scholarly journals Bank Transparency and Risk Taking: Empirical Evidence from Tunisia

2016 ◽  
Vol 8 (5) ◽  
pp. 111 ◽  
Author(s):  
Raoudha Dhouibi ◽  
Abir Mabrouk ◽  
Emna Rouetbi
Keyword(s):  
Risk Taking ◽  
Voluntary Disclosure ◽  
Stock Exchange ◽  
Banking System ◽  
Market Discipline ◽  
Capital Adequacy ◽  
Financial Accounting ◽  
Necessary Condition ◽  
Basel Accord ◽  
The Impact

<p>An important unresolved issue in finance is the extent to which bank transparency promotes or undermines banking risk-taking. Financial accounting information is an essential component of transparency and a necessary condition for market discipline. This latter can be conceptualized as a market-based incentive scheme with which investors in banking securities penalize banks for greater risk-taking by asking for higher returns on their investments. However, in developing countries, where financial markets are insufficiently developed, the role of market discipline in limiting banks’ risk-taking may be restricted.</p>This paper examines the impact of transparency, as measured by voluntary disclosure of financial information, on the fragility of Tunisian banks. This study is motivated by the decision of the Central Bank of Tunisia to implement the directives of the second Basel Accord to improve the soundness and the safety of the Tunisian banking system. We examine a sample of ten Tunisian banks listed on the Stock Exchange of Tunis over the period 2000-2011. The results show that transparency has no effect on Tunisian banks’ risk-taking. Similarly, the results indicate that the capital adequacy ratio has no effect on the non-performing loans rate. These results may undermine the effectiveness of the guidelines of the Basel Committee agreements to reduce risk-taking by Tunisian banks.

scholarly journals The Impact of BASEL Accords on the Management of Vietnamese Commercial Banks

2020 ◽  
Vol 13 (10) ◽  
pp. 228
Author(s):  
Hai Long Pham ◽  
Kevin James Daly
Keyword(s):  
Risk Management ◽  
Commercial Banks ◽  
Value At Risk ◽  
Banking System ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Equation Modeling ◽  
Least Squares Regression ◽  
Basel Accord ◽  
The Impact

This paper is an attempt to empirically examine the impact of Basel Accord regulatory guidelines on the risk-based capital adequacy regulation and bank risk management of Vietnamese commercial banks. Our research aims to assess how Vietnamese commercial banks manage their capital ratio and bank risk under the latest Basel Accord capital adequacy ratio requirements. Building on previous studies, this research uses a simultaneous equation modeling (SiEM) with three-stage least squares regression (3SLS) to analyze the endogenous relationship between risk-based capital adequacy standards and bank risk management. A year dummy variable (dy2013) is included in the model to take account of changes in the regulation of the Vietnamese banking system. Furthermore, we add a value-at-risk variable developed by as an independent variable into equations of the empirical models. The results reveal a significant impact of Basel capital adequacy regulatory pressure on the risk-based capital adequacy standards and bank risk management of Vietnamese commercial banks. Moreover, banks under the latest Basel capital adequacy regulations are induced to reduce risks and increase banks’ financial performance.

scholarly journals The Impact of Market Discipline on Banks’ Capital Adequacy: Evidence From an Emerging Economy

2015 ◽  
Vol 4 (1) ◽  
pp. 61-73 ◽  
Author(s):  
Ayesha Afzal
Keyword(s):  
Perceived Risk ◽  
Banking System ◽  
Empirical Support ◽  
Market Discipline ◽  
Capital Adequacy ◽  
Risk Level ◽  
Bank Capital ◽  
The Cost ◽  
The Impact

This study presents empirical support for the role of market discipline in augmenting bank capital ratios in a competitive banking environment. Using a panel dataset on domestic commercial banks in Pakistan from 2009 to 2014, the study determines if the market penalized banks for any increase in their risk profile through a rise in the cost of raising funds. The results point to a significant relationship between capital adequacy and other risk factors, with the cost of deposits demonstrating how depositors align the required return to the perceived risk level of the bank. These findings have important implications for policymakers as market discipline could complement the role of regulators, which would eventually lower the cost of supervision. Moreover, the focus of international reforms as seen through the implementation of Basel III should continue to be on developing a more competitive and transparent banking system.

scholarly journals NBU'S influence on economic growth through bank capital regulations

2020 ◽  
Vol 93 (8) ◽  
pp. 47-56
Author(s):  
L. Sus ◽  
◽  
Yu. Sus ◽  
M. Sapatsinsky ◽  
S. Cherepansky ◽  
...  
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Banking System ◽  
Developed Countries ◽  
Capital Adequacy ◽  
Necessary Condition ◽  
Bank Capital ◽  
Regulatory Capital ◽  
Banking Institutions ◽  
The Impact

In crisis situations, stable and efficient functioning of banking institutions is a necessary condition for country’s economic growth. Capitalization is one of the important factors that creates a positive impact of the domestic banking system on economic development. The purpose of the study is to substantiate the patterns and differences in the strength and nature of the impact of capital adequacy requirements on the financial and economic development of countries. The key tasks include: research of capitalization indicatorsof the banking system of Ukraine; identification of the impact of bank capital adequacy on the financial and economic development of individual European countries and other highly developed countries. The research methods were: theoretical -study of foreign and domestic scientific literature, materials and publications, and empirical -measurement, comparison, grouping, rating, correlation and regression analysis.The article analyzes the essence of the concept of "bank capital" and identifies the peculiarities of its formation. The dynamics of equity and authorized capital of Ukrainian banks in recent years has been studied and the capitalization indicators of the banking system have been calculated. The structure of bank capital in terms of banking groups is presented. The share of equity of the largest banks in the banking system of Ukraine is calculated. The banks were grouped by the amount of capital in order to identify those banking institutions that need further additional capitalization. Prospects for the development of sources of growth of bank capital of state, foreign and private banks of Ukraine are analyzed and evaluated. The economic standards of the NBU (size of regulatory capital, adequacy of regulatory capital, adequacy of fixed capital) are characterized and the dynamics of regulatory capital indicators is presented. The rating of banks in Ukraine according to the highest and lowest indicator of regulatory capital adequacy is built. The results of the correlation between the capital of the banking system and the financial and economic indicators of development of a number of European and other highly developed countries are presented. The regularities and differences of the influence of banks' capital adequacy on the financial and economic development of countries using the method of correlation-regression analysis are characterized.Prospects for further research in this area are the improvement of existing or development of new economic and mathematical models to determine the forecast indicators of financial and economic development of the country when changing the supervisory requirements for capital adequacy of banks.

scholarly journals Assessing the Impact of Corporate Governance Index on Financial Performance in the Romanian and Italian Banking Systems

2021 ◽  
Vol 13 (10) ◽  
pp. 5535
Author(s):  
Marco Benvenuto ◽  
Roxana Loredana Avram ◽  
Alexandru Avram ◽  
Carmine Viola
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Banking Sector ◽  
Research Question ◽  
Interactive Effect ◽  
Banking System ◽  
Capital Adequacy ◽  
Banking Systems ◽  
Governance Index ◽  
The Impact

Background: Our study aims to verify the impact of corporate governance index on financial performance, namely return on assets (ROA), general liquidity, capital adequacy and size of company expressed as total assets in the banking sector for both a developing and a developed country. In addition, we investigate the interactive effect of corporate governance on a homogenous and a heterogeneous banking system. These two banking systems were chosen in order to assess the impact of corporate governance on two distinct types of banking system: a homogenous one such as the Romanian one and a heterogeneous one such as the Italian one. The two systems are very distinct; the Romanian one is represented by only 34 banks, while the Italian one comprises more than 350 banks. Thus, our research question is how a modification in corporate governance legislation is influencing the two different banking systems. The research implication of our study is whether a modification in legislation, thus in the index of corporate governance, is feasible for two different banking sectors and what the best ways to increase the financial performance of banks are without compromising their resilience. Methods: Using survey data from the Italian and Romanian banking systems over the period 2007–2018, we find that the corporate governance has a significant, positive and long-lasting effect on profitability and capital adequacy in both countries. Results: Taking the size of the company into consideration, the impact of the Index of Corporate Governance (ICG) on a homogenous banking system is positive while the impact on a heterogeneous banking system is negative. Conclusions: Our study provides evidence of the impact of IGC on financial performance and sheds light on the importance of the size of the company. Therefore, one can state that the corporate governance principles applied do not encourage the growth of large banks in heterogeneous banking sectors, thereby suggesting new avenues of research associated with new perspectives.

Shareholder risk-taking incentives in the presence of contingent capital

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahmoud Fatouh ◽  
Ayowande A. McCunn
Keyword(s):  
Risk Taking ◽  
Banking System ◽  
Capital Requirements ◽  
Content Type ◽  
Basic Model ◽  
Conversion Rates ◽  
A Minor ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to present a model of shareholders’ willingness to exert effort to reduce the likelihood of bank distress and the implications of the presence of contingent convertible (CoCo) bonds in the liabilities structure of a bank. Design/methodology/approach This study presents a basic model about the moral hazard surrounding shareholders willingness to exert effort that increases the likelihood of a bank’s success. This study uses a one-shot game and so do not capture the effects of repeated interactions. Findings Consistent with the existing literature, this study shows that the direction of the wealth transfer at the conversion of CoCo bonds determines their impact on shareholder risk-taking incentives. This study also finds that “anytime” CoCos (CoCo bonds trigger-able anytime at the discretion of managers) have a minor advantage over regular CoCo bonds, and that quality of capital requirements can reduce the risk-taking incentives of shareholders. Practical implications This study argues that shareholders can also use manager-specific CoCo bonds to reduce the riskiness of the bank activities. The issuance of such bonds can increase the resilience of individual banks and the whole banking system. Regulators can use restrictions on conversion rates and/or requirements on the quality of capital to address the impact of CoCo bonds issuance on risk-taking incentives. Originality/value To model the risk-taking incentives, authors generally modify the asset processes to introduce components that reflect asymmetric information between CoCo holders and shareholders and/or managers. This paper follows a simpler method similar to that of Holmström and Tirole (1998).

scholarly journals Use and Limitations of the Reserve Requirement Policy in Montenegro

2014 ◽  
Vol 3 (2) ◽  
pp. 5-20
Author(s):  
Velibor Milošević
Keyword(s):  
Economic Activity ◽  
Positive Impact ◽  
Stock Exchange ◽  
Banking System ◽  
Policy Instrument ◽  
Transmission Mechanism ◽  
Demand Model ◽  
Reserve Requirement ◽  
Lending Activity ◽  
The Impact

Abstract Since reserve requirement is the only monetary policy instrument used in Montenegro, it has been subject to frequent amendments since the global crisis outbreak. The analysis of the monetary demand model showed that there is an active transmission mechanism of change in the reserve requirement rate on the deposits trend reflects on lending activity. Also, there is a significant impact of FDIs on deposits trending in the banking system, as well as the positive impact of turnover on stock exchange on the deposits and loans trend. Finally, it was found that the financial crisis has caused negative trends in loans and deposits. On the other hand, the impact of changes in the reserve requirement on the economic activity in Montenegro could not be determined. This is primarily due to the fact that the transmission mechanism of the effect of reserve requirement on economic activity is too long to be able to estimate the model that does not allow the dynamics of the independent variables. The second reason is that industrial output index is only an indirect indicator of the economic activity.

scholarly journals The Impact of the Application of International Standard for Financial Reporting No (9) on the Faithful Representation of Financial Accounting Information in Jordanian Commercial Banks

2019 ◽  
Vol 14 (3) ◽  
pp. 88
Author(s):  
Amer Sulaiman Alkhresat ◽  
Tareq Hammad Almubaydeen
Keyword(s):  
Financial Reporting ◽  
Commercial Banks ◽  
Stock Exchange ◽  
Accounting Information ◽  
Correlation Coefficients ◽  
Study Data ◽  
Financial Accounting ◽  
Faithful Representation ◽  
Ifrs 9 ◽  
The Impact

The purpose of this study is to demonstrate the impact of the application of IFRS 9 on the faithful representation of financial accounting information in Jordanian commercial banks. To achieve this objective, the study used the descriptive analytical approach to analyze a questionnaire that was answered by the managers of 13 commercial banks, which are listed in Amman stock exchange. The researchers distributed 78 questionnaires, while 76 were retrieved with a percentage of 97%. Additionally, the study relied on the descriptive statistics, correlation coefficients, and the simple regression to analyze the study data, and hypotheses. As a result, the study found a significant impact for the application of IFRS 9 to the faithful representation of financial accounting information. Relied on the aforementioned consequence, the study recommended that there is a necessity for financial departments to focus on measuring their financial obligations, as well as focusing on the development of accounting policies during the application of the standard. In addition, the study concludes that it is important for these banks to have an adequate knowledge of accounting standards in general, while standard No &ldquo;9&rdquo; specifically.

Capital regulation, competition and risk-taking behavior of Indian banks in a simultaneous approach

2018 ◽  
Vol 44 (4) ◽  
pp. 459-477 ◽  
Author(s):  
Santi Gopal Maji ◽  
Preeti Hazarika
Keyword(s):  
Human Capital ◽  
Risk Taking ◽  
Value Added ◽  
Capital Adequacy ◽  
Bank Risk ◽  
Capital Regulation ◽  
Content Type ◽  
Risk Taking Behavior ◽  
Indian Banks ◽  
The Impact

Purpose The purpose of this paper is to investigate the association between capital regulation and risk-taking behavior of Indian banks after incorporating the influence of competition. Further, the study intends to enrich the existing literature by providing empirical evidence on the role of human resources in managing risk along with the influence of other bank specific and macroeconomic variables. Design/methodology/approach Secondary data on 39 listed Indian commercial banks are collected from “Capitaline Plus” corporate data database for a period of 15 years. Capital is measured by capital adequacy ratio as defined by the regulators, and two definitions of risk – credit risk and insolvency risk – are employed. Competition is measured by Herfindahl-Hirschman deposits index, concentration ratio and H-statistic. The value-added intellectual coefficient model is employed to compute human capital efficiency (HCE). Three-stage least squares technique in a simultaneous equation framework is used to estimate the coefficients. Findings The study finds that absolute level of regulatory capital and bank risk are positively associated, although the influence of capital on risk is not statistically significant. The influence of competition on risk is negative for all the models, which supports the “competition stability” view. The impact of human capital on bank risk is also negative for all cases. Practical implications The findings of the study are useful for the decision makers in several ways based on the inverse influence of competition and HCE on bank risk. Further, the observed positive association between capital and risk indicates that the capital regulation is not sufficient to enhance the stability in the banking sector. Originality/value This is the first study in the Indian context that incorporates the competition in the banking industry as an explanatory variable in the extant bank capital and risk relationship.

scholarly journals AN EXAMINATION OF VOLUNTARY DISCLOSURE, INDEPENDENT BOARD, INDEPENDENT AUDIT COMMITTEE AND INSTITUTIONAL OWNERSHIP: FIRM SIZE AS A MODERATOR

2019 ◽  
Vol 2 (2) ◽  
pp. 509
Author(s):  
Hisar Pangaribuan
Keyword(s):  
Firm Size ◽  
Voluntary Disclosure ◽  
Audit Committee ◽  
Final Section ◽  
Stock Exchange ◽  
Institutional Ownership ◽  
Board Members ◽  
The Public ◽  
The Impact ◽  
Independent Audit

: This study examines the impact of the independent board, independent audit committee and institutional ownership on voluntary disclosure (by placing company size as a moderating variable) in Indonesia banking companies. Data collected from the annual report of banking companies listed on the Indonesia Stock Exchange throughout the year of study. Hypotheses developed to be tested with a variance based approach and the results were interpreted. The result has shown that the increase of independent board members and independent audit committee members tend to decrease the level of voluntary disclosure (although the impact is not significant). Independent board and independent audit committee performed this to reduce cost due to a high disclosure and to avoid the threat of high competition in banking companies. The other result has shown that institutional investors are considered more professional and powerful in supervising management to disclose more information to the public. The final section of the study's findings indicated that firm size cannot be as a moderating variable on the impact of the independent board, independent audit committee and institutional ownership toward voluntary disclosure.

scholarly journals The Impact of Macroeconomic and Banking Factors on Credit Growth in the Albanian Banking System

2015 ◽  
Vol 2 (1) ◽  
pp. 113 ◽  
Author(s):  
Ali Shingjergji ◽  
Marsida Hyseni
Keyword(s):  
Interest Rate ◽  
Unemployment Rate ◽  
Inflation Rate ◽  
Banking System ◽  
Ordinary Least Squares ◽  
Capital Adequacy ◽  
Gdp Growth ◽  
Credit Growth ◽  
Capital Adequacy Ratio ◽  
The Impact

The aim of this paper is to analyze the influence of some macroeconomic and bankhttp://ejes.euser.org/issues/may-august-2015/Ali.pdfing factors on credit growth in the Albanian banking system. From the literature review is noticed that the credit growth in the banking system is influenced by both macroeconomic and banking factors. We use credit growth as a dependent variable while as independent variables we use: GDP growth, inflation rate, unemployment rate, loan interest rate, capital adequacy ratio, bank size and NPL ratio. The relationship between credit growth and macroeconomic and banking factors was tested by using a regression model like the ordinary least squares (OLS). We take into consideration a period from 2002 – 2013 using quarterly panel data for the whole Albanian banking system with a total of 48 observations per each variable. The regression results find out that the credit growth in the Albanian banking system is positively related to GDP growth, inflation rate and capital adequacy ratio while is negatively related to unemployment rate, interest rate, non performing loans and bank size.

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