Family-owned banks in Jordan: do they perform better?

PurposeFamily ownership is very common for Jordanian businesses, leading to a high level of involvement of family members in company management. There continues to be intense discussion on the pros and cons of family ownership, particularly as it focuses corporate control within a small family group. The purpose of this paper is to examine the performance of family- and non-family-owned banks that appear on the Amman Stock Exchange over the 2016 to 2020 period.Design/methodology/approachThe research on Jordanian domestic banks is based on data from the annual reports of banks listed on their websites which offers comprehensive data on finances, ownership and the board. Family-owned and non-family banks were analysed using multiple regression technique to identify any variations in their performance.FindingsUsing a sample of 16 domestic banks with 75 bank-year observations over the 2016 to 2020 period, the study supports other research in finding that family ownership is negatively related to bank performance. This is true for accounting-based and market-based performance measures, including return on assets (ROA), return on equity (ROE) and Tobin's Q test results. Additionally, analysis identifies greater negative consequences for performance within family-owned banks by board of directors.Originality/valueThis paper extends previous research on family businesses by investigating the impact of family ownership on the financial performance in the Jordanian bank sector. This research determined that devaluation is a consequence of higher levels of ownership concentration for domestic banks in Jordan.

Efficiency and productivity of the Brazilian banks: A new approach based on two-stage network DEA

This article creates a conceptual model, called a network system, to represent the Brazilian banking production system, based on its internal operational processes. The first, called the intermediation process, measures a bank's efficiency in extending loans from its available resources. The second, called the revenue process, measures a bank's efficiency in earning profit, mainly from loans granted. We adopt a two-stage DEA model. In the first stage, a relational network DEA model measures both the network system efficiency scores and internal processes. This technique, associated with the Malmquist Index, assesses performance changes over time. In the second stage, these efficiency scores are considered dependent variables, such that Tobit models can determine how the Brazilian credit market's characteristics can explain the network system and internal processes' efficiency. Results show not only a growing trend toward greater efficiency in the revenue process, but also an increase in productivity accompanied by a decline in the intermediation process technology. Given the high banking spreads in Brazil, these results indicate deterioration in the quality of the credit portfolio and the prospect of future insolvency. We discuss implications of this scenario for domestic banks and collateral policy.

LENDING ACTIVITIES OF UKRAINIAN BANKS: PROBLEMS AND PROSPECTS FOR SUSTAINABLE DEVELOPMENT

An important and topical issue for Ukraine is the issue of improving the organizational, economic and legal foundations of effective lending activities of domestic banks. The ability of the latter to satisfy public needs for loans contributes to the development of the country’s economy. The stability of the banking system largely depends on the level of efficiency of banks’ lending activities. The revitalization of the lending activity of Ukrainian banks in recent years has been accompanied by a simultaneous decrease in its profitability, which is primarily due to the instability of financial markets, imperfect regulatory framework and a high level of competition. Under such conditions, the requirements for the quality of the management process in banks are growing, in particular, there is a need to develop new and improve existing methods for assessing and increasing the efficiency of lending activities.

Anti-crisis management of the bank in the conditions of financial market instability

The aggravation of problems in the banking system is generally associated with the deterioration of the financial condition of some banks under the COVID-19 pandemic, military aggression in eastern Ukraine and the need to introduce anti-crisis management. The lack of timely and effective crisis management has led to the liquidation of more than forty commercial banks over the past five years. The need for crisis management by domestic banks is exacerbated by the instability of the financial market and requires a review of views on the essence of crisis management. The purpose of the article is to develop theoretical provisions for crisis management in conditions of financial market instability. The theoretical and methodological basis of the study were the scientific works of domestic and foreign scientists. Scientists most often associate anti-crisis bank management with the banking crisis, that is, the state of the entire banking system, and at the same time level other destructive factors. The set of commercial banks that received a net loss was determined: A critical analysis of the definitions of domestic scientists, the concept of "anti-crisis management of the bank" and identified the following groups of approaches: as a process of identifying, preventing and overcoming crisis phenomena; as a process aimed at identifying and preventing crisis situations; as measures taken during the crisis; as measures to rehabilitate the bank; as measures to increase the solvency of the bank; as a component of the bank's financial stability management; as a component of achieving the effective functioning of the bank; as a system for counteracting the bankruptcy of the bank. It is proposed to understand the essence of the category "anti-crisis management of the bank" as a special type of management, interpreted in a narrow and broad sense with the need for specific types and management methods and carried out to diagnose, prevent, neutralize and overcome crisis phenomena, including financial instability market.

Efficiency and its determinants in the Algerian banks: network data envelopment analysis and partial least squares regression

PurposeThe purpose of this paper is to evaluate the efficiency of Algerian banks and examine the effects of explanatory factors on their performance.Design/methodology/approachIn this paper, a methodology of two-stage network data envelopment analysis (DEA) is used to explore the efficiency of a sample of 13 Algerian banks during the 2013–2017 period. In the first stage, the network DEA is used to assess the overall and stages efficiencies. In the second stage, the partial least squares (PLS) regression is conducted to determine the potential effects of explanatory factors on stages efficiency.FindingsThe main empirical results indicate that Algerian banks need an efficiency improvement in both stages. The overall efficiency of the Algerian banking system improves over the study period. The deposit producing efficiency is positively affected by bank size and bank age. The revenue earning efficiency is negatively associated with bank size and bank age. The domestic banks are more efficient than foreign banks in the deposit producing stage and the foreign banks are more efficient than domestic banks in the revenue earning stage.Practical implicationsThe results might be used as guidelines for both managers and policymakers in order to improve banks and banking system performance.Originality/valueTo the best of our knowledge, this study is the first that uses the DEA in investigating the efficiency of Algerian banks by dividing the overall efficiency into deposit producing and revenue earning efficiencies. Unlike most studies that have usually used OLS regression, Tobit regression and bootstrapped truncated regression, this study is the first in the bank efficiency literature that uses PLS regression to investigate the potential effect of explanatory variables on deposit producing and revenue earning efficiencies.

The internationalization of domestic banks and the credit channel of monetary policy

How does the expansion of domestic banks in international markets affect the bank lending channel of monetary policy? Using bank-firm loan-level data, we find that loan growth and loan rates from international banks respond less to monetary policy changes than domestic banks and that internationalization partially mitigates the risk-taking channel of monetary policy. Banks with a large international presence tend to tolerate more their credit risk exposition relative to domestic banks. Moreover, international banks tend to rely more on foreign funding when policy rates change, allowing them to insulate better the monetary policy changes from their credit supply than domestic banks. This result is consistent with the predictions of the internal capital markets hypothesis. We also show that macroprudential FX regulation reduces banks with high FX exposition access to foreign funding, ultimately contributing to monetary policy transmission. Overall, our results suggest that the internationalization of banks lowers the potency of the bank lending channel. Furthermore, it diminishes the risk-taking channel of monetary policy within the limit established by macroprudential FX regulations.

International Spillovers and Local Credit Cycles

This paper studies the transmission of the Global Financial Cycle (GFC) to domestic credit market conditions in a large emerging market, Turkey, over 2003–13. We use administrative data covering the universe of corporate credit transactions matched to bank balance sheets to document four facts: (1) an easing in global financial conditions leads to lower borrowing costs and an increase in local lending; (2) domestic banks more exposed to international capital markets transmit the GFC locally; (3) the fall in local currency borrowing costs is larger than foreign currency borrowing costs due to the comovement of the uncovered interest rate parity (UIP) premium with the GFC over time; (4) data on posted collateral for new loan issuances show that collateral constraints do not relax during the boom phase of the GFC.

Lender representatives on board of directors and internationalization in firms: an institutionalized agency perspective

From an agency perspective, the Anglo-Saxon features of corporate governance are predominantly explored by various studies in extant literature. However, it has recently been established that diverse and unique institutional configurations exist in different economies across the world and hence, the attitude of different actors within a firm, as shaped by institutional logics, can vary. Our study applies the institutionalized agency perspective to understand how the behaviour of different actors, within firms in the Indian institutional context, are shaped, consequently determining their roles in the strategic decisions of firms. We examine the representation of lenders in the board of directors, which is a characteristic of corporate governance in India. Our sample for this study consists of 985 unique Indian firms and 5513 firm year observations across the 2006–2017 time-period. We find a negative association between the proportion of lender representatives on board of directors and internationalization of firms. In addition, we also find that family ownership positively moderates this relation, whereas foreign institutional investors and domestic banks and financial institutional investors moderate this relationship negatively. In this manner, we explore the impact of institutional environment on a very specific actor (lenders) and their representatives towards internationalization.