Bank-specific Factors Research Articles

Impact of the Capital Adequacy on Bank Competition in the Kosovo Banking Sector

Sustainable growth, higher competitiveness, and a stable position should be the top mission of each bank during this century. Central banks are obliged to play their role by monitoring the banks on being sound and ensuring a stable economic system, by enforcing them to keep their CAR ratios well above the minimum required level. On the other hand, banks should increase their profit and competitiveness by orienting their investment more on low-risk products. Banks with high levels of capital will tend to possess outstanding performance and promote public confidence. However, the requirement for a higher capital ratio appears to be a barrier to rising competition. According to the various studies, macroeconomic factors and bank-specific factors both had a significant impact on the bank’s capital adequacy position. This study through the statistical regression shows the impact of the Capital Adequacy Ratio on bank competition. The results we have obtained prove that the capital requirement has a positive impact on increasing bank competition. Supported by the results, we advise banks to focus their investment on the market for highly rated instruments. By doing so, they may spark the next round of competition and be able to keep their capital adequacy ratios at the highest possible level, improving the soundness and stability of their institution.

An Empirical Analysis of Macroeconomic and Bank Specific Factors Ascertaining Bank Deposit: A Study on Bangladesh

Bank working capital is largely determined by the level of bank deposits. As the primary source of funds for carrying out lending activities, deposits are the lifeblood of a banking firm. More savings encourages more investment which in turn ensures economic growth. This paper tries to find out relevant factors influencing volume of deposit mobilization by commercial banks. The study is based on the opinion of 200 sample professionals from 29 listed private commercial banks in Bangladesh. The result shows that Government monetary policy, bank size, diversified services, state of local and national economy dominates the collection of bank deposit by commercial banks. Probable implication from the findings is investment friendly government monetary policy that can lead towards improving bank-specific factors as enhancing bank size and ensuring diversified services for more deposit attraction.

Examining the impact of demonetization on banking efficiency: Evidence from bootstrapped estimates after consideration of undesirable outputs

The recent demonetization announced in India led to a massive flow of deposits in banks, which called for efficient disbursement of available funds. Realizing its implication for the financial sector, researchers explored the possible impact of demonetization on the performance, profitability, and efficiency of Indian banks. However, these studies overlooked the non-performing assets, which are a serious concern for banks and have emerged as an undesirable output of the credit creation process. To fill this research gap, the present study investigates the impact of demonetization on the efficiency of domestic banks with due consideration of such undesirable assets. To get bias-free efficiency estimates, bootstrapped data envelopment analysis has been done. The study period has been divided into two sub-periods viz., pre-demonetization period and post-demonetization period. The results indicate that the efficiency of the majority of banks remains unaffected by demonetization. Only 13 banks have got a significant impact, out of which eight banks exhibited better efficiency while five banks were found to be less efficient during the post-demonetization period. However, these changes have been contributed to bank-specific factors, and demonetization cannot be accounted for the same. The findings are useful to banks, regulators, and policymakers.

The Capital Structure Determinants on Banking Sector of Western Balkan Countries

The study examines the capital structure of the Western Balkan banking industry across the period 2015 - 2020. Forty-seven of the total Western Balkan-based commercial banks were included in the study. By constructing a balanced panel, this study uses pooled ordinary least squares fixed and random effects regressions to examine the relationship between bank book leverage as the dependent variable and bank-specific explanatory variables that include profitability, leverage ratio, bank size, earnings volatility, collateral, growth opportunities, and liquidity. These reports are examined using linear regression analysis. The study shows a significant positive relationship between profitability and book leverage for the period studied. In contrast, leverage ratio, earnings volatility, collateral, growth, and liquidity significantly negatively impact the book leverage of Western Balkan banks.
 The findings have practical implications for bank executives. They will assist them in identifying the bank-specific factors that influence the capital structure and selecting values that promote optimal capital structure. The findings of this study can help regulators develop an effective prudential framework. This study opens up new avenues for further research in this area for academics, researchers, and analysts.

Factors Affecting Commercial Bank’s Net Interest Margin: Study Case in Indonesia, Thailand, and Philippines.

The aim of this research is to investigate determinants factors of Commercial Banks’s net interest margin in Indonesia, Thailand, and Philippines. This study uses quarterly panel data from 2010 until 2020. The OLS Equation Model was used to analyze the macroeconomic factors and banks' specific factors towards Net Interest Margin (NIM). The result showed that inflation rate as the only one factor from Macroeconomic factors and Overheard cost is one from Bank Specific factors which significantly affect Net Interest Margin in all of these countries. Other than that, valuable findings from this research show that determinants factors which have significant impact from bank specific characteristics in each country are different. In Indonesia, Higher Size of operations, Risk Aversion and Income Diversification are determinants factor that can lower net interest margin. Bank in Indonesia have to manage their credit risk well, because this factor can potentially lead to higher NIM. Commercial Banks in Thailand and Philippines show opposite result. Larger size of operations and higher risk aversion will lead to higher NIM. Market concentration plays a critical role to minimize NIM in Philippines. So, regulators should maintain this condition. Because higher competition potentially led to higher NIM in Philippines’s bank.DOI: 10.26905/jkdpv27i2.9598

Impact of Bank- Specific Factors on the Capital Adequacy of Commercial Banks in Nigeria

This study seeks to investigate the impact of bank-specific factors on the capital adequacy of commercial banks in Nigeria. This study employs panel data regression analysis of commercial banks in Nigeria from 2009 to 2020. Using the Ex-post facto research design, the study presented and analyzed the data using both descriptive statistics and inferential statistics. The specific findings reveals that nonperforming loans has negative and significant influence on capital adequacy. Also, credit risk has negative and insignificant effect on the capital adequacy of the banks. Furthermore, bank profitability has a positive and significant effect on capital adequacy of the banks. Finally, the study found that operational risk is statistically insignificant to capital adequacy of listed commercial banks in Nigeria. The study recommends that, the Central Bank of Nigeria (CBN) should enforce bank to invest more on less risky investments with fixed interest income such as government bonds, this will enable the bank to minimize the level of the bank risky assets and losses that may arise from risky asset and investment.

Making text count: Identifying systemic risk spillover channels in the Chinese banking sector using annual reports text

Using the annual report text information of Chinese listed banks from 2007 to 2020, this paper constructs multiple kinds of spatial weight matrices from the perspective of business similarity to identify the systemic risk spillover channels. Furthermore, the Bayesian posterior probability methodology proposed by Debarsy and LeSage (2018) is employed to assess the relative importance of each spillover channel. Besides, we discuss the risk spillovers of specific factors. The empirical results show that the loan type, loan region, investment industry, and income structure are all effective risk spillover channels, and the loan type channel is of the utmost importance. And also the spillover effects of bank-specific factors are identified and continuous. Our results are validated by robust analysis.

Non-Performing Loans as a Driver of Banking Distress: A Systematic Literature Review

The main purpose of this paper is to present a systematic literature review of studies on the determinants of non-performing loans (NPLs) published over the period 1987–2022. This paper reviewed 76 studies in 58 peer-reviewed journals. The provocation for this analysis is that the issue of NPLs is attributed to close attention from policymakers and is currently addressed with various measures. The authors synthesize the literature according to the following main boards: macroeconomic factors, bank-specific factors, and industry factors. This study tries to construct the main findings from the numerous studies that are performed concerning NPLs and their determinants. The authors’ motivation is to provide a detailed perspective on NPLs. Hence, this study provides a complete and coherent framework for the researchers to examine the varied NPL literature.

Analyzing Relationship Between ROA and Beta and The Influence of Multi Factors on ROA – A Case of Vietinbank in Vietnam

In emerging markets such as Vietnam, banking markets has been developing with fast growth and implies risk, hence, we need to focus on building strategies for improving ROA and profitability of banks. Hossain and Khalid (2018) found that bank specific factors and market specific factors have influenced the bank profitability. One of this study’s purposes is to state formulation of weighted beta capm index, By using VAR (vector auto-regression model) which is a reliable method, our research results tell that there are management and policy implications: Ministry of Finance, State bank of Vietnam and relevant agencies need to control GDP better in medium term to help increasing bank ROA.Beside, the bank may increase lending rate in long term to support ROA. Also, the bank consider to mange cost better in medium term to increase ROA. Last but not least, bank management can consider to reduce lending rate in short term in order to reduce risk or beta. Therefore, our study can be expanded for other markets.

Impact of Bank Specific Factors on Credit Risk: Evidence from Islamic and Conventional Banks of Pakistan

The impact of credit risk (CR) on bank-specific factors (BSF’s) and banks in the event of conventional and Islamic banks of Pakistan is an essential motivation behind this learning. These banks are chosen by their value commitment. The financial explanation investigation of chosen Islamic and conventional banks is contemplated from 2007 to 2017. Relapse examination of non-performing loan (NPL) proportion and Z-Score is utilized to discover the connections of BSF’s on chosen banks. The Islamic banking system consists of (return on equity (ROE), ROA, liquidity, spread and bank size) having a significant relationship toward credit risk. Therefore, the impact of the Z-score is less for Islamic banks relatively compared to conventional banks. The increased risk of bank debt reflects a strong NPL. In this examination bank, certain factors, for instance, efficiency, return on assets (ROA) and bank dimension, have a significant liaison through credit card risk in the conventional selected banking system, and this process affects overall banking performance. These findings provide valuable insights for policymakers, regulators, and banking professionals to manage credit risk effectively in the context of Pakistan's banking system. The originality of this study lies in its focus on the comparison between conventional and Islamic banks in Pakistan, which has yet to be extensively explored in the literature.

PENGARUH FAKTOR SPESIFIK DAN FAKTOR EKSTERNAL BANK TERHADAP PROFITABILITAS PERBANKAN KONVENSIONAL YANG TERDAFTAR DI BEI

This study aims to examine the effect of bank-specific factors on banking profitability. The samples used in this study were 33 conventional banks listed on the Indonesia Stock Exchange during 2017-2021. The sampling technique used was purposive sampling and the analytical method used in this study was panel data regression. The independent variables in this study consist of bank size, loan ratio, deposit ratio, capital ratio, and inflation, while the dependent variable is banking profitability which includes return on asset and return on equity. The panel data regression results show that bank size has a significant positive effect on return on asset, but has no effect on return on equity. The loan ratio, deposit ratio, and capital ratio have no effect on return on assets and return on equity. Inflation has a significant positive effect on return on asset, but does not affect return on assets. The results of this study are expected to be a reference for conventional banking in increasing its profitability as well as a reference for investors to consider the factors that affect bank profitability.

How does uncertainty drive the bank lending channel of monetary policy?

The literature has ignored the mediating role of uncertainty in the link between monetary policy and bank lending. Using data from commercial banks in Vietnam from 2007 to 2019, this article expands the literature stream on monetary policy transmission by investigating the impact of uncertainty on the bank lending channel. We employ the variability of shocks to bank-specific factors to measure banking uncertainty and a set of interest- and money-supply-based instruments to capture monetary indicators. We reveal that bank loan growth may increase in response to monetary expansion when the regulatory authority lowers interest rates or increases liquidity injection. Further analysis shows that this bank lending channel is less effective with increased uncertainty in the banking sector. Our finding firmly holds with the generalized method of moments (GMM) estimator and the least squares dummy variable corrected (LSDVC) technique.

Bank-Specific as Basis of Banking Sector Development: An ARDL Approach

This study aims to examine the bank-specific factors and banking sector development in Nepal by using the ARDL approach technique with economic time series data ranging from 1995 to 2020. The study employed the Autoregressive Distributed Lag (ARDL) model to avoid the spurious regression problem in the construction of contemporary time series econometrics. The study depends on the co-integration analysis to find out the long-run equilibrium relationship among the variables of the model. Banking sector development is measured by the arithmetic average of the normalized values of banking depth, banking efficiency, and banking stability. This study reveals that banking trade has positive and significant influenced the banking sector development in line with theoretical predictions. Electronic banking and liquidity have a positive and statistically significant role to explain banking sector development in Nepal. In addition, it demonstrates that non-performing loans has a negatively and significantly influenced banking sector development whilst branch network has a marginally negative but insignificant impact on banking sector development. This study reveals implications for policymakers as it sheds light on the importance of raising deposits and lending policies and focused on electronic banking. The authorities of a financial institution should be implied to build systems and skills in liquidity management, assets and liability management, and branch networking management to enhance the banking sector's development.

THE DETERMINANTS OF PROFITABILITY OF SCHEDULED COMMERCIAL BANKS IN INDIA: A TIME SERIES AND CROSS-SECTIONAL ANALYSIS

The current study examines the determinants of profitability of Indian scheduled commercial banks. The analysis is conducted over a period of 17 years in which the Indian banking sector has faced different challenges such as implementation of Basel II (2008), Basel III (2013) accord and issues related to demonetization (2016), banking sector sustainability and financial crisis in U.S (2008).The analysis is based on balanced panel data over a period ranging from 2005 to 2021 for 33 scheduled commercial banks of India. Profitability of Indian banks is measured by two proxies, namely,return on assets (ROA) and return on equity (ROE),whereas bank size,assets quality,capital adequacy,liquidity, operating efficiency, deposits, leverage, and assets management are used as bank-specific factors. Further, a set of macroeconomic determinants such as gross domestic product,inflation rate, export,import,interest rate, and financial crisis are used as independent variables.Stationary test along with correlation matrix, pooled, fixed, random effect models and Hausman test are used in this study. The results revealed that bank size; assets management ratio, and operational efficiency, are the most important bank-specific determinants have positively and significantly affect the profitability of Indian commercial banks as measured by ROA as well as ROE.However,leverage ratio and asset quality have significant and negative impact on ROA and ROE during the period of study.With regard to the macroeconomic determinants,the results revealed that the GDP,export,and interest rate are found to have a positive significant impact on ROA and ROE.However,inflation rate and crisis have significant and negative impact on ROA and ROE during the period of study.

What Determines the Capital Adequacy Ratio of Joint Venture Commercial Banks of Nepal? An Evidence from Panel Data Analysis

The bank with the appropriate capital adequacy ratio (CAR) is considered the more substantial bank that can meet its obligations and take risks. Thus, the bank management has to identify those factors influencing CAR. This study aims to identify the factors determining the CAR of commercial banks in Nepal. For this purpose, this study has used annual panel data of 6 joint venture commercial banks of Nepal from 2007 to 2021. This paper's regression analysis revealed that bank-specific factors significantly determine the capital adequacy ratio. Further, the study concluded that the financial performance measured by ROE and lending policy measured by the ratio of the total loan and advance to total assets (LTA) plays an inverse role. Liquidity LTD), management efficiency (ME), operational efficiency (OE), and the size of the bank (SIZE) play a positive role in determining the capital adequacy ratio. The bank's management can implement the findings of this paper to maintain a sufficient capital adequacy ratio. Further, the finding of this study can also be implemented by the regulatory bodies to develop policies relating to the capital requirements of commercial banks.

Determinants of bank profitability in Georgian banking sector

This study examines the impact of bank-specific and macroeconomic determinants on the profitability of commercial banks in Georgia, where banks tend to be the largest part of the financial system, with free market systems and liberalization policies similar to those in other transition economies, using panel data analysis and random forest method (RVI) is implemented as a robustness check. The profitability indicators return on asset (ROA), return on equity (ROE), and net interest margin (NIM), all of which have been extensively utilized as indicators of profitability in previous research, were employed. The research indicates that the three most significant bank-specific factors are net loans, nonperforming loans, and capital adequacy ratios. Other bank-specific factors such as asset size and liquidity ratio have statistically minor effects on bank profitability. The other macroeconomic determinant, inflation rate, has no effect on the profitability performance levels of the banks studied.

Determinants of private banks performance in Ethiopia: A partial least square structural equation model analysis (PLS-SEM)

This study examines the factors affecting Ethiopia’s private bank performance. The study followed a causational research design employing data from 2010–to 2021. The study unit of analysis is Eleven private banks in Ethiopia. The study also uses PLS-SEM with Gaussian copula (GC) estimation because of its advantage in resolving econometric concerns of endogeneity. According to the study’s findings, industry-specific factors and macroeconomic variables have a negative statistically significant effect on bank performance. On the other hand, bank-specific factors have statistically positively affected both bank performance and the banking industry. Besides, industry-specific positively mediates the relationship between bank-specific factors and bank performance. The macroeconomic variables do not affect bank and industry-specific variables. Since Bank-specific factors enhance profit and industry (market share), continuous supervision and assistance from stakeholders can prevent banks from failing, improve their financial performance, and neutralize the industry’s adverse effect on the bank performance. Also, its mediating role through increasing the private banks’ market share may be due to the leading government-owned bank’s monopoly over the banking industry. The failure of banks could lead to the collapse of the entire economy. The current study fills a vacuum in the body of literature because it considers previously overlooked factors that affect bank performance, i.e., industry-specific variables and their mediating role on the effect of bank-specific factors on bank performance.

WHAT CAUSES NON-PERFORMING LOANS? EVIDENCE FROM THE ISLAMIC BANKING SECTOR OF BANGLADESH

This study aims to investigate the impact of bank-specific and macroeconomic factors on non-performing loans (NPLs), also known as irregular loans, in Islamic banks in Bangladesh. The study is crucial, as the NPL has become a growing concern for Bangladesh's banking sector, which is affecting the country's economy. The data of banks specific factors were collected from the annual reports of the sample. In contrast, macroeconomic factors were gathered from the World Development Indicators covering the period from 2007 to 2018. Different diagnostic tests, including correlations, heteroskedasticity, and VIF (Variance Inflation Factor), were run to confirm that the results from OLS are accurate and reliable. The study further runs fixed effect and random effect models to check the robustness of the findings. The findings indicate that bank-specific factors such as loan growth, loan-to-asset ratio, and net interest margin significantly reduce NPLs. Moreover, macroeconomic factors like GDP growth and inflation significantly influence NPLs under all models. While we divide the samples into some sub-samples, we found almost similar results, confirming the robustness of the findings. The findings suggest banks' management, regulatory bodies, and other stakeholders have necessary initiatives on how to reduce the NPLs.

Credit Risk and Bank Specific Factors: an Empirical Study using Panel GMM

Credit Risk and Bank Specific Factors: an Empirical Study using Panel GMM

Determinants of bank profitability: Evidence from the emerging economy

This study examines the determinants of bank profitability in Zimbabwe, a country that has faced severe economic challenges in the past decade. To address this issue, we use a panel data analysis of 11 commercial banks over the period 2011–2020 and apply the system generalised method of moments (GMM) estimator to control heterogeneity and endogeneity issues. We find that bank specific factors, such as non-interest income, liquidity, cost efficiency, capital adequacy, and bank stability, have a positive and significant impact on bank profitability, while the industry factor, bank concentration, has a negative and significant impact on bank profitability. We also find that macroeconomic factors, such as gross domestic product (GDP) and inflation, do not have a significant influence on bank profitability. This result is surprising given the high inflation and low growth rates experienced by Zimbabwe in recent years. Moreover, we find that regulatory capital weakens the positive effect of bank stability on bank profitability in Zimbabwe. This result suggests that higher capital requirements may reduce the risk-taking incentives or opportunities of banks, which may lower their profitability potential. Finally, we find no evidence of a moderating effect of fintech on bank performance. This result implies that fintech may not significantly impact the competitiveness and performance of banks in Zimbabwe in non interest income activities. Our study concludes that bank profitability in Zimbabwe is mainly determined by internal factors that are under the control of bank managers and regulators, rather than external factors that are beyond their influence. Based on these findings, we provide several policy implications and recommendations for enhancing bank profitability and fostering a sound and resilient banking sector in Zimbabwe.