Asia-Pacific Banks Research Articles

Earnings management and bank risk-taking behavior in Asia-Pacific region

The issue of bank risk-taking behavior has regained attention in Asia-Pacific banking sector as banks in this region are facing rising risk and capital costs. This study investigates the association between earnings management and risk-taking behavior in Asia-Pacific banks. We argue that earnings management induces banks to invest in riskier assets to ‘search for yield’ since earnings management increases banks’ capital cost leading to reduction in profitability. Using a sample of 237 listed commercial banks across 13 Asia-Pacific countries and territories in the period of 2001–2017, our research finds that there is a significant positive relationship between earnings management using loan loss provisions and bank risk-taking behavior.

Impact of Covid on Banking Industry in India

Diminished productivity and lockdowns have effectively begun to negatively affect the financials of the every business house. Inventory network interruptions, fabricating blocks and disabled wellbeing frameworks need a robust public asset/boost to proceed with activities easily. With monetary development ready to back off — the International Monetary Fund has sliced India's GDP development gauge to 1.9 percent for 2020-21 — the banking and monetary area, whose possibilities are tied near the, is will undoubtedly endure the worst part. There could be a spike in terrible loans."The stoppage could prompt potential occupation misfortunes, which could cause pressure in banks' retail advance books. Pay from the travel industry, diversion areas among numerous others has effectively disabled the financial circumstance. Variables like these are on the whole amounting to strain the worldwide economy which may likewise have its repercussions in the year ahead. Asia-Pacific governments, national banks, and administrative specialists have carried out different measures to address COVID-19. These incorporate liquidity infusions, directed credits to influenced businesses and districts, and strategy rate cuts. It additionally incorporates support for banks to give avoidance to in any case monetarily practical families and organizations sideswiped by COVID-19. Banking area in India has assumed a significant and an essential part in financial advancement and this is apparent since the freedom. Banking area is the essence of an economy for any country. It is the most indispensable column for any monetary area and assumes a significant part in financial improvement of the country. This research paper looks to dissect and think about the banking area in India pre and post Covid-19. The paper likewise centers around the effect of Covid-19 on the populace. This was finished with the assistance of arbitrary examining and their reactions were summed up utilizing diagrams for better arrangement.

Why do banks react differently to short-selling bans? Evidence from the Asia-Pacific area and the United States

The use of short-selling bans in different countries has greatly caught the attention of policy modelling. Our study is among the first studies to try to explain the phenomenon of different bank price reactions in terms of country and stock market conditions, looking at both the stock price reaction and risk. Overall, our findings suggest that the impacts of these bans on overall market efficiency were heterogeneous and, in most cases, modest for the countries analysed. Indeed, either we do not observe any improvements or the improvements are only short-lived. For the first time, we document that banks react differently to ban restrictions mostly because of differences in terms of their fundamental factors (balance sheet indicators). Given that Us and Asia-Pacific banks react differently to a ban on short selling depending on the particular financial structure of each market, when taking these actions, policy makers should consider which firm characteristics are most important and should pay attention to whether these interventions are effective in the market. Moreover, short-selling restrictions did not contribute to containing the volatility of the financial stocks subjected to the bans; on the contrary, our results indicate that negative volatility increased in some countries.

The Changing Role of a Bank's Treasury

AbstractThis study investigates the contemporary role of banks’ treasuries and shows how the treasury function is being transformed across the banking sector. Using a sample of international surveys of banks representing both emerging and advanced markets (with 35% of banks representing the Asia–Pacific region), we analyze the current and future challenges faced by treasuries. Including the Asia–Pacific banks in the analysis enables comparison of how the treasury departments differ in their search of revenue diversification under the conditions of tighter credit and liquidity, and what are the problems associated with treasury products offering as part of the revised strategies.

Long-term strategic effects of mergers and acquisitions in Asia-Pacific banks

This study empirically examines the effects of the Asian banks’ M&A, focusing on the long-term changes in banking management strategies for the acquirer banks. Target countries have tighter/more stringent legal and regulatory rules to ensure that the acquirer banks enjoy higher equity at lower cost. We find that Asian banks’ M&As contribute toward increasing new loans and enhancing capital adequacy. However, banks fail to make profits because of the non-performing loans. Most importantly, as part of cross-border deals, strong legal systems and stringent regulations could enable Asian banks to operate effectively by undertaking M&A between countries with different economic systems.

CSR Disclosure by Asia-Pacific Banks: Evidence from Comparative Assessment against India's Compulsory CSR Law

India’s new corporations law (2013) introduced a unique provision mandating CSR spending. This paper evaluates the before and after effects of CSR spending in four major Indian banks from 2005 to 2015. It is compared with four major banks from Japan, Australia, and China. We designed a legal index and analysed the content of CSR disclosures. The research demonstrates that countries with a higher legal index had consistently higher CSR disclosure index scores and actual CSR activity reported in detail. This research also finds that based on company reporting media, there is marginal change in CSR spending in Indian banks and minimal improvement in the reporting quality following change in legislation in 2013. Our findings reveal a small but significant legalisation in the disclosure content following the enactment of section 135. However, poor drafting and poor institutional context revealed by India’s low legal index score shows high levels of auto-interpretation and creative compliance. The section in its current form is failing to promote ethically responsible behaviour and not generating an ethical obligation to obey the law in spirit. These findings are of value to policy makers – to reform the law, to socialise corporations and CEOs, to design enforcement mechanisms, and generate ethical behaviour.

How Bank Risk Profiles Affect Their Strength: An Assessment of Banks in the Asia-Pacific Region

This paper analyses bank relative riskiness by testing the sensitivity of Asia-Pacific banks to overall market risk, global credit risk shocks, interest rate risk shocks and maturity risk shocks. The banks' risk profiles are categorised according to their capitalisation levels and functional degree of diversification. Our results indicate that highly capitalised banks yield higher average stock returns whilst functionally diversified banks have less volatile returns. Generally, banks that adopt capital adequacy guidelines and hold higher capital levels have greater protection from these risks. Functionally diversified banks are also more strongly positioned against system-wide shocks to the banking sector.

Does the global reporting initiative influence sustainability disclosures in Asia-Pacific banks?

ABSTRACTThis article examines sustainability disclosures by the major banks in the Asia-Pacific region (the six largest banks from each of four countries: Australia, Japan, China and India) during the period 2005–2012. The findings show sustainability disclosures by banks that participate in the global reporting initiative (GRI) are significantly higher than disclosures by those banks that have not participated in the GRI. Amongst those banks that have participated in the GRI there is a higher rate of disclosure by externally assured banks than by non-externally assured banks. Among the GRI participating banks, there was significant variation of disclosures between countries. Disclosures by Australian banks appeared to be significantly higher than disclosures by banks in any other countries under observation. The findings are discussed from a moral legitimacy perspective. Consistent with this view, the banks under study were responsive to the GRI, which is seen as an influential actor that shapes and reflects the expectations of the broader community. However, the role of the GRI in minimising country differences in disclosure by banks is not significant.

Voluntary CSR disclosure works! Evidence from Asia-Pacific banks

Purpose – The purpose of this paper is to evaluate corporate social responsibility (CSR) reporting in six large banks each from Japan, China, Australia and India over the period of 2005-2011. Design/methodology/approach – CSR and banks’ annual reports and websites were analysed using a comprehensive disclosure framework to evaluate the themes of ethical standards, extent of CSR reporting, environment, products, community, employees, supply chain management and benchmarking. Findings – Over the seven years, bank CSR disclosure improved in all four countries. Australian banks were found to have the best scores and Indian banks demonstrated maximum improvement. Despite the absence of legislative requirements or standards for CSR, this paper finds that CSR reporting continued to improve in quality and quantity in the region on a purely voluntary basis. Research limitations/implications – This study indicates that financial institutions have a commitment to CSR activities. The comparison between financial institutions in developed and developing economies suggests that the motivation for such activities is complex. A review of the studied banks suggests that strategic rather than economic drivers are an important influence. Practical implications – Asia-Pacific Governments need not mandate bank CSR reporting standards as the banks improved their CSR reporting consistently over the seven years despite the Global Financial Crisis (GFC). Originality/value – A disclosure framework index is used to assess the comprehensiveness of bank practice in relation to CSR reporting. This approach enables cross-sectional and cross-country comparisons over time and the ability to replicate and apply to other industries or sectors.

The Financial Crisis and Systemic Risks in Asia Pacific Banks: An Evaluation of Policy Responses

This paper examines the effects of the 2008 financial crisis on the Asia Pacific banking system and the policies that the local government authorities implemented in response to the crisis. We use descriptive statistics to examine capital adequacy and loan quality in the Asia Pacific banks. We show that the extent of spillover effects of the crisis on the Asia Pacific banking industry is associated with the trade-off between financial liberalization and financial stability; there is a linear relationship between foreign bank participation and cross-border loans in the Asia Pacific economies. We also conduct an event study to examine the systemic risks in the Asia Pacific banks. Particularly, we find that the CDS spread started to converge in 2009 after the implementation of stimulus packages and assertive policies in the Asia Pacific countries, implying that the policies adopted by the regional governments had at least some immediate effectiveness in helping banks decentralize the international financial shocks.

Investigating the Determinants of the Extent of Asia-Pacific Banks' Derivative Activities

We present an analysis of the determinants of Asia-Pacific banks' extent of derivative activities. Our findings suggest that the probability of financial distress and economies of scale arguments are important in this regard. Further analyses reveal that Asia-Pacific dealer banks tend to use more foreign currency derivatives while interest rate derivatives are generally used for hedging purposes. Our findings also indicate that banks located in countries with an explicit deposit insurance scheme engage in greater derivative activities. Such behaviour may reflect either hedging or speculation.

Asia-Pacific banks risk exposures: pre and post the Asian financial crisis

In this article, we provide an insight into Asia-Pacific banks' market, interest rate and exchange rate exposures using a market-based model, pre and post the Asian financial crisis. Our study provides a unique comparative analysis across 10 countries, for both short-horizon and long-horizon risk exposures. Overall, our findings reveal that bank portfolios in countries that are harder hit by the Asian crisis have higher market and short-term interest rate exposures post-crisis. With long-horizon returns, there are a larger number of significant interest rate (IR) and exchange rate (ER) exposures, which are consistent with the prior literature that long-horizon return measures economic exposures that are difficult to hedge. When the long-horizon regressions with an error correction model are carried out, the results obtained support the short-horizon results. Among the country groups, the newly industrialized economies display the greatest sensitivity to IR and ER changes during the post-Asian crisis period. Investigating bank regulation effects, we find evidence that bank portfolios that experience lower restrictions on their activities and ownership, and greater private monitoring have lower market risk.

Derivative activities and Asia-Pacific banks’ interest rate and exchange rate exposures

In this paper, we investigate whether the level of derivative activities of Asia-Pacific banks is associated with the market's perception of their interest rate and exchange rate risks. The results suggest that the level of derivative activities (especially interest rate derivatives) is positively associated with long-term interest rate exposure (LTIR) but negatively associated with short-term interest rate exposure (STIR). Further investigations reveal that the positive LTIR exposures are driven by banks with extensive derivative activities. We do not find any significant association between banks’ derivative activities and exchange rate exposure. The significant positive association between the level of derivative activities and LTIR suggests the need for better management of banks’ internal control systems and/or greater derivative disclosure requirements to bring stronger market discipline to banks, particularly for banks with extensive derivative activities.

Asia Pacific banks' derivative and risk management disclosures

This study investigates Asia Pacific banks' annual report disclosures on derivatives using the Basel Committee and IOSCO joint recommendations as the derivative and risk management disclosure benchmark. Based on our constructed disclosure index, the mean score is 35%, suggesting that many of the disclosure recommendations are not being adopted by the banks in our sample. Cross‐country and regional variation exists in the disclosure practices, with the variation associated with the extent to which accounting regulations for derivative instruments are operational. Hong Kong banks have the highest mean disclosure scores while the Philippines banks have the lowest mean disclosure scores. Australasian banks generally provide more disclosures than East Asian and South East Asian banks, and banks in developed countries generally have a higher level of disclosure relative to developing countries. The transparency of derivative activities by the banks is expected to improve as Asia Pacific countries promulgate accounting regulations congruent with international accounting standards.

Information Technology, Productivity and Profitability in Asia-Pacific Banks

Past analyses of the relationship between IT, productivity and bank profitability in the U.S., Europe and Australia have shown both positive and negative linkages. This study considers the IT impact on productivity in two groups of Asia-Pacific banks based on reported profitability during the Asian financial crisis. In general, the banks perceive increased productivity, and both strategic and operational benefits from IT. The high costs of IT permit only suboptimal investments, in both IT capital and IT labor. Better management of IT resources enhances competitiveness through higher quality service at lower costs, delivered faster through a variety of channels more convenient to customers. IT investments and their proper implementation are more relevant when the banks are not performing well. Since increased productivity may not be adequately reflected in profits, profitability measures should not be used alone to measure the impact of IT on productivity.

Information technology and productivity: a comparison of Japanese and Asia-Pacific banks

Banks throughout Asia have achieved productivity improvement through information technology (IT) use. Retail and wholesale IT products positively influence productivity. IT use increases outputs and decreases costs. Both IT capital investments and IT human resources have a positive relationship to productivity. Japanese banks benefit less from IT use than Asia-Pacific banks. To improve, these banks should better utilize their IT human resources and capabilities and acquire more cost-effective IT from international sources. The positive impact of IT on productivity is difficult to determine in net profit and asset (predominantly loans) increases. However, both Japanese and Asia-Pacific banks can enhance productivity by increased spending on IT and better management of IT resources. This would increase their competitiveness through differentiation and customer service improvement, reduced costs, better risk avoidance, and maintaining the stability of their customer base and market share.

Achieving audit uniformity out of diversity

The rapid growth in the economy of the Asia Pacific region has attracted many banks to expand in this area. Rapid expansion has brought the need for an increased emphasis on internal controls. A more structured control over the internal audit function is needed to provide sufficient assurance to head office. Due to the varying cultures, business practices and government regulations, there are many difficulties in the establishment of a centralized internal audit approach for different audit units in the region. These have been resolved by the international bank in this case study through (1) developing and implementing a uniform audit planning model; (2) establishing centres of excellence to cultivate expert knowledge in specific systems to streamline the development efforts in audit programme formulation; (3) formulating an Internal Audit Manual with laid‐down guidelines on the roles, objectives, standards of performance and work procedures for the audit units; (4) setting up a uniform reporting line; (5) standardizing the job descriptions of internal auditors to ensure that the audit units are staffed by qualified personnel with adequate skills and competence; (6) improving the communications and networking of the audit units to promote ideas and experience exchange; (7) enhancing cross‐functional or even cross‐border exposure through job rotation to other audit units.