Examining the Relationship Between Banking Competition and Solvency, Liquidity and Credit Risks in Pakistan

2020 ◽  
Vol 4 (1) ◽  
pp. 29-52
Author(s):  
Sheikh Muhammad Umer Farooq ◽  
Muhammad Zubair Mumtaz
Keyword(s):  
Credit Risk ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Banking Industry ◽  
Liquidity Risk ◽  
Foreign Banks ◽  
Banking Competition ◽  
Credit Risks ◽  
Private Banks ◽  
The Relationship

This study empirically examines the relationship between the banking competition and the risks faced by the financial sector (i.e. solvency, liquidity, and credit risks) considering 31 banks for the period 2001 to 2018. Banks are further sub-divided into three categories i.e. state-owned banks, foreign banks, and private/commercial banks. The results reveal that Pakistan’s banking industry is relatively elastic and an increase in competition is directly associated with solvency risk, liquidity risk and credit risk of financial institutions and these findings corroborate the competition fragility theory. Besides, state-owned banks have a lesser probability to cope with solvency risk, however, foreign banks appear to face the least liquidity risk whereas private banks appear to face the least credit risk among the entire cluster.

scholarly journals Does competition only impact on insolvency risk? New evidence from the Chinese banking industry

2017 ◽  
Vol 13 (3) ◽  
pp. 332-354 ◽  
Author(s):  
Yong Tan ◽  
John Anchor
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Banking Industry ◽  
Liquidity Risk ◽  
Empirical Literature ◽  
Content Type ◽  
Insolvency Risk ◽  
Chinese Banking Industry ◽  
The Impact ◽  
Chinese Banking

Purpose The purpose of this paper is to investigate the impact of competition on credit risk, liquidity risk, capital risk and insolvency risk in the Chinese banking industry during the period 2003-2013. Design/methodology/approach This study uses a generalized method of moments system estimator to examine the impact of competition on risk. In particular, translog specifications are used to measure the competition and insolvency risk. Findings The results show that greater competition within each bank ownership type (state-owned commercial banks, joint-stock commercial banks and city commercial banks) leads to higher credit risk, higher liquidity risk, higher capital risk, but lower insolvency risk. Originality/value This paper is the first piece of research testing the impact of competition on different types of risk in banking industry and it further contributes to the empirical literature by using a more accurate competition indicator (efficiency-adjusted Lerner index) and a more precise insolvency risk indicator (stability inefficiency).

scholarly journals Credit Information Sharing and Credit Risk Reduction in Kenya Commercial Banks

2016 ◽  
Vol 10 (1) ◽  
pp. 1941-1949
Author(s):  
Tabitha Nasieku ◽  
Rosemary Wanjiku Ngugi
Keyword(s):  
Credit Risk ◽  
Information Sharing ◽  
Risk Reduction ◽  
Financial Institutions ◽  
Commercial Banks ◽  
Theoretical Study ◽  
Financial Risks ◽  
Lending Policy ◽  
The Relationship

Financial Institutions are in the business of mobilizing and lending to borrowers and they assume various kinds of financial risks in the process of mobilizing and lending financial resources.This Theoretical study reviewed the literature to investigate the relationship between credit of information sharing and credit risk reduction in Kenya commercial banks. The literature found that the lending policy is periodically reviewed to reflect the prevailing conditions thus loan characteristics, considers an applicant's bank statements thus borrowers characteristics and the credit collection policy thus lenders characteristics before credit is advanced. The study recommends that banks should incorporate credit information sharing to reduce credit risk.

scholarly journals Impact of credit risk (NPLs) and capital on liquidity risk of Malaysian banks

2017 ◽  
Author(s):  
Yaman Hajja
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Positive Relationship ◽  
Liquidity Risk ◽  
Dynamic Panel Data ◽  
Bank Capital ◽  
Dynamic Panel ◽  
Macroeconomic Variables ◽  
The Impact ◽  
The Relationship

We investigate the relationship between bank liquidity risk and credit risk and the impact of bank capital on liquidity risk. Using 19 Malaysian commercial banks data over 2002-2011 and applying dynamic panel data GMM estimation after controlling for bank-specific and macroeconomic variables, empirical results document a positive relationship between liquidity and credit risk and a non-linear U-shaped relationship between bank capital and liquidity risk.

scholarly journals The relationship between liquidity risk and credit risk in Islamic banking industry of Iran

2013 ◽  
Vol 3 (4) ◽  
pp. 1223-1232 ◽  
Author(s):  
Hashem Nikomaram ◽  
Mehdi Taghavi ◽  
Somayeh Khalili Diman
Keyword(s):  
Credit Risk ◽  
Banking Industry ◽  
Liquidity Risk ◽  
Islamic Banking ◽  
The Relationship

scholarly journals Risk Management & Financial Performance of Commercial Banks in Pakistan

2020 ◽  
Vol 9 (1) ◽  
pp. 87-103
Author(s):  
Ghulam Saghir ◽  
Emad Tabassam Ch
Keyword(s):  
Panel Data ◽  
Credit Risk ◽  
Financial Performance ◽  
Financial Institutions ◽  
Cross Sections ◽  
Commercial Banks ◽  
Financial Risk ◽  
Developing Economies ◽  
Liquidity Risk ◽  
The Impact

The main objective of this study is to find out how, the two different types of risks,i.e. Liquidity Risk & Credit Risk,affect the overall profitability/financial performance of commercial banks in Pakistan. We used methods that were applicable on a panel data for long run and short run time specifications. Thirty-three scheduled banks listed with the SBP,as of December 2018 have been used for the purpose of the data analysis. The panel data that is used for this study stretches across a period of 10 years,with 33 cross sections. The findings of this current study revealed that the financial performance of the banks present in Pakistan is negatively,and significantly influenced by the credit risk. In addition to this, it was revealed that the lesser the non-performing loans, the lower the risk factor that is experienced. The financial risk comprising of credit risk and liquidity risk tends to have a significantly robust impact on the overall enactment of the commercial banks in Pakistan. This study will prove beneficial for the top management of the financial institutions developing economies, as it will enhance their existing knowledge regarding the impact of financial risk, which will eventually infiltrate into the intensity and quality of the financial performance of the banks. This will also enable banks, and other financial institutions to involve all the relevant stakeholders,in order to determine how they can minimize the effects of the financial risk,so as to maximize the overall returns.

scholarly journals The Effect of Liquidity Risk and Credit Risk on the Bank Performance: Empirical Evidence from Iraq

2021 ◽  
Vol 3 (1) ◽  
pp. 58-67
Author(s):  
Noor Hashim Mohammed Al-Husainy ◽  
Hamid Mohsin Jadah
Keyword(s):  
Credit Risk ◽  
Commercial Banks ◽  
Fixed Effects ◽  
Stock Exchange ◽  
Liquidity Risk ◽  
Bank Performance ◽  
Bank Profitability ◽  
Dynamic Panel Model ◽  
Credit Risks ◽  
Generalized Methods Of Moments

The main objective of this paper is to study the effect of liquidity risk and credit risk on the profitability of commercial banks in Iraq. The sample is 18 private commercial banks listed in Iraqi Stock Exchange for six years for the period 2010 to 2020. This paper especially focuses on Iraqi commercial private Banks. The dependent variable is bank performance is measured by return on asset (ROA) and independent variables are, liquidity risks, credit risks. This paper employs a dynamic panel model, using Generalized Methods of Moments (GMM) panel data regression of Fixed-effects models. Furthermore, the findings illustrate that liquidity risk has a positive significant association with bank profitability. Meanwhile, credit risk has an adverse significant association with bank profitability. This paper contributes to the debate of risk management as well as determinants of bank performance from several dimensions. First, this study is the first to investigate the impacts of liquidity risks on bank performance in Iraq. Secondly, this is the first study that investigates the impacts of credit risks on bank performance in Iraq. It is hoped that the result of this paper can fill the gap of the literature on the association between liquidity risks, credit risks, and bank performance.

scholarly journals Historical Trends and Transitions in Credit Risk Management of Chinese Commercial Banks

2018 ◽  
Vol 9 (5) ◽  
pp. 96
Author(s):  
Bhabani Shankar Nayak ◽  
Jia Xu
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Foreign Banks ◽  
Credit Risk Management ◽  
Historical Trends ◽  
Credit Management ◽  
Credit Risks ◽  
History Of ◽  
Managing Risk

The paper outlines different trends and transitions in the history of credit risk management of Chinese commercial banks. By critically reviewing different stages of credit management and its historical evolution, it helps in understanding the nature of subjective challenges faced by Chinese commercial banks to manage credit risks. It reviews post reform policies in particularly after 1978 to locate the policy transitions and trajectories of credit risk management of commercial banks in China. It helps to understand the problems and prospects of effective credit management of risks by Chinese commercial banks. It argues that Chinese commercial banks are facing greater challenges in managing risk after the entry of foreign banks to China. Therefore, it is important for the commercial banks in China to develop its own credit management mechanisms within the context of Chinese banking environment.

scholarly journals The Relationship of Credit Risk to Liquidity and its Reflection in Achieving the Profitability Target

2017 ◽  
Vol 1 (1) ◽  
pp. 38-59
Author(s):  
Alaa Farhan Talib ◽  
Saadi Ahmed Hamid ◽  
Sabah Hassan Abd AlAkeil
Keyword(s):  
Credit Risk ◽  
Strong Correlation ◽  
Commercial Banks ◽  
Liquidity Risk ◽  
Financial Ratios ◽  
Bank Profitability ◽  
Relationship Of ◽  
The Relationship

This study attempts to show the relationship between the credit risk in liquidity and the reflection of that relationship in achieving the goal of banking profitability. A group of financial ratios was used for the sample banks to conduct the analysis. The study included a sample of Iraqi commercial banks for the period 2011-2015. There is a strong correlation between the two variables (credit and liquidity risk) and a reflection of that relationship also in achieving the goal of bank profitability.

scholarly journals Integrative Leadership is a Precursor of Engagement of Bank Employees in Pakistan

2017 ◽  
Vol 7 (3) ◽  
pp. 257
Author(s):  
Sanober Salman Shaikh ◽  
Chiraprapha Akaraborworn
Keyword(s):  
Employee Engagement ◽  
Quantitative Research ◽  
Sampling Method ◽  
Final Analysis ◽  
Foreign Banks ◽  
Private Banks ◽  
Bank Employees ◽  
The Difference ◽  
Integrative Leadership ◽  
The Relationship

The purpose of this study was twofold: to examine the relationship and determine the predictive power of integrative leadership on employee engagement. To achieve the mentioned objectives, the quantitative research method was employed and data was collected through survey questionnaire from 1000 operational employees of all 21 private banks in Pakistan. The sample of 819 respondents was utilized for final analysis. Two stage sampling method was performed; non- probability sampling and stratified random sampling. The data analysis was done by use of correlation and multiple regression. The result indicated a positive correlation among all of the nine constructs of integrative leadership with employee engagement and the six constructs of integrative leadership significantly predicted employees’ engagement in private banks in Pakistan. Additionally, analysis of variance was performed to assess the differences in employee engagement among the respondents’ demographic characteristics. The ANOVA result showed that the employees working in a conventional and Islamic bank and age 49 and above group, predicted a difference only in the satisfaction dimension of employee engagement. Furthermore, the current bank experience indicated the difference in overall employee engagement. This study adds value to the literature as it contributes empirical evidence on integrative leadership and employee engagement. This study can be helpful for private banks, also for public & foreign banks and other organizations in Pakistan in adopting integrative leadership for enhancing employee engagement. 

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