Instability In Banking Sector Research Articles

THE ROLE OF DIGITAL MEDIA FOR DIGITAL TRADE IN BANKING SERVICES IN A VOLATILE ENVIRONMENT

In the 21st century, the European banking system is going through a period of fundamental structural changes caused by global challenges that will determine its future ability to serve the financial needs of the economy on digital platforms. The aim of this research is to study how electronic social media influence the effectiveness of e-banking in the context of banking sector instability. The empirical model for determining the impact of digital media was developed on the basis of theoretical concepts and tested on a sample of 307 respondents from banking institutions (UniCredit, Raiffeisen, PrivatGroup) and 2,800 consumers of banking services through quantitative methods, as well as economic and statistical calculation methods. The obtained results show that digital social media have a quite strong effect (r=0.788) on creating consumer loyalty and increasing indicators of digital trade in banking services. The theoretical significance of this study is the synthesis of scientific approaches to the creation of a conceptual method for determining the effectiveness of engaging digital media resources as a marketing tool for improving the effectiveness of digital trade in banking services. The key practical aspect is the combination of theoretical approaches and business experience in optimizing and improving the use of electronic social media in the trade in banking services in a difficult period of economic development.

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.

U.S. banks’ lending, financial stability, and text-based sentiment analysis

We examine the impact of investor sentiment on bank credit and financial stability. We also investigate how loan growth may affect bank stability. We use a large panel data set of U.S. commercial banks over the period 1999Q1–2015Q4, using bank-level data. Investor sentiment is proxied by two novel but alternative measures based on textual analysis. First, we employ the sentiment measure constructed by García (2013) based on the fraction of positive and negative words in two columns of financial news from the New York Times. Second, we employ the text-based measure of uncertainty constructed by Manela and Moreira (2017) called News Implied Volatility, which uses front-page articles of the Wall Street Journal. The results show that banks’ lending falls when investor sentiment is low, while this effect is more pronounced when banks hold a higher level of credit risk. These effects are more pronounced during recessions with loan growth also responding negatively to the anxiety of investors throughout recessions. Finally, we show that the Great Financial Crisis had a negative effect on investor sentiment leading to a decline in U.S. lending behavior and an increase in the U.S. banking sector instability.

Effects of Bank Specific Factors on Stock Returns of Listed Commercial Banks in Kenya

The objective of this study was to establish the effects of bank specific factors on stock returns of listed commercial banks in Kenya, with four specific objectives; to determine the effect of capital adequacy on stock returns of listed commercial banks in Kenya, to determine the effect of asset quality on stock returns of listed commercial banks in Kenya, to determine the effect of earnings ability on stock returns of listed commercial banks in Kenya and to determine the effect of liquidity on stock returns of listed commercial banks in Kenya. The Kenyan banking sector instability within the stock market has been of great concern as depicted by continuous fluctuations in the stock prices of listed banks. Studies undertaken in other stock markets displayed mixed findings and much concentration has been on the United States, Turkey and Indonesian stock markets. Hence, a study providing a Kenyan perspective on the link between banks’ internal environment and stock returns of listed banks was crucial. The study was based on market portfolio theory, efficiency structure hypothesis and the buffer capital theory. The research targeted all the 11 listed commercial banks at the Nairobi Securities Exchange. Quarterly data was collected for the period 2010-2019. A pooled panel regression model was used in the estimation of the significance of the impact of the variables. Findings of the research established that capital adequacy and earnings had a significant effect on stock returns. The study recommends that commercial banks should improve their capital base and expand their asset quality through better loan management.

Banking Sector Instability and Economic Growth: Evidence from Turkey

The banking sector, an important component of the financial system, can affect the economic growth through raising and mobilizing the savings, channeling the funds to the productive uses and enhancing the efficiency. However, the deteriorations in the banking sector stability may negatively affect the economic growth through preventing the efficiently functioning of the aforementioned interaction channels. This study investigates the effect off banking sector instability and banking sector development on the economic growth in Turkey during August 2006-December 2018 through time series analysis. We revealed that the banking sector instability negatively affects the economic growth, but banking sector development positively affects the economic growth.

Regional banking instability and FOMC voting

Abstract This study analyzes if regionally affiliated Federal Open Market Committee (FOMC) members take their districts’ regional banking sector instability into account when they vote. Considering the period 1979–2010, we find that a deterioration in a district's bank health increases the probability that this district's representative in the FOMC votes to ease interest rates. According to member-specific characteristics, the effect of regional banking sector instability on FOMC voting behavior is most pronounced for Bank presidents (as opposed to Governors) and FOMC members who have career backgrounds in the financial industry or who represent a district with a large banking sector.

Changes in monetary policy after the crisis - towards preventing banking sector instability

The instability of the banking sector has become the subject of wider scientific research during the global financial crisis. The financial crisis of the first decade of the twenty-first century began in the U.S. subprime mortgage market and quickly spread to the whole banking sector in the United States as well as in many countries of the global economy. Among five major American investment banks - Lehman Brothers went bankrupt, Bear Stearns and Merrill Lynch were taken over by other banks, and Goldman Sachs and Morgan Stanley were transformed into commercial banks, which were covered by the supervision and regulations of the central bank - the Federal Reserve System. The consequences of the global financial crisis also affected British banks, including The Royal Bank of Scotland, Lloyds Bank, Halifax, Abbey Bank, Barclays Bank and NBC Bank. In Iceland, during the global financial crisis which affected the Icelandic banking sector, three largest banks: Glitnir Bank, Landsbanki and Kauphting were nationalized, which means that the control was taken over by their government. It has caused, that reflections and scientific research on financial stability were replaced by the study of instability in particular in relation to the banking sector. The main aim of the study is to identify the general framework of the response system of central banks on the phenomenon of banking sector instability, in the context of preventing it in a long term. Current - the traditional system proved to be ineffective, because it did not prevent the spread of the factors that led to the destabilization of the banking market

Who should supervise banks for the banking sector stability?

We empirically examine by whom the commercial banks should be supervised for the stability of a banking sector. With a cross-sectional dataset from 78 countries and using a logit estimation model, we find that the probability of the instability of a country’s banking sector reduces if the commercial banks are supervised exclusively by the country’s central bank. This probability is even higher if the central bank can conduct its supervision in a less-corrupt institutional environment. Finally, by carrying out some counter-factual thought experiments, we confirm that banking supervision causes banking sector instability, not vice versa.

Larger crises cost more: Impact of banking sector instability on output growth

We propose a method for calculating the macroeconomic costs of banking crises that controls for the downward impact of recessions on banking activity. This method uses an event-study approach and a multiple-equation identification and estimation technique. In contrast to earlier research, we estimate the cost of crises based on the size of banking crises. The extent of a crisis is measured using banking sector aggregates. The results, based on our method and data from over 100 banking crises, suggest that it is the size of the crisis that matters for economic growth. Lower credit and money growth during crises cause GDP growth to decline.

The Czech transition banking sector instability: the role of operational cost management

In this article we show—using the estimated cost efficiency of banks—that besides the risk (proxied by the share of non-performing loans), the quality of operational cost management was an equally important determinant of bank failure risk during the decade of banking sector transformation in the Czech Republic.