Bank Behavior Research Articles

“Go green” – evaluating the roles of environmental concerns, environmental social norms and green technology in fostering pro-green banking behaviors

Purpose The purpose of this paper is to evaluate the relationship between bankers’ perspectives and their pro-green banking behaviors (i.e. intentions). Specifically, how do bankers’ perspectives on environmental concerns, environmental normative structure and green technology affect their intentions toward G-banking activities? Design/methodology/approach A theoretical framework of the theory of bounded rational planned behavior (TBRPB) as its foundation was established. Using measurement scales to measure different aspects of environmental concern, environmental normative structure, green technology, attitudes, perceived behavioral control and subjective norms, a survey instrument was developed to examine the various associations implied by the model of TBRPB. Data were collected from the bankers of selected commercial banks in Bangladesh following the random sampling procedure. The data were analyzed using the partial least square structural equation modeling technique. Findings Findings indicate that all of the predictors appear to be robust in predicting the G-banking intention of the sampled bankers in Bangladesh. The results also show that attitudes, subjective norms and perceived behavioral control have significant mediating effects toward bankers’ bounded rational G-banking intention. Research limitations/implications There are a few limitations in the study. First, the study considers environmental concerns as an antecedent of the attitude of bankers toward G-banking activities. Future studies can explore other variables related to environmental problems to study G-banking adoption and practices. Second, this study only considers the private conventional bankers as respondents to the survey to assess G-baking intention. In the future, other types of bankers, such as Islamic bankers and public banks’ bankers could be included in the survey to explore G-banking practices. Finally, this research has been done in a developing country-context. Practical implications In this study, environmental concerns of bankers appeared to be highly significant predictors to influence their attitudes toward bounded rational G-banking intention. Similarly, the social normative structure also appears to be a robust antecedent of subjective norms to influence bounded rational G-banking intention of respondent bankers. Finally, green technology or bakers’ personal and skill-related ability to control bounded rational G-banking intention also appeared to be a strongly significant predictor of green banking activities. All this evidence implies that respondent bankers in the sample responded positively to provide their positive intention toward G-banking activities based on their environmental concern. Social implications Important social implication of the current study is G-banking practices can help reduce carbon emissions and other pollutants which would enrich overall environmental sustainability and ecological conditions. Originality/value Few studies are directed on G-banking perspective in Bangladesh. This research is one of the empirical studies which will certainly add values for the clients, institutions and policymakers in banking paradigm.

The dominant risks in the interest rate channel: evidence from the urban housing market in Taiwan

ABSTRACT The main purpose of this paper is to investigate the city-level data on mortgage rates of banks which may hide significant information about the monetary transmission mechanism. This study, by regional housing loans and risks data, investigates the behaviour of banks after a monetary policy tightening. By using the structural vector autoregressive model with the counterfactual impulse response function and the spatial regression model, our results show that monetary tightening causes mortgage rates to rise. This response is mainly driven by price and credit risks. Consequently, these housing activities have a significant effect on mortgage rates, by amplifying the shock from the tightening monetary policy. The latter result provides evidence that financial intermediation and regional housing risks play an important role in the interest rate channel.

Indifference to Riba Practices: Using "Epistemology of Ignorance" to Understand Customer Behavior in Conventional General Banking

Indifference to Riba Practices: Using "Epistemology of Ignorance" to Understand Customer Behavior in Conventional General Banking

From Borrowing to Growth: Ghana’s Public Debt Strategy within its Financial Development Trajectory

Purpose: The study examined the implications of Ghana’s soaring public debt on its financial development, specifically its banking behaviour. Given Ghana’s alarming public debt of 78.3% of GDP by 2022 and previous periods of high public debt correlating to global economic downturns, understanding this relationship is vital for both local and international policymakers.
 Methodology: The research employs annual growth rates of various financial development indicators (e.g, Ease of Doing Business Index and Digital Transaction Index) and measures public debt using the Public Debt-to-GDP Ratio. Advanced econometric methods were used to ensure data accuracy, including cointegration, error correction models, and tests like Dickey-Fuller, Augmented Dickey-Fuller, and Sargan-Rhargava Durbin-Watson.
 Findings: The ADF test confirmed the stationarity of all study variables. Cointegration tests show a long-term equilibrium relationship among the variables. In the short run, a positive and significant relationship exists between variables such as Domestic Bank Intermediation, Financial Development, and Public Debt. Regression outcomes indicate that as Public Debt escalates, there’s an associated increase in Financial Development in Ghana.
 Implications: These findings reveal that despite the potential pitfalls of high public debt, a complex dynamic exists where increasing public debt positively correlates with financial development in Ghana’s short run. This insight can be valuable for policymakers in balancing infrastructural investments, social programs, fiscal sustainability, and financial growth, especially for developing nations facing similar debt scenarios.
 Originality: This study offers a unique, in-depth three-decade analysis (1992-2022) on the relationship between Ghana’s public debt and banking behaviour. It is an empirical precedent for other nations to understand the intricate relationships between public debt and financial growth.

How does the repo market behave under stress? Evidence from the COVID-19 crisis

We examine how the repo market operates during liquidity stress by applying network analysis to novel transaction-level data of the overnight gilt repo market including the COVID-19 crisis. We find that during this crisis the repo network becomes more connected, with most institutions relying on previously used counterparties. There are however important changes in the repo volumes and spreads during the stress relative to normal times. There is a significant increase in volumes traded with the central counterparties (CCPs) sector. At the same time non-banks, except hedge funds, decrease borrowing and face higher spreads in the bilateral segment. Overall, this evidence reflects a preference for dealers and banks to transact in the centrally cleared rather than the bilateral segment. Our results can inform the policy debate around the behaviour of banks and non-banks in recent liquidity stress and on widening participation in CCPs by non-banks.

Bank behavior due to a buildup in Chinese nonperforming loans

We study 33 Chinese banks from December 2009 to December 2020 to examine the moral hazard behavior of Chinese banks from the perspective of nonperforming loans (NPLs). The results show that banks with low returns are more likely to engage in risk-taking behavior and have a high number of NPLs. The government could adopt regulations that would help joint stock banks to be more prudential and encourage city and rural banks to take more risks.

Peer effect, bank concentration, and crises: Evidence from the United States

AbstractThis research analyzes the impact of banks' peer effect in lending on the bank concentration‐crisis nexus for the period 2015–2021 in the United States. The analysis finds that a high level of bank concentration increases a crisis via the channel of banks' peer effect in lending, to which the imitative behavior of big banks is deemed to be the cause of deteriorating the damage of bank concentration on the stability of the banking sector. The results propose policy implications and what banks should do when treating financial market sustainability as their duty on the environmental, social, and governance (ESG) issues.

Lending and risk controls for BHCs after the Dodd–Frank act

AbstractWe investigate the impact of the Dodd–Frank Act (DFA) on the credit risk behavior of complex bank holding companies (BHCs). Specifically, we assess the effectiveness of the DFA in reducing the credit riskiness of complex banks. Consistent with the moral hazard hypothesis, we find that complex BHCs affected by the DFA increase their credit risk. We argue that possible explanations are that BHCs decreased their lending portfolio quality, loan monitoring, and strength and independence of the risk management function after the DFA. The results are robust to endogeneity concerns, different sample selection criteria, various model and treatment specifications, and placebo tests.

Did the 2012 Spanish law reform to protect mortgage debtors modify banks’ lending behavior?

Royal Decree-Law 6/2012 introduced a new Code of Good Practice for Spanish banks and financial institutions with the aim of protecting low-income debtors. In this study, we examine the impact of this legal reform on the lending behavior of banks. We analyze quarterly data spanning from 2005 to 2020(Q1) across the 17 Spanish NUTS II regions. Our analysis employs panel data models incorporating regional, year, and quarter fixed effects, as well as linear and quadratic region-specific time trends. We also include other relevant control variables at the regional level, such as house prices, inflation rates, and unemployment rates. Our findings indicate that the Code had a significant and negative effect on the number of new mortgage loans, the average interest rate, and the average ratio between monthly mortgage payments and wage costs.

Leverage ratio, risk‐based capital requirements, and risk‐taking in the United Kingdom

AbstractWe assess the impact of the leverage ratio capital requirements on the risk‐taking behaviour of banks both theoretically and empirically. Conceptually, introducing binding leverage ratio requirements into a regulatory framework with risk‐based capital requirements induces banks to re‐optimise, shifting from safer to riskier assets (higher asset risk). Yet, this shift would not be one‐for‐one due to risk weight differences, meaning the shift would be associated with a lower level of leverage (lower insolvency risk). The interaction of these two changes determines the impact on the aggregate level of risk. Empirically, we use a difference‐in‐differences setup to compare the behaviour of UK banks subject to the leverage ratio requirements (LR banks) to otherwise similar banks (non‐LR banks). Our results show that LR banks did not increase asset risk, and slightly reduced leverage levels, compared to the control group after the introduction of leverage ratio in the UK. As expected, these two changes led to a lower aggregate level of risk. Emperical results indicate that credit default swap spreads on the 5‐year subordinated debt of LR banks decreased relative to non‐LR banks post leverage ratio introduction, suggesting the market viewed LR banks as less risky, especially during the COVID 19 stress.

The Tunisian Islamic and conventional banks: a performance comparative study

PurposeThis paper aims to determine whether Islamic banks (IBs) and conventional banks (CBs) in Tunisia are distinguishable from one another based on financial characteristics during the 2005–2014 period covering the 2008 global financial crisis (GFC) and the 2011 Tunisian revolution.Design/methodology/approachFor the comparison between IBs and CBs, 11 hypotheses are formulated to distinguish between the two types of banks. The authors use a univariate analysis based on the multi-dimension figures investigation and a multivariate one based on the robust OLS technique for panel linear regression with mixed effects.FindingsBank-specific factors, dummy and dummy interacting variables indicate that there are differences between Islamic and conventional bank behavior. Both methods show that IBs are more liquid, more profitable and riskier than CBs. Post-2011 Tunisian revolution, small IBs (small CBs) are more (less) solvent, large IBs are more stable and both types of banks are more liquid, which explain why Tunisian governments have relay on bank system to cover budget deficits post-2011 revolution.Originality/valueIn investigating the feature of IBs and CBs from the Tunisian context, the authors take into account the effect of two abnormal events (2008 GFC and 2011 Tunisian revolution) on IBs through interaction variables.

Stacked LSTM-GRU Long-Term Forecasting Model for Indonesian Islamic Banks

The development of the Islamic banking industry in Indonesia has become a significant concern in recent years, with rapid growth in the number of banks operating based on Sharia principles. To face emerging challenges and opportunities, a deep understanding of the long-term financial behavior of Islamic banks is becoming increasingly important. This study aims to predict the share price of PT Bank Syariah Indonesia Tbk, over 28 days using the LSTM-GRU stack. The observation stage includes importing the dataset, data separation, model variations, the training process, output, and evaluation. Observations were conducted using 10 model variations from 4 stacks of LSTM and GRU. Each model performs the training process in four epochs (200, 500, 750, and 1000). The results of observations in this study show that long-term predictions (28 days ahead) using four stacks of LSTM-GRU and daily training accumulation techniques produce better accuracy than the general method (using multiple outputs). From the observations we have made for predictions for the next 28 days, the model with the LGLG stack arrangement (LSTM-GRU-LSTM-GRU) produces the best accuracy at epoch 750 with an MSE LSTM-GRU 63.43762863. This study will undoubtedly continue in order to achieve even better precision, either by utilizing a new design or by further improving the technology we are now employing.

INVESTIGATING DRIVERS OF DIGITAL BANKING ADOPTION OF GEN Z IN INDONESIA

Despite the fact that digital banks are the most recent financial service that provides online banking services without direct contact with customers, they have yet to transform the whole financial sector. This study was done in a quantitative manner utilizing primary data to investigate drivers of digital banking adoption by Gen Z using the Unified Theory of Acceptance and Use of Technology 2 (UTAUT 2) approach. There was a total of 232 respondents participating in this study. The data was analyzed using Structural Equation Modeling - Partial Least Square (SEM-PLS). The results show that social influence, facilitating conditions, hedonic motivations, perceived value, and habit positively influence the Gen Z’s behavioral intention to use the digital banks; while performance expectancy and effort expectancy show the opposite influence. Further, the behavioral intention also positively influences the Gen Z’s use behavior of digital banks. To promote digital bank customer commitment and satisfaction, digital banking service providers are suggested to increase the value of benefits outweighing the costs borne by users, as well as to improve service quality in terms of user friendliness.JEL: G40, O33.

Asymmetries in banking conduct: A Cournot - Bertrand model

This paper presents a Cournot – Bertrand model with differentiated loans and deposits. In this context, banks compete in different strategic variables, with bank 1 competing in quantities and bank 2 in interest rates. It is shown that loan and deposit differentiation are necessary conditions for a unique Nash equilibrium. The analysis constitutes a simple framework for the introduction of asymmetries in the behavior of oligopolistic banks, providing possible policy and bank ownership extensions.

Executive and non-executive employee ownership and bank risk: Evidence from European banks

Our study investigates how executive and non-executive employee ownership affects the risk-taking behavior of European banks, which has become an important issue for regulators as supportive policies promoting employee ownership are implemented. The extant literature on banking firms provides mixed results, focusing exclusively on executive ownership. We investigate channels that could shed light on the inconsistent of these findings. Using data from 2005 to 2019, we find that both executive and non-executive ownership are associated with lower bank risk, depending on employee ability and incentives to take risks. We address endogeneity issues related to banking risk and employee ownership by considering employees' long-term orientation. Our results indicate that policymakers should encourage broad-based employee ownership plans in the banking industry.

The Impact of Financial Technology on Customer Behavior in the Jordanian Commercial Banks

This study investigated impact of financial technology on customer behavior in Jordanian commercial banks. The descriptive technique was employed based on the study of the research topic. The study population consisted of all administrative workers in Jordanian commercial banks. The data was collected through a random sample of administrative workers in Jordanian commercial banks, estimated at 300 male and female employees. The statistical package for the social sciences program was used to examine the data after obtaining it using the questionnaire (SPSS). The results showed that there is a statistically significant positive effect of financial technology (credit service, payment services, investment management services, financial market support services) on customer behavior in Jordanian banks, which indicates that (financial technology) explained an amount (84.1%) of the change in customer behavior in Jordanian banks. Banking will unquestionably concentrate on delivering financial services through data in the future, limiting the ability to react. By enhancing the promise of value, financial institutions that have been able to quickly adapt to financial innovations boost client loyalty and happiness. The study recommends that Jordanian banks, in light of global competitiveness and the global trend towards digital transformation, follow the financial technology approach and make the most of the opportunities and advantages offered by digitization to banks in order to preserve their customers and compete. The study also recommended researchers and those interested in banking studies expand their research on financial technology due to the relative lack of studies covering the subject.

Ownership structure and bank performance: the impact of market competition

ABSTRACT This paper investigates whether and how ownership concentration, as an intearnal mechanism of corporate governance, and market competition, as an external mechanism of corporate governance, interact to influence bank performance. In other words, we test whether ownership concentration and competition are complementary or substitutes. To do so, we use a unique hand-collected database covering commercial banks based in 17 Western European countries from 2006 to 2019. Consistent with previous studies, we find that ownership concentration and market concentration increase the profitability and risk-taking behaviour of banks. Furthermore, no evidence of non-linearity of competition is found for our sample of European banks. Regarding the interaction effect, our results indicate that market competition seems to foster the profitability of banks with concentrated ownership. In addition, we find that risk-taking behaviour of banks with controlling shareholders increases when they operate in competitive markets. These results suggest that ownership concentration and market competition are complementary, and hence banks may benefit differently from these corporate governance mechanisms to improve their performance.

The behavior of Islamic and conventional banks around the pandemic: cross-country evidence

PurposeUsing cross-country data on the 1,000 largest global banks for 2019, the paper aims to examine the response of bank risk and returns to the pandemic.Design/methodology/approachThe author employs weighted least squares (WLS) techniques for the purposes of analysis.FindingsThe findings suggest that banks with Islamic windows increased their riskiness in response to the pandemic, although there was not much impact on profitability. Additionally, the author categorizes banks based on certain major characteristics and find that these findings are manifest primarily for well-capitalized and less liquid banks.Originality/valueResearch as to the impact of the pandemic on banks' balance sheets has been an unaddressed area of research. By focusing on a large sample of banks across countries with both Islamic and conventional banking presence, the analysis sheds light on the balance sheet response of banks to the pandemic, an aspect that has not been addressed earlier.

The UTAUT Implementation Model in Defining the Behavioral Intention of Mobile Banking Users

Research aims: This goal is to comprehend how the UTAUT model was used to influence mobile banking behavior intentions and act as a mediator variable along with attitude.Design/Methodology/Approach: A quantitative approach and a sample size of 110 respondents using mobile banking were used. The deployment questionnaire for the retrieval technique sample was completed using Google Forms, and the sampling strategy was a snowball. In this study, both data analysis and hypothesis evaluation were performed utilizing PLS-SEM.Research findings: The study uncovered that out of ten hypotheses, seven were accepted, and three were rejected. In this study, performance expectancy, facilitating conditions, and social influence variables could all have an impact on attitude. With regard to behavioral intention, attitude served as a mediator between performance expectancy, social influence, and facilitating conditions. Aside from serving as a mediator, the attitude directly affected behavioral intentions. The results indicate that attitude was not significantly affected by effort expectations, and behavioral intentions were not significantly impacted by trust.Theoretical Contribution/Originality: The Unified Theory of Acceptance and Use of Technology (UTAUT) was employed in this study to understand better how the UTAUT model was applied in influencing mobile banking behavior intentions, as well as how attitude functions as a variable mediator.Practitioners/Policy Implications: Results from the study have implications for how mobile banking users' behavioral intentions may change depending on their performance expectancy, social influence, facilitating conditions, and attitudes.Research Limitations/Implications: Further research is required to observe other aspects, such as the desire to keep utilizing mobile banking, as it is the focus of this study, which was restricted to behavioral intention based on the considerations of UTAUT-based mobile banking users.

A Review of Research on Blockchain Empowered Supply Chain Financing in China

To promote theoretical and empirical research on blockchain-enabled supply chain finance in China, this article provides an overview of relevant studies in China. Currently, research related to blockchain-enabled supply chain finance in China primarily focuses on three aspects: the underlying mechanisms of blockchain-enabled supply chain finance (including decentralization and consensus mechanisms, distributed storage, tamper resistance, and anti-denial features, as well as smart contracts), the positive effects of blockchain-enabled supply chain finance (including comprehensive effects, credit transmission, risk management) and the application scenarios of blockchain-enabled supply chain finance, and the impact mechanisms of blockchain on supply chain finance gaming behaviors (including the influence of blockchain on supply chain finance decision-making, risk assessment, and the supply chain financial system). Overall, research in China on the positive effects of blockchain-enabled supply chain finance (such as cost and benefit analysis, micro-level efficiency) is relatively limited. Additionally, studies on the factors affecting the adoption of blockchain in supply chain finance and the behavior of banks and small and medium sized enterprises (SMEs) in blockchain adoption within supply chain finance are relatively scarce. Given the backdrop of financial technology, further research is needed to deepen our understanding of various aspects related to blockchain-enabled supply chain finance in China.