Bank Capital Research Articles

Effect of Foreign Banking Capital on the Financial Innovativeness of the Country: Evidence from Former Soviet Union and Young EU Members Countries

The main hypothesis of the paper was the assumption that the increase in the level of innovation of the financial sector in the post-Soviet states and young European Union (EU) members with an imperfect banking sector and a protracted financial crisis is accompanied by difficulties accessing financing sources and significantly depends on the volume foreign banking capital. The aim of the study is to identify the correlation between the growth of financial innovativeness of the country and the level of foreign banking capital, using Panel data analysis from 2009 to 2019. Unlike previous studies, it was taken into account that the level of financial innovation of the republics of the former Soviet Union is increasingly dependent on external credit resources, while the innovative development of the EU countries becomes financially independent, and this constitutes the scientific novelty of the research. The results confirm the relationship between foreign banking capital and the growth of financial innovativeness of the country, especially with its low and medium levels. To test his hypothesis, the author presented empirical models with the conditions of interaction with the Financial Innovativeness Index. Based on a comparison of indicators of the financial innovation of the country and foreign banking capital, clusters of countries are distinguished according to the nature and direction of the relationship of the analyzed indicators. The author concludes that the increase in the level of innovation in the financial sector of the countries of the former Soviet Union and young EU members depends on the amount of foreign banking capital and the need to consistently expand the tools for the country’s economic growth by attracting it.

Green light for green credit? Evidence from its impact on bank efficiency

AbstractWe assess, for the first time in the literature, the impact of green credit on bank efficiency. We find that green credit has a negative impact on bank efficiency. However, the effect is heterogeneous among different types of banks. While small and low capitalized banks are more affected, the impact is lower in banks with higher levels of risk. On the other hand, we find that highly capitalized banks can offset the negative effects of green credit, while large banks and those highly involved in green credit, benefit from this activity.

Social capital and bank liquidity hoarding

This study examines whether and to what extent social capital affects bank liquidity hoarding. Using more than 96,000 bank-quarter observations for more than 3,900 U.S. commercial banks spanning the period from 2003 to 2014, we find strong evidence that banks headquartered in counties with high social capital exhibit low liquidity hoarding. Social capital moderates the relationship between liquidity risk and liquidity hoarding and that between credit risk and liquidity hoarding. Bank capital has a mediation effect on the association between social capital and liquidity hoarding. Thus, social capital serves as an informal monitoring mechanism and can reduce costly liquidity hoarding.

Determinants of Intellectual Capital Performance of Banks in Africa: Evidence from Ghana, Nigeria, South Africa and Kenya

In public lectures, managers usually sing the chorus that employees are their most valued asset, however, the value of these same employees are not captured on their statement of financial position arguing that finding an appropriate measure to recognise intellectual capital has always been a herculean task. As this subject matter is crucial in re-echoing the importance of human capital to companies, the study seeks to examine determinants of intellectual capital performance of banks in the Sub-Saharan Africa from 2016 to 2020. Adopting the multiple regression technique in analysing the data sourced from the individual banks financial reports revealed that bank profitability and efficiency of human capital investment are positively related to intellectual capital performance. However, the impact of bank size on intellectual capital performance was negative. Aside these, all the other variables were not significant in explaining banks intellectual capital performance. It is therefore, recommended that the human capital of banks be evaluated to identify those which are underperforming to either retrained or replaced. Most importantly, top managers who suffer from the “peter principle” should be identified and replaced with high performing managers to efficiently coordinate the tangible and the intangible resources in order to achieve greater value. Keywords: Intellectual capital performance, Human capital, VAIC, Sub-Saharan Africa DOI: 10.7176/RJFA/13-18-02 Publication date: September 30 th 2022

Bank capital requirement shocks: A narrative perspective

We provide new estimates of the impact of shocks to bank capital requirements on lending supply and macroeconomic activity based on a Bayesian VAR estimated on Italian data and identified combining sign and narrative restrictions. Narrative restrictions are based on the EBA 2011 Stress Test (ST) and the ECB 2014 Comprehensive Assessment (CA) and are corroborated by evidence from the Euro Area Bank Lending Survey. IRFs show that shocks to required capital persistently reduce R.W.A. and loan supply and lead to a temporary decline in GDP. Based on historical decomposition, the ST and the CA increased banks’ Tier 1 ratio by 40 bps and determined a contraction in loan supply and GDP after two years of up to 1.5% and 0.5%, respectively. Results are robust to using alternative narrative restrictions and hold also when controlling for market pressure during the sovereign debt crisis and for global shocks to bank capitalization.

Управління власною ресурсною базою АТ АКБ «ЛЬВІВ»

Abstract. Introduction. The normal development of market relations requires an effectively functioning banking sector, through which the links between all participants and components of the economic mechanism of the state economy can be realized. The key prerequisite for the stable operation of the banking system and ensuring its implementation of the function of financial intermediation is the effective formation of the resource base of banks. Because commercial banks are the centers of the financial system, which concentrate the financial resources of depositors and open access to sources of borrowed resources to borrowers, thereby contributing to the development of the real sector of the economy. For the effective functioning of the bank requires constant analysis of its resource base. Therefore, this article is devoted to the study of the essence of the concept of «bank equity"» from the point of view of the system approach and the analysis of management of own capital of banking institution on the basis of the reporting of JSCB Lviv during 2017-2020. Purpose. The purpose of the article is to highlight the features of managing the bank's own resource base and study of issues of formation of bank resources, their use, assessment of the system of formation and management of bank resources and development of recommendations on ways to improve the effective functioning of this system. Results. The article considers and defines the essence of the concept of bank equity in accordance with the Law of Ukraine. The functions of bank capital are given and characterized. The efficiency of managing the banking institution's own resource base on the example of JSCB «Lviv» is analyzed. The current state of equity development of JSCB «Lviv» in Ukraine is considered and studied. A dynamic and structural analysis of the main indicators that characterize the own potential of the banking institution. The key standards that relate to the bank's own resources base are presented. The level of compliance of the JSCB Lviv with the economic standards set by the National Bank of Ukraine, namely the dynamics of regulatory capital and the regulatory capital adequacy ratio of JSCB Lviv for 2018-2021, is analyzed. »During 2019-2020. The importance of such an indicator as a capital multiplier is considered. The problems of formation and use of the bank's own resources are identified and measures to improve the management of the bank's resource base are proposed. Conclusions. This study will understand what factors affect the ability of banking institutions to effectively conduct banking operations and provide services, as well as the financial stability of the banking system, its place and role in economic transformation and further development of the economy on a market basis, the movement of Ukraine's banking system. society. Dynamic and structural analysis of the main indicators that characterize the bank's own potential will allow to establish the financial stability, reliability and capital adequacy of the bank.

Impact of corporate governance and CEO remuneration on bank capitalization strategies and payout decision in income shocks period.

The purpose of this research is to explore corporate governance and CEO remuneration with banks capitalization strategies and payout policy within the Pakistani banking context. Data were obtained from the financial statements of scheduled banks listed on the Pakistan stock exchange from 2005 to 2020. The findings of the research study revealed that corporate governance mechanisms that promote the bank's shareholders' interests are linked to low capitalization strategies. The size of the board of directors has a significant impact on the capitalization of banks. Banks' capitalization techniques are also adversely correlated with effective board size. The shareholder benefits from low capitalization. Corporate governance is positively related with banking sector instability, as seen by this negative correlation. Bank capitalization strategies have a significant impact on CEO remuneration. In the event of an income shock, dividend payout is essential. Banking sector payout policies are negatively related with corporate governance. In the event of a negative income shock, financial institutions reduce dividends. As a result, it has been argued that effective corporate governance benefits shareholders by reducing capitalization tactics and limiting financial institutions' aggressive payouts.JEL classificationG21, G30, G32, G35.

Segment Reporting and Cost of Capital of Banks with International Authorization in Nigeria

This study investigated the effect of segment reporting on cost of capital of selected deposit money banks in Nigeria. The dependent variable of this study was cost of capital which was proxied by cost of debt, while segment reporting being the independent variable was proxied by business segment information, geographical segment information and external customer information. The research design adopted for the study was ex post facto, secondary data was employed, three hypotheses were also tested, and purposive sampling technique was employed. The data for the study was analyzed using ordinary least square technique and the statistical tool used was STATA 16. From the outcome of the analysis, it was found out that business segment information and geographical segment information has significant effect on cost of debt capital of selected banks in Nigeria. Thus it was concluded that reporting separate financial information about reportable segments have the likelihood to reduce the banks cost of debt. Based on the outcome of this study, it was recommended that banks should in addition to the disclosure requirement of IFRS 8 make other voluntary and non-financial information as this will completely eliminate information asymmetry and in both the short and long run reduce their cost of debt.

ANALISIS PERAN PERBANKAN DALAM PENYALURAN KREDIT USAHA KECIL TERHADAP PENGEMBANGAN WILAYAH DI KOTA MEDAN

The purpose of this study is to find out and analyze the effect of banking and labor loans on small business income and to find out and explain how the role of small businesses in regional development. As a source of data and information for banking policymakers in terms of providing small business loans, especially to support regional development in the city of Medan. The results of this study can be used to formulate wisdom programs and as a basis for making predictions of regional development in the city of Medan. The results of this study can be used as a tool to evaluate economic policies in the banking industry that have been implemented in the city of Medan. The regression equation can be obtained as follows: Y = 0.838 + 0.106 X1 + 0.261 X2, Where: Y = Total small business income per month X1 = Amount of banking capital / credit received X2 = Number of workers. Based on the equation above, it can be concluded, that the significant value between the amount of bank credit received and the total income per month (small business income) of 0.059 shows the result of the correlation of these two variables is significant which means that these two variables have a related relationship. The significant value between the number of workers and the total income per month of 0.000 shows that the correlation between these two variables is significant, which means that these two variables have a related relationship. In the appendix table, we can see that column R shows the correlation coefficient number, which is 0.702. This shows the relationship between the variables is very strong.
 

INTELLECTUAL CAPITAL DISCLOSURE AND COMPANY PERFORMANCE: A COMPARISON STUDY OF SHARIA BANK IN INDONESIA AND MALAYSIA

This study aimed to compare the performance of Islamic banking companies in Indonesia and Malaysia in terms of intellectual capital disclosure (ICD). ICD is measured using Ulum's Indonesian Intellectual Capital Disclosure (ICD-In) framework (2015). IC is divided into three categories and 36 items: human capital (8 items), structural capital (15 items), and relational capital (13 items). Meanwhile, the company's performance variable is measured by using profitability ratios, namely, return on assets (ROA) and return on equity (ROE), and Capital Adequacy Ratio (CAR). The population in this study are Islamic banking companies listed on the Indonesia Stock Exchange and the Malaysia Stock Exchange from 2017 to 2020. The sample in this study amounted to 16, consisting of 8 Indonesian Islamic banks and 8 Malaysian Islamic banks. This study makes use of secondary data from the company's annual reports. This study used content analysis and a T-test as analytical tools. According to the findings, the ICD component, namely the relational capital of Malaysian Islamic banks, is lower than that of Indonesian Islamic banks. As for the company performance variable, the results of the research show that the ROA of Malaysian Islamic banks is higher than that of Indonesian Islamic banks, the ROE of Malaysian Islamic banks is higher than that of Indonesian Islamic banks, and the CAR of Malaysian Islamic banks is lower than that of Indonesian Islamic banks.

Analysis of the effect of bank size, credit risk, and capital adequacy on cost efficiency of banks in Indonesia (SFA method)

Many banks are competing to achieve bank cost efficiency for business continuity amidst the competition in the banking sector. So banks need to review cost-efficiency regularly. The purpose of this study was to analyze determinants of bank cost efficiency. Variable use bank size, capital adequacy, return on asset, group of the bank, credit risk, economic growth, and inflation on bank cost efficiency in Indonesia. Determination of bank input and output variables using a bank intermediation approach. This study used panel data on 38 banks in Indonesia for the period 2012-2018. This paper used the Stochastic Frontier Analysis (SFA) analysis method. The results of this study reveal four things. First, bank size has a negative effect bank cost efficiency. Second, credit risk has a positive effect on bank cost efficiency. Third, capital adequacy has a positive effect on bank efficiency. Fourth, the small core capital bank group has a negative effect on bank cost efficiency. Bank external variables do not affect bank cost efficiency in Indonesia.

Examining the determinants of bank efficiency in transition: empirical evidence from Ghana

This paper measures and evaluates the relative pure technical efficiency and cost-efficiency of Ghanaian banks over the period 2008–2019 using a nonparametric DEA technique. The study also examines the factors that determines bank efficiency in Ghana using both static panel and dynamic panel regression estimators. The results show that the overall average bank efficiency (pure-technical and cost) levels in Ghana are relatively low compared to the benchmark “best-practice” efficiency level of 1. However, the results indicate that there are remarkable improvements in both the pure technical efficiency and cost-efficiency levels since the coming into effect of the new banking Act in 2016. Further, the study depicts bank size, GDP growth rate and inflation to be the most important factors that must be considered in the determination of bank efficiency in Ghana. Also, bank capitalization is depicted to have a significant impact on bank cost-efficiency. In contrast, the findings reveal that return on assets (ROA), liquidity and loan loss provision are, however, not important factors in the determination of both banks pure technical and cost-efficiency. Bank capital is further depicted to have insignificant impact in the determination of bank pure technical efficiency in Ghana.

Banks' Strategic Responses to Supervisory Coverage: Evidence from a Natural Experiment

AbstractU.S. bank supervisors conduct frequent and comprehensive loan‐level exams of the syndicated loan market. These exams are costly as adverse exam loan ratings may increase supervisory scrutiny and reduce bank capital. Relying on an unexpected change in supervisory coverage in 1998, we estimate that the cost of bank credit for borrowers excluded from supervision decreases by approximately 18%. We show that large lenders use the coverage change to exclude deals from supervision, especially riskier deals. Strikingly, small lenders shift their lending to increase supervisory coverage, suggesting the potential importance of supervision in reducing information asymmetries within lending syndicates.

Basel III Capital Regulations and Bank Efficiency: Evidence from Selected African Countries

The core function of a commercial bank is the provision of credit facilities to its customers and to keep the flow and cycle of economic and financial resources balanced. Banks can only perform these functions if they are well regulated and efficient. The main focus of this study is to analyse the efficiency of African banks, most importantly after the 2008 global financial crisis when the Basel III regulations were popularly adopted by banks globally. The research focus was examined in two ways, the first part focused on investigating the impact of the Basel III capital regulations on the operational and investment efficiency of African banks by using the random effects and pooled ordinary least square panel data regression models. The second part examined if the African banks are indeed efficient by analysing their level of efficiency using the input-oriented DEA approach. The study used audited bank-level data from 45 listed banks operating in six African nations, namely, South Africa, Nigeria, Kenya, Tanzania, Uganda and Malawi, that have adopted the Basel III Accord for the period from 2010 to 2019. The bank-level data were obtained from the IRESS database. The findings revealed that capital buffer premiums significantly affect the operating and investment efficiency of African banks positively. This relationship implies that the capital buffer premium does not only serve as cushion capital against financial, market and economic shocks but also improves the banks’ efficiency by influencing the banks’ decisions and perspective on cost containment strategies. Another key finding is the positive influence the liquidity coverage ratio has on banks’ operational efficiency. The implication of this relationship may simply mean that African banks with well-performing liquidity ratios are efficient in their operations with the ability to meet their short-term obligations such as meeting customers’ credit needs, unannounced depositors’ withdrawals and creditors’ repayments, amongst others. This result could well be interpreted that adopting stricter liquidity requirements creates a liquidity buffer for African banks, giving them cushion confidence to undertake profitable and high-yielding projects, which invariably lead to increased profitability and operational efficiency. Furthermore, the DEA results showed that the sampled banks are operationally efficient with an aggregate of 84.8%, and for their investment efficiency, an aggregate of 94.9%. These findings suggest that African banks are largely efficient and can survive any possible financial or economic crisis. It can be put forward that it is probable that banks that are yet to adopt the Basel III Accord or strengthen their capital and liquidity base, are less efficient and might fail during a global crisis. The current work suggests some appropriate policy-based recommendations.

The Cost of Capital for Banks: Evidence from Analyst Earnings Forecasts

ABSTRACTWe extract cost of capital measures for banks using analyst earnings forecasts, which we show are unbiased. We find that the cost of equity and the cost of debt decrease in the Tier 1 ratio, whereas total cost of capital is uncorrelated with the Tier 1 ratio. These findings suggest that investors adjust their return expectations for banks in accordance with the Modigliani–Miller conservation‐of‐risk principle. Hence, increased capital requirements arenotmade socially costly based on a notion that market pricing violates risk conservation. Equity can nevertheless still be privately costly for banks because of reduced subsidies.

ECONOMIC MECHANISM OF STATE REGULATION OF THE INVESTMENT ACTIVITY IN AGRICULTURE

The main task of the state investment strategy in the development of agriculture is to form an effective policy of state promotion of investment in the agricultural sector, which will increase the level of investment attractiveness of the farm sector. Given the study's relevance, the article aims to justify the feasibility of introducing an economic mechanism of state regulation of investment activities in agriculture by combining the levers of state regulation with financial instruments of banking institutions. The study's goals were solved using the following general scientific methods: synthesis and analysis, economic statistics, systematization, theoretical generalization, and abstraction. The information base was the work of domestic and foreign scientists, analysts, practitioners, and statistics of the State Statistics Service of Ukraine. In the article, the authors propose a model of financing investment activities based on the principles of attracting private (bank) capital. The structural and logical interpretation of the state budget savings from the introduction of the recommended financial support model for agricultural producers' investment activities is given. Based on a sample of indicators for 2010-2020, a multi-factor regression model of the dependence of Ukraine's GDP in agriculture on the factors of development of investment activity in agriculture ("the volume of investment in agriculture" and "expenditures to support state regulators of the agricultural sector"). To check the quality of the constructed model, the multiple correlation coefficient (R-squared), the test for heteroskedasticity of model residues (t-statistics), and the probability of error P(t) were determined. The student's t-test was calculated to assess the statistical significance of the correlation coefficient, and Fisher's F-test was used to test the effectiveness of the regression model. The change of GDP of Ukraine in agriculture for 2021-2024 under the conditions of state regulation of parameters of investment development in agriculture is forecasted. The proposed economic mechanism and tools for implementing the main strategic guidelines for further development of investment activities in agriculture of Ukraine is a prerequisite for determining the aid to promote this process at the local level by local governments and civil society organizations.

“Lazy banks” and “Safe asset” Hypothesis: Is it the answer for Public Debt and Financial Development Indicators Puzzle in Emerging Markets?

This paper investigates the role of public debt in financial development in an emerging market namely, Jordan. Based on previous empirical research, we test the empirical prediction of two hypotheses for the role of public debt: “safe asset” vs “lazy banks”. Using annual data over the period of 2008 to 2018 and using the Fixed Effect (FE) and Bias Correction Fixed Effects (BCFE) methodologies that control for both unobservable banks specific and time-specific variables. We find that public debt has a positive impact on financial development after controlling for Banks size, Banks risk. ROA, Capital Adequacy, and Banks Capitalization. The results provide weak evidence consistent with the “Safe Asset” hypothesis that banks choose to invest in treasury securities as safe assets.

Pengaruh Kinerja Keuangan Terhadap Permodalan Bank Syariah Mandiri

The financial performance seen through the ratio calculation has a relationship to the capital of Islamic banks. Bank Syariah Mandiri as the largest Islamic bank in Indonesia is a benchmark for the Islamic banking industry in Indonesia. The purpose of this study is to see the relationship between financial performance and capital adequacy of Bank Syariah Mandiri. By using secondary data from 2015-2019 and performing classic assumption tests, multiple linear regression tests, and hypothesis testing, the results showed that ROA had no significant effect on CAR. FDR has a significant negative effect on CAR. BOPO has no significant effect on CAR. NIM has no significant effect on CAR. NPF has a significant negative effect on CAR. The results of multiple linear regression analysis simultaneously show that ROA, FDR, BOPO, NIM, NPF simultaneously affect CAR

DETERMINANTS OF BANK CAPITAL STRUCTURE: EVIDENCE FROM INDONESIA

Abstract –The capital structure in banking has become discussed due to the competition with the fintech and bank digital and debate about the efficiency of its choices. The purpose of this paper is to investigate the dynamics that go into determining a bank's capital structure in Indonesia. The capital structure of Indonesian banks is examined using a panel regression model. Profitability, corporate tax, growth, collateral, and bank size all influence banks' financing or capital structure decisions, according to the findings of this study. The study's most important result is that debts finance more than 87 percent of banks' assets, with short-term obligations accounting for more than three-quarters of bank capital. This emphasizes the importance of short-term borrowing in Indonesian bank funding over long-term debts. The fundamental contribution of this article is the identification of factors that influence the capital structure of Indonesian banks.
 Keywords: Capital Structure Determinants; Banks; Trade-Off Theory; Pecking Order Theory

Is Economic Freedom a Moderator of the Relationship Between Bank Capital and Profitability?

The study uses the GMM and panel OLS framework on the data of the US banks over the period ‎from 2002 to 2019 to reveal the moderating role of economic freedom on the ‎relationship between bank capital and ‎profitability. The overall findings show that ‎economic freedom and bank capital positively influence ‎banks' profitability. The results reveal that economic freedom positively (negatively) moderates the relationship between risk-based (traditional) capital ratio. Furthermore, the results also find heterogeneity in the relationship across different market conditions (before and after crisis) and bank characteristics (well or undercapitalized, high and low liquid banks). The results ‎remain robust for ‎alternative methodology and proxies. The heterogeneity of findings has ‎implications for ‎policymakers in banking for the improvement of the financial system.