Time-frequency co-movements between bank credit supply and economic growth in an emerging market: Does the bank ownership structure matter?

This study aims to shed some light on the causal link between bank credit supply and economic growth in Turkey for the banks with the different ownership structures between 1993Q4 and 2017Q3. Wavelet coherence test is used to obtain this objective and to answer the following questions: (i) does bank credit supply lead to economic growth in Turkey and vice versa, and (ii) does the bank ownership matters in this linkage? The findings from wavelet coherence reveal that between 1993 and 2003 in the short and medium term, economic growth leads credit supply but in the long run there is feedback causality between credit supply and economic growth for only public and private banks. However, in the long-run between 1993 and 2003 economic growth leads credit supply in the foreign banks in Turkey. Between 2004 and 2017, there is feedback causality between credit supply and economic growth. Moreover, our findings suggest that bank ownership affects the strength of the linkage between credit supply and economic growth in Turkey especially in the short and medium terms. More specially, within the three types of bank ownership, the findings imply that the strongest correlation among the variables is for the private banks while the weakest one is for foreign banks.     

Do business strategies vary across firms in the banking industry? New perspectives from the bank size–profitability nexus

This study examines the roles of interdependence and policy variations across firms in the causality between bank size and profitability in Nigeria, using second-generation estimators and the Dumitrescu–Hurlin panel Granger non-causality test. The findings support different business strategies and policy variances across banks. Causality is found non-existent in the cases of 11 banks. A unidirectional causality from size to profitability is established in two banks while evidence of a unidirectional causality is established from profitability to bank size in the other two banks. This study concludes that cross-sectional dependence and policy variations across firms matter in the bank size–profitability nexus.     

The effects of international off-site surveillance on bank rating changes

This article explores the determinants for off-site surveillance of short and long-term bank rating changes for rated banks in Asia, and the differences between them. An ordered logit model reveals that the CAMEL criteria for asset quality and capital adequacy and other financial variables such as asset size and mergers and acquisitions (M&A) play an important role that influences both the short-term and long-term bank ratings. Notably, it is found that higher capital to loan ratio and greater liquid asset ratio are likely to improve the probability of long-term creditworthiness, while higher impaired loan ratios are less likely to improve the short-term bank ratings. Results of the marginal effect suggest that the dividable scale helps to improve long-term creditworthiness through cross-selling tactics, synergy gains, and a better capability for fund raising.     

Macroeconomic uncertainty and bank lending: The case of Ukraine

This study investigates the link between bank lending behavior and country-level instability. Our dynamic model of bank's profit maximization predicts a non-monotonic relationship between bank lending and macroeconomic uncertainty. We test this proposition using a panel of Ukrainian banks over the 2003Q2–2008Q2 period. The estimates indicate that banks decrease their lending ratio in times of substantial economic volatility, which could be explained by higher risk aversion of bank managers. Additionally, small and least profitable banks are less likely to be affected by changes in the macroeconomic environment compared to their large and most profitable peers. This outcome is robust with respect to the different measurements of macroeconomic uncertainty.     

Monitoring and governance of private banks

In this paper I examine regulation and corporate governance mechanisms at a sample of non-publicly traded state member banks in 2006. Using a simultaneous regression approach, results show that insider representation on the board has a positive influence on both director and executive compensation in commercial banks. Regulatory ratings, however, are only related to bank performance—not to board structure or compensation schemes. This may be attributed to less information asymmetry between managers and owners at private banks. Also, directors are rewarded for strong CAMELS ratings. The governance structure of private banks is not affected by regulatory ratings; however, the percent of insiders on the board influences actions of the board to a large extent.     

Political environment and bank performance: Does bank size matter?

In this study, we investigate the relationship between the political environment and bank performance and whether this relationship is contingent on bank size. We use a sample comprising more than 1600 banks in 58 countries and a set of multidimensional measures collected by the Economist Intelligence Unit to proxy for the political environment. Overall, our findings indicate that political uncertainty is associated with a significant decrease in bank performance. A deeper analysis shows that bank size matters when analyzing the relationship between political risk and bank performance. Precisely, large banks are less vulnerable and more resilient under political distress than other banks. Our findings shed light on the importance of bank size as a determinant of bank performance in countries with high political risk, particularly for investment decision makers. The results are robust to a variety of alternative measurements, and different estimation techniques to deal with endogeneity.     

我国商业银行资本结构影响因素分析

以14家上市商业银行为研究对象,通过多元线性回归实证分析了影响银行资本结构的因素。研究结果表明:银行规模和盈利能力对资产负债率的影响是正相关的,资产担保能力和成长性对资产负债率的影响呈负相关关系。     

Bank valuation in new EU member countries

This paper studies the role of institutional reforms in affecting bank valuation in new European Union (EU) member countries. It takes advantage of the dynamic nature of institutional reforms in transition economies and explores the causal effects of those reforms on banks’ Tobin's Q over the period of 1997–2008. Using a difference-in-difference approach, the paper shows that Tobin's Q increases substantially after these countries reform their legal institutions and liberalize banking. However, it decreases after stock market reforms. After further examination of the interactive relationships between different reforms and bank valuation, it is observed that when the banking reform is well implemented, legal reform can have a stronger impact on banks’ Tobin's Q. On the other hand, banking reform and security market reform has a substitutive relationship. The analysis also suggests that foreign ownership, market power, and asset diversification significantly affect Tobin's Q. These results are robust even after simultaneously controlling for equity risk.     

The valuation effects of bank loan ratings in the presence of multiple monitors

Studies have shown that when two information providers or outside auditors exist, the value provided by the second one will be decreased by the actions of the first. Credit rating agencies have been rating bank loans since 1996. Capitalizing on the highly similar functions performed by banks and these agencies, the informational value of bank loan ratings is examined. Further, evidence is provided on whether rating agencies duplicate the certifying and monitoring roles played by banks. The significant market reaction to negative bank loan rating announcements suggests these rating actions convey information beyond that provided via bank loan approvals and renewals. The authors wish to thank Richard Robinson (the Editor), an anonymous referee, Mary A. Lawrence, Abdullah Mamun, Brian Murphy, Lawrence Rose, Mark Vaughn, Massey University-Albany seminar, 2004 Financial Management Association and 2005 Academy of Financial Services participants for their helpful comments.     

Are commercial bank lending propensities useful in understanding small firm finance?

We consider recent criticism by Berger et al. (J Bank Finance 31:11–33, 2007) of the use of commercial bank lending propensities (e.g., small business loans/total assets) as research tools. We use 2SLS cross sectional regressions with bank fixed effects to examine the relationship between small business lending and bank size. Our results indicate that the propensity to lend to small businesses declines as bank size increases, and the growth in small business lending does not keep pace with the growth in bank size. An increase in bank asset size from $1 billion to $100 billion reduces the ratio of small business loans to total loans and leases by 28 percentage points. Contrary to Berger and Black (2007) we find that most small business loans are made by small banks. For 1993 to 2006 as a whole, small banks (those under $1 billion) accounted for only 14.1% of total deposits and 9.7% of total banking assets, but they accounted for 28.4% of small business loans outstanding. This is consistent with the pattern shown by lending propensities. We conclude that these propensities remain very useful tools in research on small firm finance.     

The evolution of scale economies in US banking

Continued consolidation of the US banking industry and a general increase in the size of banks have prompted some policymakers to consider policies that discourage banks from getting larger, including explicit caps on bank size. However, limits on the size of banks could entail economic costs if they prevent banks from achieving economies of scale. This paper presents new estimates of returns to scale for US banks based on nonparametric, local‐linear estimation of bank cost, revenue, and profit functions. We report estimates for both 2006 and 2015 to compare returns to scale some 7 years after the financial crisis and 5 years after enactment of the Dodd–Frank Act with returns to scale before the crisis. We find that a high percentage of banks faced increasing returns to scale in cost in both years, including most of the 10 largest bank holding companies. Also, while returns to scale in revenue and profit vary more across banks, we find evidence that the largest four banks operate under increasing returns to scale.     

目标客户企业规模与差异化银行资本结构的关系研究

本文从企业引入银行外部监管的角度,构造了一个将融资企业规模与银行资本结构融合起来的模型,用以分析银行目标客户企业的规模是否会影响企业的资本结构水平的确定。研究结论表明,大的银行可能更趋向于通过目标客户企业规模的筛选,来降低自己的监督成本,而中小银行可能更趋向于通过资本金比率的方式吸引优质客户,以较高的收益水平来弥补监督成本的提高,这从一定程度上给出了目标客户企业规模不同的银行在资本结构安排上差异化的原因。     

Did small or large US banks transmit more risk during the Subprime crisis?

This paper investigates bank size as a factor of risk transmission in the US banking sector during the Subprime crisis. Risk transmission is examined in two directions: from large to small banks and from small to large banks. To do this, we estimated a Spatial Autoregressive model using information on all US commercial banks from 2005 to 2010. Our results show that risk transmission from small to large banks appeared during early stages of the Subprime Crisis and transmission from large to small banks appeared later but was more long lasting.     

Explaining Bank Productivity in Ghana

The objective of this paper is to examine productivity changes among Ghanaian banks. The Malmquist productivity index is employed to estimate total factor productivity changes and its components on a panel of 18 banks from 2003 to 2011. The results indicate that productivity growth was attributable to the catch‐up effect of efficiency changes. We also find productivity growth across three categories of bank size to be driven by efficiency changes. From a panel regression analysis, we identify size, concentration, income diversification and risk as the factors that explain productivity differences among Ghanaian banks. Recommendations for improving bank productivity are derived from the results. Copyright © 2015 John Wiley & Sons, Ltd.     

The impact of technological change on bank performance

Quarterly call report data for 225 banks over twenty-six quarters are used to estimate a quadratic cost function to provide a measure of technological change within the banking industry. The nature of the relationship between technological change and bank performance is then examined. A logit model is formulated to estimate the likelihood that banks will display a positive level of technological development. Return on assets and return on equity are selected as measures of banking performance. The results suggest that technological change is significantly related to over-all banking performance. Finally, a significant relationship is indicated between bank size and profitability and the rate at which banks implement technological change.     

Bank Ownership and Lending Behaviours: The Relevance of Community Links

Asset size does not seem to be a good predictor of bank lending behaviours. An overlooked determinant of lending may be the relationship a bank has with its local community. This article suggests that US banks owned and headquartered in a community are typically central actors in local business networks, and bank executives are intimately connected to their communities. As a result, lending decisions made by banks headquartered in the community often become influenced by the social relations and social networks of bank executives.     

Do Pan-African banks have the best of both worlds?

There has been a large expansion of foreign banks in Africa over the last two decades, with Pan-African banks playing a key role in this phenomenon. This paper questions if this development is beneficial for bank efficiency in African countries by investigating if Pan-African banks are more efficient than other types of foreign and domestic banks. We analyse the relation between ownership type and bank efficiency on a large sample of African banks covering 39 African countries over the period 2002–2015. We find that Pan-African banks are the most efficient banks in the African banking industries. We explain this finding with the fact that these banks combine the best of both worlds: they have the global advantages of foreign banks and the home field advantages of domestic banks. They are therefore able to be more efficient than both foreign banks from developed countries and domestic banks. This suggests that favouring the entry of Pan-African banks would be beneficial to bank efficiency in Africa.     

The impact of bank competition and concentration on bank risk-taking behavior and stability: Evidence from GCC countries

This paper presents a comprehensive assessment of the impact of competition on bank fragility pre and post financial crisis period in the GCC banking market as measured by bank risk-taking behavior and bank stability during the period 1998–2016. Our results indicate that a higher level of bank competition and the greater degree of concentration adds to financial fragility. The findings further shows that during the 2008 crisis, lower bank competition maintain the stability of GCC banks. We also find that lower level of competition and lower concentration in the banking market increases the risk-taking behavior of the low capitalized, low liquid and small banks which add to fragility in the banking system. Our findings suggest that countries with greater capital stringency, greater supervisory power, greater market discipline, and private monitoring, with explicit deposit insurance schemes, higher shareholder protection, and higher legal efficiency decrease banks’ risk-taking and increase their stability. We also find that greater regulatory restrictions and higher creditor protection decrease banks’ stability and increase risk in concerned countries. We find support for both competition-fragility and competition-stability hypotheses in the GCC banking market. The results also confirm that the use of a single measure of competition is insufficient to assess the role of competition in banking stability.     

Efficiency in Islamic and conventional banking: an international comparison

The paper investigates the efficiency of a sample of Islamic and conventional banks in 10 countries that operate Islamic banking for the period 1996–2002, using an output distance function approach. We obtain measures of efficiency after allowing for environmental influences such as country macroeconomic conditions, accessibility of banking services and bank type. While these factors are assumed to directly influence the shape of the technology, we assume that country dummies and bank size directly influence technical inefficiency. The parameter estimates highlight that during the sample period, Islamic banking appears to be associated with higher input usage. Furthermore, by allowing for bank size and international differences in the underlying inefficiency distributions, we are also able to demonstrate statistically significant differences in inefficiency related to these factors even after controlling for specific environmental characteristics and Islamic banking. Thus, for example, our results suggest that Sudan and Yemen have relatively higher inefficiency while Bahrain and Bangladesh have lower estimated inefficiency. Except for Sudan, where banks exhibits relatively strong returns to scale, most sample banks exhibit very slight returns to scale, although Islamic banks are found to have moderately higher returns to scale than conventional banks. While this suggests that Islamic banks may benefit from increased scale, we would emphasize that our results suggest that identifying and overcoming the factors that cause Islamic banks to have relatively low potential outputs for given input usage levels will be the key challenge for Islamic banking in the coming decades.     

An empirical study of depositor sensitivity to bank risk

Using a cross-sectional data set on U.S. commercial banks, the argument that during the mid 1980s to early 1990s depositors were insensitive to bank risk is empirically examined. Bank risk is measured by the predicted probability of bank failure as a function of contributing factors. The natural log of bank deposits is then regressed on bank risk and other control variables. The coefficient on bank risk in this equation measures the sensitivity of deposits to bank risk. A close examination of the estimated coefficient on bank risk offers little support for the argument that depositors were insensitive to bank risk.