understanding of financial stability in the banking industry during the last decade, and it may have possible implications for the macroprudential policy.

scholarly journals Financial Hegemony, Diversification Strategies and the Firm Value of Top 30 FTSE Companies in Malaysia

2016 ◽  
Vol 12 (3) ◽  
pp. 14
Author(s):  
Wan Sallha Yusoff ◽  
Mohd Fairuz Md. Salleh ◽  
Azlina Ahmad ◽  
Norida Basnan
Keyword(s):  
Data Analysis ◽  
Panel Data ◽  
Firm Value ◽  
Financial Stability ◽  
Panel Data Analysis ◽  
Location Decisions ◽  
Asian Countries ◽  
Diversification Strategies ◽  
The Stability ◽  
Southeast Asian Countries

<p>This study investigates the relationships between financial hegemony groups, global diversification strategies and firm value of the Malaysia’s 30 largest companies listed in FTSE Bursa Malaysia Index Series during 2009 to 2012 period. We chose Malaysia as an ideal setting because the findings contribute to the phenomenon of the diversification–performance relationship in the Southeast Asian countries. We apply hegemony stability theory to explain the importance of financial hegemony groups in deciding international locations for operations. By using panel data analysis, we find that financial hegemony groups are significantly important in international location decisions. Results reveal that the stability of financial hegemony in BRICS and G7 groups enhances the financial value of the Malaysia’s 30 largest companies, whereas the stability of financial hegemony in ASEAN groups is able to enhance the non-financial value of the firms. Overall, this paper suggests that in order to diversify globally, it is necessarily for the manager in the guest country to evaluate and fully understand the host country’s geopolitical situation and its financial stability.</p>

REVENUE DIVERSIFICATION AND BANKING RISK: DOES THE STATE OWNERSHIP MATTER? EVIDENCE FROM AN EMERGING MARKET

2020 ◽  
Vol 15 (04) ◽  
pp. 2050019
Author(s):  
GIANG THI HUONG VUONG ◽  
MANH HUU NGUYEN
Keyword(s):  
Commercial Banks ◽  
Emerging Market ◽  
Generalized Method Of Moments ◽  
State Ownership ◽  
The State ◽  
Least Square ◽  
Revenue Diversification ◽  
Income Diversification ◽  
Empirical Results ◽  
Banking Risk

Our paper investigates the influence of state ownership on the linkage between revenue diversification and risk of Vietnam domestic commercial banks in the period 2009–2018. By using the Generalized Method of Moments (GMM) estimation for a dynamic panel model, the empirical results indicate that Vietnamese domestic commercial banks with higher state equity are promoted to take more risks in the revenue diversification process. Our findings are robustly checked by a variety of measures of banking risk, income diversification, and state equity. Empirical results from our dynamic model are not only accordant with the previous findings of Batten and Vo [(2016). Bank risk shifting and diversification in an emerging market. Risk Management, 18(4), 217–235] estimated by Ordinary Least Square (OLS) regression on the positive relationship between banking risk and income diversification in Vietnamese domestic commercial banks but also provide new evidence on the tradeoff relationship between risk-return in the operating strategy of Vietnamese state-owned banks in the post-financial crisis. This paper proposes a framework for evaluating the nexus between revenue diversification and risk from the state ownership aspect in other frontier markets.

St. Petersburg Summit of the «Group of Twenty»

2014 ◽  
pp. 15-25
Author(s):  
D. Smyslov
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Financial Stability ◽  
Management Practices ◽  
Emerging Market ◽  
Action Plan ◽  
Tax Avoidance ◽  
Financial Education ◽  
Debt Management ◽  
Wide Range

«The Group of Twenty» is an informal forum for international cooperation between the leading developed states, the largest developing countries and emerging market economies. The article explores the key strategic approaches and governance decisions related to the main directions of international macroeconomic and financial regulation elaborated during the Russian chairmanship in the G-20 (December 2012 – December 2013) which culminated in the St. Petersburg summit. The author makes attempt to estimate viability of discussed approaches and decisions against the background of the actual problems of global economy. The author pays special attention to the St. Petersburg summit’s approaches to the problems of providing favorable conditions for strong and sustainable economic growth and of addressing unemployment. The point is how to achieve an acceptable compromise between the purposes of fiscal and monetary policies, on the one part, and providing balanced state budgets, as well as price stability, on the other part. Also, the importance of a wide range of radical structural reforms is stressed. The author argues that Russia proposed to vital themes to discuss at G-20 summit: long-term financing for investment as a foundation for economic growth and improvement of public debt management practices. The article describes the principal provisions of the Declaration and the Action plan related to various aspects of the reconstruction of financial and monetary system, including: tackling tax avoidance; implementing the Basel-3 standards, dealing with the adequacy of the bank’s capital; ending «too big to fail» problem; reforming over-the-counter (OTC) derivatives market; reducing reliance on the credit rating agencies; addressing potential risks for financial stability posed by the shadow banking; increasing financial inclusion, financial education and strengthening financial consumer protection; eliminating the international misbalances through broad based rebalancing of global demand; resisting of all forms of protectionism and promoting liberalization of global trade and investment; moving towards exchange rate flexibility to avoid persistent exchange rate misalignment; transforming the International Monetary Fund and Financial Stability Board. The author points to significant achievements of G-20 as a coordinating body for economic crisis management and, at the same time, discloses obstacles complicating its activities and development.

Consequences of corporate sustainability reporting: evidence from an emerging market

2020 ◽  
Vol 62 (3) ◽  
pp. 243-265
Author(s):  
RMNC Swarnapali
Keyword(s):  
Financial Reporting ◽  
Firm Value ◽  
Stock Exchange ◽  
Emerging Market ◽  
Earnings Quality ◽  
Corporate Sustainability ◽  
Market Value ◽  
Sustainability Reporting ◽  
Content Type ◽  
Sustainability Disclosure

Purpose The purpose of this paper is to discover whether corporate sustainability disclosure has a potential impact on the market value and earnings quality of firms in an emerging market. Design/methodology/approach The data were collected from 220 companies listed in the Colombo Stock Exchange (CSE) in Sri Lanka during the period 2012-2016. Firm value proxies by Tobin’s Q, while earnings quality proxies by discretionary accruals (DAC). The study is premised on value-enhancing theory for firm value and transparent financial reporting perspective for earnings quality. Regression analyses are executed on the panel data to achieve the study objectives. Findings The results reveal a positive relationship between sustainability reporting (SR) and firm market value, accepting the value-enhancing theory while rejecting the value-destroying theory. This finding suggests that investors pay a premium in the financial markets for firms that perform in an environmentally and socially responsible manner, compared to firms that do not perform in a similar manner. In the same vein, the results reveal that sustainability disclosure and DAC are negatively and significantly associated, resulting in high-quality earnings. The result is consistent with the transparent financial reporting hypothesis, which is also in line with the managers’ integrity motivation. Originality/value This is the first study investigating the consequences of SR that is specific to the Sri Lankan context. Owing to the sparse studies on consequences of SR, this study contributes significantly to the extant literature by broadening the geographical coverage to include a developing country setting.

Corruption and Firm Value: Evidence from Emerging Market Economies

2019 ◽  
pp. 1-16 ◽  
Author(s):  
Bhanu Pratap Singh Thakur ◽  
M Kannadhasan ◽  
Parikshit Charan ◽  
C. P. Gupta
Keyword(s):  
Firm Value ◽  
Emerging Market ◽  
Emerging Market Economies ◽  
Market Economies

Firm Value Effects of Web Site Redesign

2010 ◽  
pp. 20-41
Author(s):  
Raquel Benbunan-Fich ◽  
Eliezer M. Fich
Keyword(s):  
Information Technology ◽  
Firm Value ◽  
Web Site ◽  
Empirical Literature ◽  
Publicly Traded ◽  
Cross Sectional ◽  
Web Presence ◽  
Service Companies ◽  
Study Methodology ◽  
Commercial Organizations

The redesign of a Web site can be classified as both an information technology (IT) investment and an e-commerce initiative. Although the empirical literature provides evidence that financial markets are sensitive to e-commerce announcements, it is still unknown what types of announcements affect the value of firms. We use the event study methodology on a sample of Web site redesigns from 1995 to 1999 to investigate the types of commercial organizations that announce changes to their Web presence and to study whether such redesign initiatives affect the value of publicly traded firms. Our findings indicate that, on average, refining a Web presence does not produce significant firm valuation adjustments. However, cross-sectional analyses reveal that Web site redesign increases firm value in service companies.

Multiple banking relationships, agency costs and firm value: evidence from India

2019 ◽  
Vol 46 (1) ◽  
pp. 1-18 ◽  
Author(s):  
Nemiraja Jadiyappa ◽  
Bhanu Sireesha ◽  
L. Emily Hickman ◽  
Pavana Jyothi
Keyword(s):  
Firm Value ◽  
Fixed Effects ◽  
Emerging Market ◽  
Negative Relationship ◽  
Bank Lending ◽  
Free Rider ◽  
Content Type ◽  
Free Rider Problem ◽  
Banking Relationships ◽  
Prior Literature

Purpose Prior literature demonstrates that the effectiveness of bank monitoring decreases when multiple banks are involved, due to a free rider problem, leading to lower firm value. The purpose of this paper is to investigate whether this free rider problem exists in an emerging market context, and whether the relationship between multiple banking relationships and firm value is conditioned on bankers’ incentives to monitor. Design/methodology/approach The authors use multivariate panel regression to examine the hypotheses. The conditioning effect of the incentive to govern (the amount of average bank lending) is modeled using an interaction variable. Based on the result of the Hausman test, the authors employ two-way fixed effects estimator to estimate the coefficients. Findings First, the negative relationship between multiple banking relationships and firm value holds true among Indian firms. Second, the authors show that this negative relationship is lessened for firms with high average bank debt or higher free cash flows. The analyses suggest that these moderating effects are related to a reduction in the free rider problem rather than a decrease in financial constraints. However, these results are only significant among larger firms. Originality/value Prior literature has not considered the conditioning impact of the “incentives to govern” when examining the free rider problem, inherent in situations where multiple actors are involved. The authors show in this study that the free rider problem disappears when the incentives to govern are considered in the overall research framework.

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