Community Banks Research Articles

ERM value for community banks: a natural experiment

PurposeWe explore the apparent value of ERM within the CB landscape in the absence of endogeneity concerns.Design/methodology/approachWe explore the observed market value of enterprise risk management (ERM) in a specific industry, community banks (CBs). To do this we employ standard event study methodology. We use the surprise failures of Silicon Valley Bank (SVB) and Signature Bank (SBNY) as a natural experiment to investigate this phenomenon.FindingsWe observe several consistent results. CBs with high institutional ownership and high insider ownership exhibited a negative relationship with abnormal returns. Univariate results indicate that there is a negative relationship between ERM and CB. However, multivariate results controlling for other known factors which impact returns indicate no relationship between ERM implementation and value for CBs. Finally, we find evidence the market considers CBs to have less risk of failure or exposure to regional banking contagion, as CARs are positive when using a regional bank index as the market model benchmark.Research limitations/implicationsThese results call into question the value of ERM for CBs.Originality/valueThese results call into question the value of ERM for CBs. This is the first paper to explore ERM value within CBs using a natural experiment approach.

Audit quality and earnings management: evidence from rural and community banks in an emerging economy

PurposeThis paper provides insights into the impact of audit quality on restraining earnings management of rural and community banks (RCBs) in an emerging economy.Design/methodology/approachA two-step generalised method of moments, absolute discretionary accruals using the modified Jones model, and multivariate regression are used to test 215 firm-year observations of 43 RCBs in Ghana.FindingsThe findings suggest a positive association between audit quality, proxied by audit firm ranking, in restraining earnings management. Specifically, the association is significant for B1-ranked audit firms and higher than B-ranked audit firms, whose observed discretionary accruals to total assets ratio is 36.6% higher than B1. Also, a negative statistically significant relationship is found between auditor specialization and earnings management, as RCBs that engage specialized auditors are found to have a lower ratio of discretionary accruals to total assets than RCBs that engage unspecialized auditors.Research limitations/implicationsRCB’s annual reports data for the research was from 2014 to 2018. The 2019 and beyond annual reports data could not be added because the study was conducted during 2019 first quarter, by which time the year had not ended, and that constrained the sample size.Practical implicationsEvidence from this study has policy implications for regulators and audit monitors in their efforts to improve AQ and minimise financial misreporting through the ranking of audit firms. As RCBs are encouraged by the findings to engage the services of higher-ranked audit firms, lower ranks will eventually be encouraged to improve quality performance in a bid to improve their ranking, which will consequently help in the minimisation of financial manipulations in RCBs financial reporting. The contemporary approach of ranking audit firms into A1, A, B1, B, C and D increases competition in the audit market space in improving quality audits more than the traditional approach of dividing audit firms into only big-4 and non-big-4. There is also a need for regulators to encourage RCBs to engage auditors who have specialized in the RCB sector so that their experience can be leveraged in minimizing EM.Originality/valueTo the best of the authors’ knowledge, there is no academic study that explores the impact of audit quality proxied by audit firm ranking and auditor specialisation, on earnings management using hand-collected data sets from non-listed rural banks in an emerging economy. The paper, therefore, fills a research gap in rural financial institution auditing literature.

Multiple disturbances, multiple legacies: Fire, canopy gaps and deer jointly change the forest seed bank

Abstract Disturbance regimes, like low‐intensity fire, canopy gaps and ungulate browsing, play a critical role in determining ecological composition and structure in temperate forests around the world. Each disturbance (or lack thereof) can lead to unique plant communities, but we do not understand how combined disturbances change plant diversity and the resulting soil seed bank. Changes in the soil seed bank, which depend on the plants that survive post‐disturbance, can then influence future biodiversity and succession. We used a long‐term experiment in West Virginia, USA, that factorially manipulated low‐intensity fire, deer exclusion and canopy gaps. Thirteen years after disturbance initiation, we sampled the seed bank from each disturbance treatment. We found that low‐intensity fire led to increased seed bank density, with additional canopy gaps and deer exclusion each creating unique seed bank communities. Combined fire, canopy gaps and deer presence led to high seed bank diversity and the most unique seed communities, while canopy gaps and deer had no effect on seed banks unless the area was previously burned. In contrast, combined fire, canopy gaps and deer exclusion led to the lowest seed bank diversity of all treatments, reflecting the continued legacy of extant plants that grew immediately after disturbance. Seed communities were also distinct from extant understory species over 13 years, regardless of disturbance treatment. Each reintroduced disturbance combination left a unique legacy in the seed bank that will likely influence future forest reorganization following disturbances, adding to our understanding of how multiple disturbances influence forest succession and organization. Synthesis. Forest disturbance regimes have changed around the world and are being restored or manipulated to support biodiversity. Reintroduction of disturbance leads to unique plant communities, but we do not understand how combined disturbances change the soil seed bank. Using an experiment that manipulates low‐intensity fire, canopy gaps and deer exclusion, we find that combinations of these experimental treatments leads to substantially different seed communities. These disturbance‐altered seed banks will likely influence future biodiversity and successional patterns, highlighting how the restoration of disturbance can strongly and indirectly influence temperate forest community dynamics.

Exploring the Mediating Role of New Product Performance in the Link between Service Innovation and Organizational (Financial and Non-Financial) Outcomes in Ghanaian Banks

This study examines the mediating role of new product performance in the relationship between service innovation and both financial and non-financial performance in selected banks in Ghana using the dynamic capability theory as the theoretical lens. The study employed a descriptive research design to frame the study’s methodology. The target population consisted of 159 commercial and community banks in Ghana. Utilizing a quantitative research approach, a structured questionnaire was used to gather data from 113 sampled respondents through purposive sampling, Structural Equation Modeling (SEM) was employed to analyze the data and assess the proposed relationships. The results reveal that service innovation has a direct and positive impact on the financial performance of banks, with a b coefficient of 0.316, affirming its importance in enhancing profitability and market share. However, the relationship between service innovation and non-financial performance was negative. Despite this, new product performance emerged as a significant mediator, strengthening the positive impact of service innovation on financial performance, with a b coefficient of 0.245 and a t-statistic of 2.409. The mediation effect of new product performance on the relationship between service innovation and non-financial performance was also validated, indicating that while service innovation alone may negatively affect non-financial outcomes, introducing successful new products can mitigate this impact. These findings contribute to the understanding of how service innovation influences different aspects of organizational performance in the banking sector. The study offers practical insights for bank managers, emphasizing the need to focus on new product development to maximize service innovation's benefits.

Impact of Human Resource Development Practices on Employee Performance in Ghana's Community Banking Sector

Aim – This study investigates the influence of Human Resource Development (HRD) practices on employee performance in community banks, with a specific focus on the mediating role of employee competence. Design/methodology/approach – The study adopted an explanatory research design aligned with a positivist epistemology. Data was collected over three months using a self-administered questionnaire distributed to a sample of 254 employees selected through a stratified random sampling technique from the three leading community banks in Ghana's Ashanti region. Partial Least Squares Structural Equation Modeling (PLS-SEM) analysis was then employed to analyze the collected data. Findings – The analysis revealed significant positive relationships between HRD practices and both employee performance and competence. Furthermore, the study confirms that employee competence mediates the relationship between HRD practices and employee performance. Limitation – The study employs a cross-sectional design, limiting the ability to establish definitive causal relationships. Practical implications – Community banks can leverage this research to design and implement targeted HRD programs that enhance employee skills and knowledge, leading to improved performance and ultimately contributing to the financial well-being of rural communities. Findings on the mediating role of employee competence suggest that HRD practices should go beyond just training and development, encompassing initiatives that foster a learning culture and encourage knowledge application within the organization. The study's focus on community banks in Ghana extends the generalizability of HRD practices research to developing economies, informing HR strategies for these institutions. Originality/value – This study emphasizes the vital role of well-planned HRD interventions in community banks, specifically in enhancing employee skills and knowledge for improved organizational performance. It provides valuable insights into HRD practices within these institutions, highlighting its potential to drive financial inclusion and support economic growth in rural areas. Additionally, the study advances knowledge on HRD-performance dynamics in an underexplored context: community banks in developing economies.

Threats to the security of banking activities in modern Russian practice

Among other sectors of the Russian economy, the banking sector is one of the most dynamically developing. Consequently, its resistance to various shocks and possible threats will be one of the central points of support for the economic security of the state. Modern statistics show an increase in various types of incidents in the financial sector. Regular monitoring and detailed analysis of fraudulent schemes will minimize the possibility of criminal manipulation, thereby significantly reducing the number of risks and the amount of financial losses.The presented article provides a structural and geographical analysis of incidents in the financial sector recorded in 2023, and a sketch of the modern landscape of possible threats is compiled. The optimal approach to the formation of information and economic security of personal and financial data, in particular, and banking activities in general, involves comprehensive protection measures both from the point of view of the individual user and from the position of representatives of the banking community and the regulator.

On the efficiency of US community banks around the COVID-19 outbreak

ABSTRACT This paper examines how the COVID-19 pandemic affected the efficiency of 569 publicly traded community banks in the United States. Using a slacks-based measure (SBM) DEA modelling framework, we analyze quarterly data around the pandemic outbreak to estimate overall technical efficiency, pure technical efficiency, and scale efficiency scores. We use four assessment perspectives: general, loan-volume focused, loan-income focused and income-focused models. Additionally, we incorporate credit risk adjustment in loan and income-focused models. Our findings indicate that U.S. community banks enhanced their efficiency during and after COVID-19, surpassing pre-pandemic levels. Managerial efficiency drove this improvement. Adjusting for default risk weakened efficiency improvements, revealing a more accurate picture of efficiency changes during and after the pandemic.

Inside the Boardroom: Evidence from the Board Structure and Meeting Minutes of Community Banks

Community banks are critical for local economies, yet research on their corporate governance has been scarce due to limited data availability. We explore a unique, proprietary dataset of board membership and meeting minutes of failed community banks to present several stylized facts regarding their board structure and meetings. Community bank boards have fewer members and a higher percentage of insiders than larger publicly traded banks, and experience little turnover during normal times. Their meetings are held monthly and span about two hours. During times of distress, community bank boards convene less often in regularly scheduled meetings in lieu of impromptu meetings, experience higher turnover, particularly among their independent directors, and their meeting tone switches from neutral to significantly negative. Board attention during distressed times shifts towards discussion of capital and examination oversight, and away from lending activities and meeting formalities.

Small-business owners and their choice of banks: Some lessons from the banking literature and game theory in the aftermath of the COVID-19 pandemic

ABSTRACT Finance textbooks treat banks as homogenous institutions. Intuition suggests that small businesses should interact with large banks, given the latter’s ability to diversify risk. Large banks are involved in transactional banking as part of their business relationships, and small and community banks use soft information and value long-term relationships with borrowers. During the recent COVID-19 pandemic and the subsequent Paycheck Protection Program lending, large banks supported bigger businesses while small and community banks supported small businesses. To investigate this phenomenon, we focus on the U.S. experience and conduct a game theory analysis. Based on the results, we recommend that small businesses develop long-term relationships with small and community banks, which are more likely to use soft information and support the small businesses during a crisis.

An investigation of the predictors of credit risk among Ghanaian rural banks

This study investigated the predictors of credit risk in rural and community banks (RCBs), and the effects of rural banking in the Ashanti Region of Ghana. The study examined the correlation between credit risk as the dependent factor and a set of 8 systemic and unsystemic factors of credit risk as independent variables. The systemic variables were GDP growth rate, interest rate, inflation rate and unemployment rate. The unsystemic factors analyzed were branch network, total assets, return on assets and capital adequacy ratio. Secondary data was collected from 15 RCBs which were selected through purposive sampling, stratified random sampling and simple random sampling. Data collected was analyzed using Microsoft Excel and STATA software applications. Dataset ranged from the year 2008 to 2017. Descriptive statistical analysis, correlational analysis and regression analysis were undertaken. The study found that, return on assets, branch network and size were the significant unsystemic predictors of credit risk whilst interest rate, inflation and unemployment were the significant systemic predictors of credit risk in RCBs in Ghana. Furthermore, the study revealed that RCBs have had considerable positive impact on the communities where they operated. Managers of RCBs must consider pursuing a strategy of branch expansion and improving efficiency of staff because of the moderating effects of these factors on credit risk. This study contributed to the understanding of the relationship between unsystemic predictors of credit risk and systemic predictors of credit risk in RCBs, as intervening variables.

Effects of Acmella radicans Invasion on Soil Seed Bank Community Characteristics in Different Habitats.

To examine the effects of the recent Acmella radicans invasion on plant community and diversity in invaded habitats, the composition, density, species richness, diversity indices, and evenness index of the soil seed bank community of two different habitats (wasteland and cultivated land) in Yunnan Province, China, were analyzed through field sampling and greenhouse germination tests. A total of 28 species of plants belonging to 15 families and 28 genera, all annual herbs, were found in the soil seed bank. Seed densities and species number in the seed bank tended to be greater in April than in October; cultivated land also featured higher seed densities and species numbers compared to wasteland. With increased A. radicans cover, the seed bank population of A. radicans also significantly increased, but the seed bank populations of many other dominant species (e.g., Ageratum conyzoides and Gamochaeta pensylvanica) and native species (e.g., Laggera crispata and Poa annua) clearly declined. The germination of A. radicans seeds was concentrated during the period from the 4th to the 5th weeks. Vertically, the seed number of A. radicans was significantly different among the 0-5 cm, 5-10 cm and 10-20 cm layers that accounted for 80.7-90.6%, 9.4-16.1% and 0.0-3.2% of the total seed density in wasteland, respectively; and in cultivated land, A. radicans accounted for 56.8-64.9%, 26.7-31.8% and 8.1-13.5% of the total seed density, respectively. With reduced A. radicans cover, the species richness, Simpson index, Shannon-Wiener index, and Pielou indices of the weed community generally increased, and most diversity indices of weed communities in cultivated land were lower than in wasteland under the same cover of A. radicans. The results indicate that the invasion of A. radicans has negatively affected local weed community composition and reduced weed community diversity, and that these negative impacts in cultivated land may be enhanced by human disturbance. Our study was the first to elucidate the influence of A. radicans invasion on soil seed bank community characteristics in invaded habitats, providing a better understanding of its invasion and spread mechanisms in order to aid in developing a scientific basis for the prevention and control of this invader.

Fertility and tillage intensity affect weed community diversity and functional structure in long-term organic systems.

Knowledge of how agricultural management interacts with weed seed banks and emergent weed communities is crucial for proactive weed management. Though studies have detailed how differences in disturbance and nutrient applications between organic and conventional herbicide-based systems affect weed communities, few have focused on these same factors in contrasting organic systems. This study assessed the seed banks and emergent weed communities from the most recent crop rotation cycle (2017-2022) of a long-term experiment, which compared four organic grain and forage cropping systems differing in nutrient inputs and soil disturbance. The high fertility (HF) system received high-rate nutrient applications, low fertility (LF) received low-rate applications, enhanced weed management (EWM) focused on weed control through frequent soil disturbance, and reduced tillage (RT) prioritized soil health with less intense or frequent soil disturbance. Soil samples for greenhouse germination assays were collected at the beginning (2017) and end (2022) of the rotation to explore how these four systems influenced seed bank dynamics over time. Weed community biomass was also sampled in each crop during this time. Treatment effects on weed abundance, taxonomic diversity, and community-weighted means and functional dispersion of weed traits were analyzed with generalized mixed-effect models. The RT system had the highest weed seed bank taxonomic diversity, and EWM had the lowest. RT and LF had higher functional dispersion of traits than HF in the seed bank. Weed seed bank communities in HF and RT were characterized by short, small-seeded, and early germinating weed species. However, seed banks were also labile: Differences between systems in seed density and all other mean trait values were dependent on the crop, which preceded seed bank sampling. Likewise, differences among emergent weed communities in the four systems depended on an interaction between crop species and their planting year. Results suggest that resource availability and intensity of disturbance act as weed community assembly filters in organic cropping systems. Organic growers seeking to design systems that balance weed management and production goals can use relatively low soil disturbance and nutrient application to increase weed community taxonomic or functional diversity without necessarily increasing weed biomass or seed bank density.

Corporate Social Responsibility, Bank Size and Customer Trust amongst Commercial Banks in Kenya

Despite the commercial banks’ significant position in Kenya's ever growing economy there is limited study on the influence of Corporate Social Responsibility (CSR) on consumer trust in the commercial banking industry. This study therefore sought to explore the impact of Corporate Social Responsibility (CSR) on customer trust in the commercial banking sector of Kenya. With focus on commercial banks, this research delved into how community investment, sustainable initiatives, stakeholder engagement, social welfare, and bank size influence customer trust. This study was anchored on Stakeholder Theory. A correlational research design was employed, targeting all the 39 commercial banks in Kenya. The analysis was centered on the banks as units of analysis, while observations were drawn from both customers and bank managers. The study used stratified sampling to select 384 bank customers population exceeding 1 million. Data was gathered through structured questionnaires and Key Informant Interview (KII), ensuring reliability and validity through Cronbach’s Alpha test and content/construct validity testing. Analysis was conducted using descriptive and inferential statistics, including regression analysis and ANOVA. The results were presented on tables, charts and bars. The findings revealed a coefficient of determination (R²) of 0.605 indicating that the CSR activities used in this study explain 60.5% of the variation in customer trust, suggesting a strong relationship between CSR and customer trust. The regression analysis demonstrated significant positive effects, with community investment (β = 0.354, p = 0.000), sustainable initiatives (β = 0.235, p = 0.003), stakeholder engagement (β = 0.275, p = 0.000), and social welfare (β = 0.329, p = 0.000) all positively influencing customer trust. Based on the findings, the study concludes that corporate social responsibility (CSR) activities, including community investment, sustainable initiatives, stakeholder engagement, and social welfare, significantly influence customer trust among commercial banks in Kenya. In view of the findings, the study recommends that commercial banks in Kenya should continue to invest in CSR activities as a strategic approach to enhance customer trust and loyalty. Policymakers should create supportive regulatory frameworks that encourage banks to adopt comprehensive CSR practices. Keywords: Corporate Social Responsibility, Community investment, Sustainable initiatives, Stakeholder engagement, Social welfare, Bank Size, Customer trust.

Corporate Social Responsibility, Bank Size and Customer Trust amongst Commercial Banks in Kenya

Despite the commercial banks’ significant position in Kenya's ever growing economy there is limited study on the influence of Corporate Social Responsibility (CSR) on consumer trust in the commercial banking industry. This study therefore sought to explore the impact of Corporate Social Responsibility (CSR) on customer trust in the commercial banking sector of Kenya. With focus on commercial banks, this research delved into how community investment, sustainable initiatives, stakeholder engagement, social welfare, and bank size influence customer trust. This study was anchored on Stakeholder Theory. A correlational research design was employed, targeting all the 39 commercial banks in Kenya. The analysis was centered on the banks as units of analysis, while observations were drawn from both customers and bank managers. The study used stratified sampling to select 384 bank customers population exceeding 1 million. Data was gathered through structured questionnaires and Key Informant Interview (KII), ensuring reliability and validity through Cronbach’s Alpha test and content/construct validity testing. Analysis was conducted using descriptive and inferential statistics, including regression analysis and ANOVA. The results were presented on tables, charts and bars. The findings revealed a coefficient of determination (R²) of 0.605 indicating that the CSR activities used in this study explain 60.5% of the variation in customer trust, suggesting a strong relationship between CSR and customer trust. The regression analysis demonstrated significant positive effects, with community investment (β = 0.354, p = 0.000), sustainable initiatives (β = 0.235, p = 0.003), stakeholder engagement (β = 0.275, p = 0.000), and social welfare (β = 0.329, p = 0.000) all positively influencing customer trust. Based on the findings, the study concludes that corporate social responsibility (CSR) activities, including community investment, sustainable initiatives, stakeholder engagement, and social welfare, significantly influence customer trust among commercial banks in Kenya. In view of the findings, the study recommends that commercial banks in Kenya should continue to invest in CSR activities as a strategic approach to enhance customer trust and loyalty. Policymakers should create supportive regulatory frameworks that encourage banks to adopt comprehensive CSR practices. Keywords: Corporate Social Responsibility, Community investment, Sustainable initiatives, Stakeholder engagement, Social welfare, Bank Size, Customer trust.

Waste management through a waste bank based on entrepreneurial readiness in Ngalang Village

This research describes entrepreneurial readiness in the waste bank community at Ngalang Village, Gunungkidul Regency. This study is qualitative phenomenological research. This study's respondents were six administrators and members of the waste bank community in Ngalang Village, Gedangsari, Gunungkidul. Respondents were selected using a purposive sampling technique with the characteristics of the respondents: administrators and members of the Ngalang Village waste bank, do not have a permanent job, have an active status, and have been involved for at least one year. The data analysis employed in this research is content analysis. The results of the study show that the entrepreneurial readiness of the waste bank community in Ngalang Village has the skills needed in business, is courageous in dealing with and anticipating business failures, has a social network community that supports business activities, can see business opportunities, and prepare business development plans. In addition, in the waste bank community, they can prepare physically, mentally, and spiritually, have strong personalities, are willing to develop their skills, prepare for business activity, and prepare themselves for marketing the products. This entrepreneurial readiness will eventually become the principal capital in starting a business in the waste bank community.

Lending discrimination and the role of community banks

Lending discrimination and the role of community banks

On the issue of the security of bank payments in modern Russian practice

he interaction of the banking sector with the external environment (which is not always favorable) determines the possibility of new threats, financial losses and, as a result, the need to use tools to ensure the security of bank payments. Its development is a priority task for the banking community and falls within the sphere of interests of each participant in the settlement and payment segment. In this publication, a dynamic and factor analysis of the number and volume of fraudulent transactions with bank customers' funds is carried out. It is possible to reduce their number thanks to the joint actions of IT specialists and employees of the security services of banks, telecom operators, law enforcement agencies, and the regulator. To achieve greater efficiency in protecting client funds, the entire arsenal of available methods should be used, starting from the simplest, such as training in selfsecurity skills, and ending with complex scientific, methodological and technological methods.

The need to address limited access to capital and strengthen entrepreneurial ecosystems in order to increase black new venture creation

PurposeRacial wealth inequality is a significant and growing issue in the USA. Improving the lagging rate of black new venture creation and successful entrepreneurship could help close the gap. The purpose of this paper is to focus needed attention on the financial challenges resulting from institutional and systemic discrimination that black entrepreneurs must deal with. Following this literature review, the paper makes recommendations and broad public policy suggestions.Design/methodology/approachThis study conducts a literature review and discusses the myriad of reasons black entrepreneurs struggle with inadequate access to capital, with special emphasis on weaker entrepreneurial ecosystems that have resulted from systemic racism.FindingsThe paper sheds light on several factors which continue to directly impede successful black entrepreneurship including discrimination in lending, distrust in institutions, over-reliance on (inadequate) personal capital and declining black-owned banking and financial institutions, as well as community banking options in black communities.Research limitations/implicationsThe paper is conceptual and relies on prior literature. The proposed solutions are just a starting point and are certainly not meant to be all-inclusive or comprehensive. Much future research, particularly longitudinal research, is needed to further develop theory and specific public policies which can close the disparities this study has discussed. This study outlines several key areas in need of further quantitative and qualitative studies to better understand black entrepreneurship.Practical implicationsThe US economy will increasingly suffer if the nearly 15% of population (and growing) made up of black communities continues to struggle. The broad-based policy solutions proposed in this paper would allow for increased access to capital that would address the long-term deficiencies and help to close the racial wealth gap.Social implicationsThrough this study’s broad-based potential solutions, entrepreneurial ecosystems can be strengthened to build the environment for successful new venture creation in black communities. The longer-term benefit would be increased tax revenues, improved communities with fewer individuals needing support through government assistance and greater social stability as economic gaps between various racial groups are closed.Originality/valueUsing a broader entrepreneurial ecosystem framework and a systemic racism theory lens, this study discusses the limited capital black entrepreneurs have access to. Following this literature review, this study offers broad-based policy solutions that can strengthen ecosystems and directly address the issues raised in the paper.

Measuring climate transition risk at the regional level with an application to community banks

We develop a measure of climate transition risk for regional economies in the U.S., based on the mix of firms that produce emissions in each region. To quantify transition risks, we consider the introduction of an emissions tax levied on companies emitting greenhouse gases and estimate changes in the market values of industries due to a carbon tax using Merton's (1974) model. We find that transition risks are highly concentrated in a few sectors and counties with heavy exposures to transition-sensitive sectors. The size and geographic concentration of the tax effects depend significantly on assumptions about the elasticity of demand for inputs in the production chain. When applying county-level estimates for transition risks to banks’ deposit footprint, we find mild to moderate transition risks for community banks as a whole, although transition risks are high for a few banks.

Does uniqueness matter for community banks?

Does uniqueness matter for community banks?