scholarly journals The Impact of Liberalization on Determinants of Bank Efficiency: Evidence from Malaysian Commercial Banks

2021 ◽  
Vol 39 (12) ◽  
Author(s):  
Yue Ma ◽  
Wei Ni Soh
Keyword(s):  
Credit Risk ◽  
Market Power ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Efficiency Score ◽  
Vital Role ◽  
Bank Efficiency ◽  
Panel Regressions ◽  
The Impact

This paper aims to examine the impact of liberalization in 2009 on the determinants of bank efficiency in Malaysia by employing a two-stage approach within the context of the growing number of foreign commercial banks. Commercial banks can play a vital role in the internationalization and diversification of Malaysia's financial sector. In the initial stage, measuring the efficiency score of 19 commercial banks throughout 2008 to 2019 by using the Data Envelopment Analysis (DEA). Multivariate panel regressions were then used to determine the impact of liberalization on the determinants of bank efficiency in 2009. As a result, domestic commercial banks seem to be more competitive than their foreign counterparts. The findings signify that bank size, market power, capitalization, and liquidity all have a positive impact on technical efficiency. However, credit risk, bank diversification, and inflation all have a negative impact. The control of the effects of liberalization, bank size, capitalization, bank’s market power, and liquidity remain positive. However, bank diversification and inflation flip negative to positive, whereas credit risk becomes less explanatory. The findings will provide bank stakeholders, regulators, investors, and regulators with important insights into the impact of liberalization measures on bank efficiency and its determinants.

scholarly journals Banking Competition and Efficiency: The Case of Vietnamese Banking Industry

2020 ◽  
Vol 11 (2) ◽  
pp. 453
Author(s):  
Long Hau Le ◽  
Truong An Duong ◽  
Tan Nghiem Le
Keyword(s):  
Market Power ◽  
Commercial Banks ◽  
Banking Industry ◽  
Negative Impact ◽  
Positive Impact ◽  
Market Competition ◽  
Annual Reports ◽  
Bank Efficiency ◽  
Empirical Results ◽  
The Impact

This paper is to investigate the impact of competition on the efficiency of the banking industry in Vietnam. Data are collected from the audited annual financial statements and the annual reports of 30 commercial banks during the period of 2010 – 2017. Lerner index is used to measure the market power of bank, while Data Envelope Analysis is employed to estimate the technical efficiency of bank. The impact of competition on the operational efficiency of commercial banks is estimated by Panel Vector Autoregressive model (PVAR). The empirical results seem to indicate that there is a positive impact of competition on the bank efficiency, which is in line with the “quiet-life” hypothesis. However, the statistical test does not confirm this at the traditional levels. Interestingly, the empirical results demonstrate a negative impact of bank efficiency on the market power of bank, and hence market competition. While this result shares the causality dimension with the “efficient structure” hypothesis, it presents an opposite sign on the causality. All these findings could be explained by the real situations and typical characteristics of the economy of Vietnam. This study has important implications for both researchers and practioners.

Banking market structure and efficiency: an assessment of the USA and Canada

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Salah U-Din ◽  
David Tripe
Keyword(s):  
Market Structure ◽  
Market Power ◽  
Negative Impact ◽  
Positive Impact ◽  
Bank Efficiency ◽  
Content Type ◽  
Frontier Analysis ◽  
Banking Market ◽  
Cost Efficient ◽  
The Impact

PurposeThe study aims to analyze the changes in banking market structure and their impact on the bank efficiency.Design/methodology/approachThis study uses a one-stage stochastic frontier analysis (SFA) to compare the impact of the market structure and the GFC on the economic efficiency of the major banks in both countries.FindingsA significant negative impact of the GFC is observed on bank efficiency. Overall, Canadian banks posted better efficiency scores than their American counterparts. Additionally, cost-efficient banks are found to be more resilient to crises and more profit-efficient in the post-GFC period. The authors found that market power had a positive impact on the cost and profit efficiency of banks. Higher levels of equity, market power and concentration helped banks be more cost-efficient.Research limitations/implicationsOnly large banks are selected for study although it represents the majority stake of both banking sectors.Practical implicationsBanking regulators should include more measures to assess the banking market structure and performance.Originality/valueAs per the best knowledge of the authors, it is the first study to assess the change in banking market structure and efficiency of the US and Canadian banking sectors in the post-GFC period.

scholarly journals IMPACT OF CREDIT RISK ON PROFITABILITY OF COMMERCIAL BANKS IN NEPAL

2018 ◽  
Vol 3 (6) ◽  
pp. 161
Author(s):  
Shiva Raj Poudel
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Panel Data Analysis ◽  
Fixed Effect Model ◽  
Capital Adequacy ◽  
Return On Equity ◽  
Significant Negative Impact ◽  
The Impact

The main purpose of the study was to examine the impact of credit risk on profitability of the commercial banks in Nepal. Data were collected from the sample of 15 commercial banks operated in Nepali economy for the period of 2002/03 to 2014/15. One way Fixed Effect Model (FEM) of panel data analysis is used as a major tool of analysis. The profitability of the commercial banks is measured in terms of return on equity and is regressed on bank specific variables and macro-economic variables. The results confirmed that credit risk has the significant negative impact on profitability of commercial banks in Nepal. In addition, solvency ratio, interest spread rate, and inflation have the insignificant negative impact on profitability. In contrast, capital adequacy ratio, total assets, and GDP growth have the significant positive impact on profitability of commercial banks in Nepal. Finally, inter-bank interest rate has insignificant positive impact on profitability.

scholarly journals Determinants of Non-Performing Loan in Nepalese Commercial Banks

2017 ◽  
pp. 22-38 ◽  
Author(s):  
Seema Bhattarai
Keyword(s):  
Exchange Rate ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Percent Level ◽  
Real Effective Exchange Rate ◽  
Macroeconomic Variables ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

The non-performing loans (NPL) of financial institutions are considered as a significant issue in the context of Nepal for last few decades. The paper aims to identify the impact of macroeconomic variables (GDP, Inflation, and Real Effective Exchange Rate) and bank specific variables (size, change in loan, real lending rate of interest, and share of loan to total assets) on the non-performing loan of the commercial banks in Nepal. The study was conducted mainly with secondary sources. The data were collected for 26 commercial banks covering the period of 2002-2012 with 227 observations. The study found that macroeconomic variables such as the real effective exchange rate have significantly negative impact on non-performing loan. The impact of GDP growth rate was found to be insignificant in this study. One year lagged inflation rate has significant positive impact on non-performing loan. The banks which charge relatively higher real interest rate have higher non-performing loan, which is consistent with the findings of previous studies. The ownership dummy has positive coefficient and significant at one percent level showing that if the bank is government owned the non-performing loan would be higher than that of the private owned banks. As well, more lending in the previous years and current year reduces the non-performing loan since the coefficient of change in loan in current and previous years have negative coefficient and significant at one percent level.Economic Journal of Development Issues Vol. 19 & 20 No. 1-2 (2015) Combined Issue, Page: 22-38

Fuzzy C-means based data envelopment analysis for mitigating the impact of units’ heterogeneity

Kybernetes ◽  
2016 ◽  
Vol 45 (3) ◽  
pp. 536-551 ◽  
Author(s):  
Seyed Hossein Razavi Hajiagha ◽  
Shide Sadat Hashemi ◽  
Hannan Amoozad Mahdiraji
Keyword(s):  
Decision Making ◽  
Data Envelopment Analysis ◽  
Negative Impact ◽  
Positive Impact ◽  
Efficiency Score ◽  
Data Envelopment ◽  
Content Type ◽  
Fuzzy C Means ◽  
The Impact ◽  
Decision Making Units

Purpose – Data envelopment analysis (DEA) is a non-parametric model that is developed for evaluating the relative efficiency of a set of homogeneous decision-making units that each unit transforms multiple inputs into multiple outputs. However, usually the decision-making units are not completely similar. The purpose of this paper is to propose an algorithm for DEA applications when considered DMUs are non-homogeneous. Design/methodology/approach – To reach this aim, an algorithm is designed to mitigate the impact of heterogeneity on efficiency evaluation. Using fuzzy C-means algorithm, a fuzzy clustering is obtained for DMUs based on their inputs and outputs. Then, the fuzzy C-means based DEA approach is used for finding the efficiency of DMUs in different clusters. Finally, the different efficiencies of each DMU are aggregated based on the membership values of DMUs in clusters. Findings – Heterogeneity causes some positive impact on some DMUs while it has negative impact on other ones. The proposed method mitigates this undesirable impact and a different distribution of efficiency score is obtained that neglects this unintended impacts. Research limitations/implications – The proposed method can be applied in DEA applications with a large number of DMUs in different situations, where some of them enjoyed the good environmental conditions, while others suffered from bad conditions. Therefore, a better assessment of real performance can be obtained. Originality/value – The paper proposed a hybrid algorithm combination of fuzzy C-means clustering method with classic DEA models for the first time.

scholarly journals Relationship Between Capital Structure and Stock Returns of Jordanian Commercial Banks

2020 ◽  
Vol 13 (2) ◽  
pp. 100
Author(s):  
Sufian Radwan Al-Manaseer
Keyword(s):  
Capital Structure ◽  
Stock Returns ◽  
Firm Size ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
The Impact ◽  
The Relationship

This study aims to analyze the relationship between capital structure and stock returns of Jordanian banks listed on the Amman Stock Exchange from 2009 to 2018. The study sample is composed of 13 commercial banks in Jordan. The e-views program is used to conduct the statistical analysis of study variables. Initially, a simple linear regression analysis is conducted to determine the impact of capital structure as measured by financial leverage on stock returns and vice versa. Then, several control variables are added: growth in assets, liquidity, firm size, and profitability. This study has found that growth, capital structure, and profitability have a positive impact on stock returns. By contrast, liquidity and firm size have a negative impact on stock returns. Stock returns and firm size have a positive impact on capital structure, whereas liquidity, growth, and profitability have a negative impact on capital structure.

scholarly journals Factors may drive the commercial banks lending: evidence from Jordan

2017 ◽  
Vol 12 (2) ◽  
pp. 31-38 ◽  
Author(s):  
Ayman Mansour Khalaf Alkhazaleh
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Negative Impact ◽  
Bank Lending ◽  
Time Frame ◽  
Least Square ◽  
Financial Reports ◽  
Ordinary Least Square ◽  
Statistical Effect ◽  
The Impact

In an attempt to shed more light on the behavior of lending in banks, especially in the environment of developing countries, this study aims at explaining the impact of some factors proposed as determinants of bank lending in Jordanian commercial banks by benefiting from the financial reports of thirteen banks during the period 2010-2016. The study, in order to achieve the objectives and to test the main hypotheses has adopted Ordinary least square model (OLS). The most important results of the study are a statistically significant adverse effect of both credit risk and liquidity on bank lending, while there is a significant positive effect of the return on assets, size of the bank measured by assets, inflation, money supply and growth in gross domestic product in determining the level of lending. In addition, the study does not show a significant statistical effect between investments, the volume of deposits and bank lending in the same time frame. The review points out that because of the negative impact of liquidity and credit risk factors, commercial banks need to focus more on reducing their impact because presence of this impact at the end will decrease the ability of these banks to provide loans and stay in the banking market.

scholarly journals Evolution of the Efficiency of Nationwide Commercial Banks in China Based on an SBM-Undesirable Model and DEA Window Analysis

2020 ◽  
Vol 2020 ◽  
pp. 1-12
Author(s):  
Lei Guo ◽  
Sanggyun Na ◽  
Xianhua Tan ◽  
Pengfei Gui ◽  
Congchong Liu
Keyword(s):  
Technical Efficiency ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Threshold Model ◽  
Influential Factors ◽  
Financial Industry ◽  
Bank Efficiency ◽  
Window Analysis ◽  
Income Ratio

In recent years, Chinese economic development has slowed down and competition in the financial industry has become increasingly fierce. The purpose of this paper is to study the efficiency characteristics of China’s banking industry in the new environment and provide suggestions for banks to improve efficiency. This paper uses a data envelopment analysis (DEA) SBM-undesirable model and window analysis to measure the technical efficiency of 13 nationwide commercial banks in China during the period from 2008 to 2017. Furthermore, the convergence characteristics of bank technical efficiency are examined. The empirical results show that state-owned banks were more efficient than joint stock banks before 2012. After 2012, state-owned banks were less efficient than joint stock banks. Finally, this paper explores the influential factors of technical efficiency. Noninterest income ratio, net interest margin, growth rate of total investment in fixed assets, and consumer price index have a significant positive impact on bank efficiency. The cost-to-income ratio has a significant negative impact on bank efficiency. Further research using the threshold model shows that noninterest income ratio has a threshold effect on bank efficiency.

scholarly journals ASSESSMENT OF CREDIT RISK IN NEPALI COMMERCIAL BANKS

2018 ◽  
Vol 3 (3) ◽  
pp. 65 ◽  
Author(s):  
Shiva Raj Poudel
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Panel Data Analysis ◽  
Fixed Effect Model ◽  
Capital Adequacy ◽  
Gdp Growth ◽  
Capital Adequacy Ratio

The main objective of the study is to identify the major indicators of credit risk among the Nepali commercial banks. The study is conducted using the sample of 15 commercial banks operated in Nepali economy. One way Fixed Effect Model (FEM) of panel data analysis is used as a major tool of analysis. All the data for the study were obtained from the database of Nepal Rastra Bank for bank specific variables and database of World Bank for macroeconomic variables for the year 2002/03 to 2014/15. The credit risk among the commercial banks in Nepal was regressed on bank specific variables such as liquidity, capital adequacy ratio, bank size, and interest spread. Similarly, the effects of macro-economic variables such as GDP growth, rate of inflation and interbank interest rate were also examined along with bank specific variables in identifying credit risk in Nepali commercial banks. The study reveals that liquidity has the significant positive impact on credit risk in Nepali commercial banks. In contrast, capital adequacy ratio and interest spread have the significant negative impact on credit risk. The analysis further confirmed that bank size and interest spread both have no any clear direction of impact on credit risk. Moving towards the GDP growth, credit risk in Nepali commercial banks is negatively fluctuates with GDP growth, however, the statistics show the coefficients are insignificant at 5% level. Contrarily, Inter-bank interest rate has insignificant negative impact on credit risk in Nepali commercial banks.

scholarly journals Impacts of Financial Inclusion on Non-Performing Loans of Commercial Banks: Evidence from China

2018 ◽  
Vol 10 (9) ◽  
pp. 3084 ◽  
Author(s):  
Feng-Wen Chen ◽  
Yuan Feng ◽  
Wei Wang
Keyword(s):  
Financial Crisis ◽  
Credit Risk ◽  
Commercial Banks ◽  
Local Governments ◽  
Banking Sector ◽  
Negative Impact ◽  
Financial Inclusion ◽  
Financial Industry ◽  
Asset Quality ◽  
The Impact

Non-performing loans of commercial banks have long hampered the development of the banking sector, and directly reflect the credit risk and asset quality. With the continuous development of the financial industry, the introduction of financial inclusion has greatly eased the shortage of funds, and narrowed the gap between poor and rich. However, whether the promotion of financial inclusion in the financial industry could affect the non-performing loans of commercial banks has not been verified. Therefore, this paper discusses the possible associations between financial inclusion and non-performing loans of commercial banks on the regional level, constructs a panel data model by selecting the data of 31 provinces (including 4 municipalities) in China from 2005 to 2016, and uses the fixed effect model for empirical test. The empirical results (from an overall national sample) reveal a negative impact of the financial inclusion on non-performing loans. Moreover, the development of the banking sector and the regional consumption could enhance the impact of financial inclusion, while government intervention and unemployment could reduce the impact of financial inclusion. From the analysis of the regional sample, when the development of financial inclusion reaches a high level, the lagged financial inclusion promote the non-performing loans of commercial banks; however, when the financial inclusion is underdeveloped, the development of commercial banks act as a disincentive to non-performing loans. Therefore, the local governments should pay more attention to the influences of financial inclusion on the financial industry, in order to maintain the stability of banking asset quality. In addition, the negative impact of financial inclusion on non-performing loans of commercial banks is significant in China central region, while its impacts in China eastern and western regions are not significant. This indicates that the development of the financial industry and economy can hamper the effects of financial inclusion. It is necessary to adjust the financial resource allocation according to the characteristics of different regions in China, so that the financial inclusion can effectively promote the regional financial industry upgrade, improve regional capital flow efficiency, and fundamentally reduce the non-performing loans of commercial banks. According to the sample analysis by time, there is a significant negative impact relationship between inclusive finance and commercial banks’ non-performing loans after the financial crisis, while the impacts before and during the financial crisis are not significant. This demonstrates that the impact of the global financial crisis on China’s regional economy has further enhanced the inefficiency of the inclusive financial system on credit risk, which in turn, helps commercial banks better maintain asset quality stability.

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