Loan Loss Provisions,Earnings, Capital Management and Signalling: Evidence from Indian Banks1

Abstract

The debate on bank capital regulation has in recent years devoted specific attention to the role that bank loan loss provisions play as a part of the overall minimum capital regulatory framework. The paper examines this issue in the Indian context, exploring the available evidence about bank loan loss provisioning in the Indian context. Using data on Indian banks for 1997–2005, evidence is found in favour of both earnings and capital management by Indian banks.     

Competitiveness and Efficiency of the Banking Sector and Economic Growth in Egypt

Abstract: This paper investigates the impact of financial reforms on competitiveness and production efficiency of the banking sector, as well as the short‐term and long‐term impact on economic growth, in Egypt during 1992–2007. The results suggest that the reforms have a positive and significant effect on competitiveness and production efficiency. Also, the evidence shows that state‐owned banks are generally less competitive than private banks and foreign banks are less competitive than domestic banks. The average x‐inefficiency of Egyptian banks is around 30 per cent, which is comparable to those reported for other African countries. Finally, there is evidence to suggest a significant relationship between financial bank productive efficiency and economic growth in the short run but not in the long run. Overall, the results support the argument for continuing the financial sector reform programme in Egypt.     

Bank Efficiency and Macro-economic Factors: The Case of Developing Countries

Abstract

This paper examines the effects of macro-economic factors on bank efficiency of commercial banks in Asia, Middle East/North Africa, and Africa. To achieve the objective, the stochastic frontier approach (SFA) was used to simultaneously estimate the parameters of the stochastic frontier and the inefficiency model. The results show that the effect of macro-economic factors on bank efficiency differs across region. Cost inefficiency of the commercial banks in the Asian region is negatively related to the real gross domestic product per capita, credit to the private sector, and market concentration but is positively related to trade openness. Banks cost inefficiency in the Middle East/North Africa is negatively related to trade openness but is positively related to market concentration suggesting that banking market in this region should be more open to competition.     

Exchange rate determination: a theory of the decisive role of central bank cooperation and conflict

Economists’ faith that variable exchange rates benevolently equilibrate has been empirically disconfirmed. That faith is here tackled at its theoretical core with an exchange rate model that although ultra abstract, includes the undeniable fundamentals of market power and differential goals of central bankers and large-scale private players. It permits a game theoretic analysis under the assumption that all agents maximize their payoffs. The paper then relaxes the assumption of maximising agents, allowing for a more complex and thus realistic second version of the model that is interpretable within SKAT, the Stages of Knowledge Ahead Theory of risk and uncertainty. In an experimental setting, this second version of the model points to: a) the inability of agents in central banks, governments and the private real and financial sectors to operate in maximising ways; b) destructive central bank conflict; and c) the widely discrepant outcomes arising from the dynamics of individual personality differences. The paper’s theoretical and empirical findings thus both point to the merits of a single world currency.     

The Euro as a Reserve Currency

This paper presents historical and econometric evidence that the euro will come to rival the dollar as a reserve currency only slowly. The fact that it pays for central banks to hold their foreign reserves in a currency that is widely used in international transactions creates a network externality that gives the dollar an incumbency advantage. In addition, creating a market with sufficient stability to be attractive to international investors requires continuous liquidity management and periodic lender-of-last-resort operations by the issuing central bank. That the Maastricht Treaty assumes a strong separation between monetary policy and prudential regulation consequently bodes ill for the euro's prospects as a reserve currency.J. Japan. Int. Econ., Dec. 1998,12(4), pp. 483–506. Department of Economics and Department of Political Science, University of California, Berkeley, California 94720.Copyright 1998 Academic Press.Journal of Economic LiteratureClassification Number F3.     

The Competitiveness and Efficiency of the Financial Services Sector in Africa: A Case Study of Kenya

Abstract: This paper reviews the broad structural shifts in banks and other financial institutions in Kenya in the face of globalization. It is found that Kenya has moved into universal banking, reflected by the gradual elimination of ‘specified’ non‐bank financial institutions since 1994 and the increased share of net commissions and fees in the banks’ total income, from 10 per cent in 1998 to 21 per cent in 2007. The evidence suggests that the sector experienced reduced concentration and presumably more competition during 1998–2007. Further, it is found that small banks are the least competitive (most concentrated), followed by large banks and then medium‐sized banks.     

Determinants of Technical Efficiency in Chinese Banking: A Double Bootstrap Data Envelopment Analysis Approach

Abstract

The main objective of this study is to measure the technical efficiency level of the Chinese banking industry. It uses a double bootstrap data envelopment analysis approach to compute bias-corrected efficiency scores and investigate the determinants of bank efficiency in China between 2003 and 2010. We observe that Chinese commercial banks regardless of ownership have shown improved efficiency from 2003 to 2010. Our results show a significant difference in the performance between state-owned banks and joint-stock banks over the period analyzed. Moreover, the equity-to-asset ratio also significantly explains variations in inefficiency across Chinese commercial banks. Initial public offering is considered one of the effective ways to improve bank efficiency in China. Overall, the present study provides valuable empirical information that can be used to help guide deliberations regarding future reform policies.     

Efficiency and Risk in Commercial Banks – Hybrid DEA Estimation

Abstract

The hybrid DEA model can solve the difference between radial inputs and non-radial inputs and evaluate efficiency. This is a pioneering study that uses the hybrid DEA model, evaluating the proportionate inputs with a radial measure and the non-proportionate inputs with a non-radial measure, in order to examine the impact of non-performing loans (NPLs) on the efficiency of Taiwan's banking sector from 2006 to 2010. In summary, this research demonstrates the following: (1) Only nine banks remained in the top efficiency list during these years: China Development Industrial Bank, Mega International Commercial Bank, Chinatrust Commercial Bank, Cathay United Bank, Bank of Kaohsiung, Industrial Bank of Taiwan, Taiwan Cooperative Bank, Land Bank, and Bank of Taiwan. (2) Risk is an important factor that should be taken into consideration when evaluating banking efficiency. (3) From the hybrid DEA model, we find that most of the inefficient banks have an inefficiency factor caused primarily by too many NPLs (risk). (4) The efficiency of Taiwan's large-scale banks is significantly better than the small-scale bank. By looking at the inefficiency index, the large-scale bank's inefficiency is caused by NPLs. For the small-scale bank, both radial variables and non-radial variables have equal importance in improving its efficiency.     

Does board gender diversity matter in the banking sector? Evidence from Tunisia

The purpose of this paper is to investigate the effects of board gender diversity on banks’ performance and risk for the case of a developing African country. Our sample includes a unique data set of Tunisian banks during the period 2005–2018. We use the two‐way cluster regression proposed by Petersen. This approach corrects for the unobserved firm effect (time‐series dependence) and time effect (cross‐sectional dependence). It gives robust standard errors adjusted for heteroscedasticity, serial correlation, and cross‐sectional correlation. Our results support a positive relationship between gender diversity and banks’ performance measured by ROA and ROE, while women board members are associated with more default risk measured by Z‐score. Our results remain robust to various measures of gender diversity, banks’ performance and risk. The findings contribute to the literature by providing empirical evidence from Tunisia, an African emerging economy, where the examination of the role of board gender diversity on bank governance is unexplored.     

我国商业银行私人银行业务的发展现状与对策

随着我国富裕阶层队伍的不断壮大,我国私人银行业务显示出巨大的市场潜力,中外银行因此展开了激烈的竞争。但是,我国商业银行发展私人银行业务也面临着诸多制约因素。因此,我国商业银行应在市场细分、产品的研发与创新、品牌建设、组织架构、专业人才的培养、外部环境建设等方面采取切实措施,以促进私人银行业务的发展     

Financial Liberalization and Foreign Bank Entry on the Domestic Banking Performance in MENA Countries

Abstract: This study examines the impact of financial liberalization and foreign bank entry on the domestic banking sector from 1996 to 2007, and builds upon and expands the work of Lee (2002). We find that foreign bank entry, financial liberalization, ownership structure and degree of openness of foreign bank entry positively impact domestic banking system operating efficiency, capitalization, risk management, long‐term soundness, financial performance as well as economic and financial development. However, foreign bank entry is associated with reduced profit margins and increased operating costs of domestic banks in countries with less developed capital markets. Empirical evidence seems to support the argument that foreign bank presence leads to better allocation of capital and eliminates connected lending practices.     

The Competitiveness of Commercial Banks in Ghana

Abstract: The paper empirically investigates the degree of bank competition and intermediation efficiency in Ghana. The evidence obtained suggests a non‐competitive market structure in the Ghanaian banking system, which hampers financial intermediation. The study also finds that Ghanaian banks are monopolistically competitive. It is argued that the structure, as well as the other markets characteristics, constitutes an indirect barrier to entry thereby shielding the large profits in the Ghanaian banking system. Further, it is argued that policies that encourage and stimulate greater consolidation in the financial sector would go a long way to enhance competition among banks and improve efficiency and profitability.     

Performance of Domestic and Foreign Banks: The Case of Korea and the Asian Financial Crisis

Abstract

This paper examines the performance of banks, domestic and foreign, in Korea before and after the Asian financial crisis, examining how the profitability of those banks differed and identifying factors that explain why those differences existed. The performance of Korean banks deteriorated dramatically in 1998 with most banks recovering somewhat in 1999. Foreign banks did not experience the same negative effect on their performance as a rule. Overall, the domestic Korean banks suffered more severely from the Asian financial crisis than foreign banks. Several possible explanations exist. First, foreign banks, unlike domestic Korean banks, were not subject to credit allocation directives from the Korean government to selected, favoured industries. Second, foreign banks, since they relied for governance on the mother bank in the home country, achieved higher efficiency and better asset and liability management. Finally, foreign banks rely more heavily on fee-for-service income rather than loan revenue.     

Bank lending and the business cycle: Does ownership matter in ASEAN countries?

We analyze the lending cyclicality of 213 ASEAN commercial banks over the period 2001–2015. The findings indicate that lending by private banks is procyclical while lending by state banks is countercyclical. Long-term liabilities also move countercyclically for state banks whereas funding for non-state banks in the form of deposit and long-term liabilities is procyclical. Greater lending cyclicality is observed for both private and state banks in Cambodia, Myanmar, Laos, and Vietnam (CMLV) compared to Indonesia, Malaysia, the Philippines, Thailand, and Singapore (ASEAN-5). Lending of non-ASEAN based foreign banks shows greater procyclicality than that of domestic banks for the ASEAN-5 countries, although not for the CMLV countries. During the global financial crisis, lending by non-ASEAN based foreign banks contracted sharply even as lending by ASEAN based foreign banks was unaffected. Overall, our results confirm that bank ownership influences lending and funding sensitivity to economic fluctuations.     

Option Trading,Price Discovery,and Earnings News Dissemination*

Abstract. Option market activity increases by more than 10 percent in the four days before quarterly earnings announcements. We show that the direction of this preannouncement trading foreshadows subsequent earnings news. Specifically, we find option traders initiate a greater proportion of long (short) positions immediately before “good” (“bad”) earnings news. Midquote returns to active-side option trades are positive during nonannouncement periods and are significantly higher immediately prior to earnings announcements. Bid-ask spreads for options widen during the announcement period, but traders do not gravitate toward high delta contracts. Collectively, the evidence shows option traders participate generally in price discovery (the incorporation of private information in price), and more specifically in the dissemination of earnings news.     

Bank Income Diversification,Asset Correlation and Systemic Risk

This paper explores whether the asset correlations among the non-interest activities of banks are the key causes for enhancing the bank diversification-systemic risk nexus. Our empirical evidence indicates that banks' income diversification significantly raises systemic risk. After removing those banks with high asset correlations, the effect of individual banks' diversification on banking systemic risk turns insignificant or even inverse. The results show that high asset correlations among banks could introduce bank failures, thereby leading to higher systemic risk in the financial sector.     

Does Government Intervention Affect Banking Globalization?

Using data from British and American banks, we provide empirical evidence that government intervention affects the global activities of individual banks along three dimensions: depth, breadth and persistence. We examine depth by studying whether a bank's preference for domestic, as opposed to external, lending (funding) changes when it is subjected to a large public intervention, such as bank nationalization. Our results suggest that, following nationalization, non-British banks allocate their lending away from the UK and increase their external funding. Second, we find that nationalized banks from the same country tend to have portfolios of foreign assets that are spread across countries in a way that is far more similar than those of either private bank from the same country or nationalized banks from different countries, consistent with an impact on the breadth of globalization. Third, we study the Troubled Asset Relief Program (TARP) to examine the persistence of the effect of large government interventions. We find weak evidence that upon entry into the TARP, foreign lending declines but domestic does not. This effect is observable at the aggregate level, and seems to disappear upon TARP exit. Collectively, this evidence suggests that large government interventions affect the depth and breadth of banking globalization, but may not persist after public interventions are unwound.     

Does government intervention affect banking globalization?

Using data from British and American banks, we provide empirical evidence that government intervention affects the global activities of individual banks along three dimensions: depth, breadth and persistence. We examine depth by studying whether a bank's preference for domestic, as opposed to external, lending (funding) changes when it is subjected to a large public intervention, such as bank nationalization. Our results suggest that, following nationalization, non-British banks allocate their lending away from the UK and increase their external funding. Second, we find that nationalized banks from the same country tend to have portfolios of foreign assets that are spread across countries in a way that is far more similar than those of either private banks from the same country or nationalized banks from different countries, consistent with an impact on the breadth of globalization. Third, we study the Troubled Asset Relief Program (TARP) to examine the persistence of the effect of large government interventions. We find weak evidence that upon entry into the TARP, foreign lending declines but domestic does not. This effect is observable at the aggregate level, and seems to disappear upon TARP exit. Collectively, this evidence suggests that large government interventions affect the depth and breadth of banking globalization, but may not persist after public interventions are unwound.     

The note issues of the bank of Sweden, 1668–1968

Abstract

Bank notes have a long history in Sweden. The first to have all the main characteristics of a bank note were issued in 1661 by Stockholms Banco. After the liquidation of that bank, caused by the over-issue of notes, the Riksbank in 1668 founded a new bank, Riksens Standers Bank (the Bank of the Estates of the Realm), now known as Sveriges Riksbank (the Bank of Sweden). This bank was initially prohibited by its statutes from issuing notes, but from the very year of its inception the public, against the will of the Bank, used certain papers intended for the internal operation of the Bank as substitute bank notes, and in 1701 the Bank introduced instruments of payment out of which bank notes proper subsequently developed.     

Board Gender Diversity,Investor Protection,and Private Information-Based Trading

ABSTRACT

This study examines the effects of board gender diversity and investor protection on private information-based trading and its persistent form. The results generally show that board gender diversity plays a significant part in preventing stock trading activities based on private information as well as persistent private information-based trading. Investor protection is also found to be significant and more pronounced in mitigating private information-based trading, but its function is hindered by the persistence of private information-based trading. Overall, the findings suggest that, besides strengthening the investor protection, policymakers should also encourage the involvement of women on boards of directors.