Bank Ownership Research Articles

Liquidity creation by Islamic and conventional banks during the Covid-19 pandemic

This study investigates how liquidity has been created during the Covid-19 pandemic and examines the different behaviours to create liquidity for different types of bank ownership. Monthly panel data of 85 Indonesian Islamic and conventional banks are utilized to capture the time periods before and during the pandemic. The estimated regression model applies one period lag for all independent variables to reduce any endogeneity problems. The results indicate that overall banks created less liquidity during the pandemic. This finding implies that adding assets is not an effective strategy to create liquidity since banks transferred assets into safer investments during the pandemic. However, Islamic banks created more liquidity, especially when off-balance sheet activities are not included in the liquidity measurement. This phenomenon validates the unique market structure of Islamic banks, which must comply with Sharia law and avoid holding and trading prohibited assets. On the liability side, the deposits of these banks will be more liquid due to their depositors’ religiosity and risk preferences. This study further indicates that the government-owned bank generated more liquidity than other ownership types. These results imply that the government successfully rescued the economy during the pandemic through the use of economic stimuli.

Banks Ownership and Development Indicators Prior to the COVID-19 Pandemic. A Comparative Study

Theoretical background: The role of banks in the economy has attracted scientific interest for many centuries now. Generally speaking, the relationship between financial development and economic growth has been widely discussed. Many studies investigated the links between the development of the financial sector and a given country’s social and economic growth using econometric methods such as cross-section, time series, panel data, company-level, industry-level and country level. The banking sector is an integral part of the economy and plays a key role in its development. Purpose of the article: The ownership status of financial institutions is not neutral for themselves or for their clients. The research problem deals with analysing the impact of ownership changes in the banking and insurance sector on the economic and social development of selected countries, especially in Poland, measured with basic macroeconomic indicators. The article attempts to verify the hypothesis that the ownership structure in banking and insurance institutions has, contemporarily, no significant impact on the socio-economic development indicators, provided that these institutions are guided by business- rather than policy-based criteria in their decision making process. Research methods: Both qualitative and quantitative research was used to empirically verify the hypotheses in question. Qualitative research is based on descriptive analysis while quantitative research will include statistical information systemization method, based on statistical source data analysis, and static dependence methodology, including fixed effects and random effects panel models. Main findings: Literature studies and research show that moderation and pragmatism are needed in the financial sectors of EU countries, including Poland. We need both public (including state-owned) financial institutions (banks and insurers) and those controlled by private capital. It seems that today it would be difficult to accept that the entire financial sector of a given country would be taken over by public institutions – state-owned companies, and the omnipotence of private institutions would also be problematic. The main issue is proportions: instead of the exclusivity of one or the other form of ownership, one has to seek an intelligent balance between them (“this and that” instead of “either-or”).

Insights and Field-level experiences of Non-Performing Loans in Bangladesh: The Case of State-Owned Commercial Banks (SOCBs)

The banking industry of Bangladesh has been facing the most turbulent times of its history due to myriad forms of challenges. The crippling scenario has been contributed by multifarious reasons among others, corrupt loan practices and connected-party lending (i.e., lending to board members’ firm), lack of monitoring, supervision and inefficiencies of board members especially in state-owned commercial banks, monopolization of banks by certain industrialist groups, unprecedented political interferences and non-existent punitive measures for miscreants by the highest regulatory body i.e., Bangladesh Bank. All these reasons coupled with recent implication of single-digit interest rate are putting the banking industry into vulnerable state and thereby losing the trust and confidence of the mass-people. The excessive volume of NPL will possibly jeopardize the profitability of banks and erode the accumulated capital which might lead to the systematic risks of bank failures in the days to come. To this backdrop, the authors intend to shed some lights with a deeper look on the origin and effects of NPL based on a sample of 200-survey respondents and endeavored to explore industry-insights which might be of special interests to bank owners, managements bodies, regulator i.e., Bangladesh Bank (BB) and finally the shareholders. Journal of Business Studies, Vol. XLII, No. 1, April 2021 Page 151-174

Effect of Bank Ownership on the Relationship between Credit Risk and Financial Performance of Commercial Banks in Kenya

Commercial banks in Kenya have faced daunting challenges that touch on various key financial performance indicators and therefore impacting on performance. Credit risk affects the key financial indicators that are likely to impact performance of any lending institution. The main goal of this study was to ascertain the moderating effect of ownership structure on the relationship between credit risk and financial performance of Commercial banks in Kenya. Longitudinal research design was utilized on data from 41 licensed banks in the country. The study relied on secondary panel data and multiple regression was used and analysis was through STATA analytical tool. The study established that bank ownership has a significant effect on the financial performance. The outcome of the study demonstrates that a more diversified ownership structure is helpful in improving bank’s financial performance. Introduction of ownership structure has added knowledge by demonstrating that the link between credit risk and financial performance cannot be studied in isolation.

Financial Literacy and Credit Accessibility of Rice Farmers in Pakistan: Analysis for Central Punjab and Khyber Pakhtunkhwa Regions

This study investigates the factors that affect farmers’ access to Food Security and Agricultural Credit (FSAC) services for the farmers of Pakistan who have no access to banking but have a feasible farm business. Using multiple regressions and logistic analysis, the authors revealed the determinants of farmers’ financial literacy and analyzed the variables which affected the farmers’ accessibility to FSAC. Results indicated that the average financial literacy of respondents was at a moderate level. It was affected by the age of respondents, length of their education, distance to nearby cities, ownership of bank accounts, annual income, and financial education experience. The FSAC accessibility was also impacted by the area of cultivated land, interest rate, collateral, farms’ income, financial literacy index, credit accessibility experiences, the legal status of farmer groups, and the amount of a loan. Some of the issues that prevent farmers from having widespread access to the FSAC include the lack of loan need, lack of FSAC awareness, lack of collateral, loan usury perspective, loan rejection experience, fear of borrowing from the bank, and inactive farmer groups. The study contributes to the existing literature on the determinants of farmers’ access and choice of credit sources by using a primary data set.

Ownership Transformations in a Post-Transition Economy: Which Institutions Matter? Evidence from the Polish Banking Sector

In this article, we investigate what kind of institutions affect bank ownership transformations in a post-transition economy. We use statistical data concerning mergers and acquisitions in the Polish banking sector over the thirty years since the political transformation. Our results indicate the significant role of political and cultural institutional dimensions in stimulating ownership transformation. The importance and current deficits in explaining Polish banking ownership transformations are evaluated through institutional analysis, emphasising the path dependence role and the critical junctures that influence the development of institutions. Identifying which institutions matter the most is crucial for post-reform economies when selecting the most effective policies. Classification codes G21, G32, G34

Stalled by design: New paradoxes in the European Union’s single financial market

ABSTRACT Since the US financial meltdown in 2008 that sparked a Eurozone crisis, the European Union has introduced new financial market initiatives that were intended to advance integration, bring stability, and create shared prosperity for EU members. Innovations included Banking Union, Capital Markets Union, and the European Fund for Strategic Investments. We find, however, that tensions between supranationalization and retaining national control in institutional design diminished incentives for full participation, particularly among the EU’s East Central European members. Uneven levels of foreign bank ownership between East and West Europe, disparities in the depth of capital markets, and varying institutional capacity have often led Eastern member states to opt out. Paradoxically, initiatives intended to advance integration and overcome developmental inequalities have instead compounded national fragmentation and restricted pathways to catching up for some of the EU’s less prosperous members. Thus, European financial integration was stalled by design.

Mobile Banking and Bank Performance: Do Bank Ownership Types Matter?

In Indonesia, mobile banking users and transactions continue to increase. Regulators and banks anticipate that digitalization will improve banking performance and financial stability. In contrast to technology-based financial services or FinTech, the digitization of banking services in Indonesia is considered somewhat tardy. FinTech, which offers digital services, is a threat to banks. Covering 138 commercial banks in Indonesia from 2004 to 2018, this study investigates the influence of mobile banking on bank performance in Indonesia. Additionally, this study investigates whether bank ownership influences the performance-enhancing effects of mobile banking based on bank ownership. A dynamic panel data analysis approach with a two-step GMM system is used to test the hypothesis. This study finds that mobile banking significantly improves bank profitability and stability in Indonesian banking. These results are more significant for private banks. Moreover, digitalization is crucial in the banking sector, particularly with the adoption of mobile banking because it encourages banks, particularly private banks, to perform better than those that do not use mobile banking. This is the first study investigating the impact of mobile banking on banks' performance and financial stability based on bank ownership in Indonesia. Keywords: mobile banking, bank ownership, bank profitability, bank stability. DOI: https://doi.org/10.55463/hkjss.issn.1021-3619.60.7

Presentation of a Conceptual Model for Central Bank Supervision over Banks with a Grounded Theory Approach

Objective: The aim of this research was to present a conceptual model for Central Bank supervision over banks with a grounded theory approach. Method: In this study, the grounded theory research approach based on parametric methods is employed. The statistical population of this research comprises experts and professionals in the field of central banking, capable of providing valuable information to the researcher. Sampling in this research has been conducted purposively. For this purpose, the qualitative samples of this research consist of 15 experts and professionals knowledgeable in the field of central banking. Data analysis of this research has been performed following the procedures of Strauss and Corbin (2011) at the Central Bank. Findings: According to the findings of the current research, factors such as government ownership in banks and changes in bank ownership, the impact of general economic conditions, the role of governance and government in supervision, government intervention in decision-making and management of the banking system, and the necessity of consistency and unity of approach in supervision are influential as intervening conditions on the strategies of the supervisory model. Further, the readiness of managers and experts in the banking system to accept the model, creating economic and social conditions meaning stability in the economic situation based on macroeconomic variables, attention to the characteristics of the banking industry as intermediaries in allocating surplus resources of some economic sectors to others in need of financial resources, and defining a suitable position for the supervisory institution in terms of ensuring the independence of the supervisory body, and providing sufficient authority in supervision were contextual conditions. Then, strategies for the success of the supervisory model were presented, including the identification and assessment of major risks in the banking industry such as credit risk, liquidity risk, market risk, and operational risk, in terms of structure and risk management methods, related analyses, and their impact on the future outlook of each bank's activities. Conclusion: Strategic analyses regarding the distribution of granted loans, commitments, investments in affiliated companies, and the status of bank reserves, assets, and collaterals, and the presentation of precautionary plans during economic shocks or potential crises are among the strategies of each bank.

Does ownership structure affect bank performance in the COVID-19 pandemic period? Evidence from Croatia

This paper investigates the relationship between bank ownership and efficiency before and after the COVID-19 pandemic in a sample of 20 Croatian commercial banks in the period from 2015 to 2020. The interconnection between these variables is examined with the use of a dynamic data envelopment analysis (window DEA) framework. Other goals are to measure the relative efficiency of Croatian banks in the observed period as well as the evolvement of the banking sector as a whole. The findings reveal that domestic banks outperform by little foreign-owned Croatian banks during the COVID-19 crisis year 2020, but, moreover, domestic and small-sized banks have experienced the least negative impact of COVID-19 in 2020. The results regarding the impact of bank size on bank efficiency are inconsistent and require additional study. The used methodology and the findings of this empirical research could be of interest to academic members, bank management and policymakers. The latter should be especially interested in the results and the resilience of domestic and foreign banks to external shocks, in order to re-examine their current bank policies and the national attitude towards attracting foreign capital in the banking sector.

Bank ownership and asset quality in Indian banking: is there a link

Bank ownership and asset quality in Indian banking: is there a link

Bank ownership and asset quality in Indian banking: is there a link

Bank ownership and asset quality in Indian banking: is there a link

Executive compensation, share ownership, and earnings management of banks in Nigeria

Aim/purpose – Higher compensation and increased share ownership are believed to drive fewer earnings management. Therefore, the study examines the moderating impact of share ownership on the relationship between executive compensation and earnings management of listed Deposit Money Banks in Nigeria. Design/methodology/approach – Panel Least Square regression and Stata 13 were used for the estimation. The secondary data source was employed and extracted from the banks’ published financial statements covering the period from 2007-2018. Post- estimation tests, including normality tests of standard error, heteroscedasticity, and mul- ticollinearity, were carried out to validate the outcome. Executive compensation variable is represented by Chief Executive Officer Pay (CEO Pay), Board Chairman’s compensa- tion, and the highest-paid director, while executive share ownership represents the mod- erator variable. Chang et al. (2008) model was used to proxy earnings management. Findings – The findings revealed that CEO Pay increases the banks’ level of earnings management, while after moderation with executive share ownership; CEO pay decreas- es the possibilities of earnings management by banks. Compensation to Chairmen of the banks decreases the level of earnings management of banks. However, an increase in share ownership of the board with an increase in compensation to chairmen of banks’ boards increases the earnings management practices of the management of the banks. Research implications/limitations – The findings imply that the executive ownership interest should be made to align with that of the minority shareholders following an increase in their stake so that they can act in the overall best interest of the owners. The study is limited to only the banking sector and some specific executive compensation variables. Originality/value/contribution – The utilization of the highest paid director variable and use of share ownership as a moderator between executive compensations and earn- ings management. Keywords: earnings management, executive, share ownership, compensation, and expectan- cy theory. JEL Classification: M21, M41, M42, G32.

Functioning trends of the state banks of Ukraine in the current conditions

This article is devoted to the consideration of current trends in the functioning of state-owned banks in Ukraine. The main internal and external problems faced by Ukrainian banking institutions, including state ones, with the beginning of a large-scale invasion and military aggression, are identified. The nationalization and liquidation of banks operating profitably in Ukraine (in particular Alfa-Bank JSC), which was carried out for the first time due to political factors caused by the war, is described. The owners of such banks were citizens of the aggressor country, were under sanctions and could negatively affect the stability of the Ukrainian banking sector.The strategic goals of state banks during the period of martial law and post-war economic recovery are given. The main performance indicators of state-owned banks have been analyzed for the last time. It is noted that state banks attract more than half of all deposits from clients of the country's banking sector, but they invest the majority of their assets in state securities, thus minimizing the risks of their own active operations and helping to finance state budget projects. State banks are leaders in the implementation of state preferential programs, in particular, «Affordable loans 5–7–9%» and «eOselya», which help restore credit and investment financing of economic development processes. The share of state banks in the country's banking sector in various areas of their activity has been determined. The possibilities and potential contribution of state-owned banks to the post-war recovery of the Ukrainian economy are described. It is the state banks that are the leaders in the market of banking services in Ukraine, which enable the state authorities in the extremely difficult conditions of the war to react quickly and implement the necessary changes in the work of the banking sector, with the aim of stabilizing it and influencing the dynamics of monetary policy in the country. Ukrainian state banks work according to a universal business model and cover customer service of all market segments, but potentially they should become state development banks that will contribute to economic growth and sustainable development of our country.

Bank Regulation in the Selected Sub-Saharan African Countries: Dynamics and Trends

Abstract This paper discusses the dynamics of bank regulation in the Sub-Saharan African (SSA) region during the period before the 1990s and post 1990s and describes the trends in bank regulatory measures between 1995 and 2017 using the updated databases of the World Bank’s Bank Regulation and Supervision Surveys. Before the 1990s, bank regulation in the majority of SSA countries was inadequate and that led to multiple occurrences of banking crises. As a result, many countries introduced the financial sector reforms from the late 1980s that included major adjustments in the banking regulatory and supervisory frameworks. In both low-income and middle-income SSA economies, bank regulatory environment became more stringent over time, driven by increased restrictions on bank entry barriers and ownership structure, as well as the introduction of macroprudential policies in the case of the former, while in the case of the latter, it was influenced by more restrictions on bank ownership structure and capital regulation requirements, as well as the adoption of macroprudential policies. Overall, the bank regulatory environment was slightly more stringent in middle-income than in low-income SSA countries over the period under review.

The Implementation of Central Bank Policy in China: The Roles of Commercial Bank Ownership and CEO Faction Membership

The Implementation of Central Bank Policy in China: The Roles of Commercial Bank Ownership and CEO Faction Membership

The Effect of Minority Bank Ownership on Minority Credit

The Effect of Minority Bank Ownership on Minority Credit

Investment in ESG activities and bank performance: does bank ownership matter

Investment in ESG activities and bank performance: does bank ownership matter

The nonlinear effects of ownership concentration and board structure on bank performance

This study looks into the relationships between the banks? ownership structures, the characteristics of their boards, and their performance. A bank?s performance varies depending on a series of different factors. In recent years, the evaluation of performance in the context of corporate governance practices has gained importance. This study considers the issue from the perspective of developed nations, looking at the examples of the United States and the United Kingdom. The findings demonstrate that adopting certain corporate governance practices improves a bank?s performance levels over previous periods. Having a duality in the board structure and increasing its proportion of nonexecutive board members improve a bank?s performance. In contrast, a statistically significant negative relationship was found between bank performance and board size, board members appointed for their specific skills, and the number of board meetings. It was also discovered that there is no linear relationship between the proportion of strictly independent board members on a board of directors and performance. A nonlinear relationship was found between bank ownership concentration and their performance. The discovery of a nonlinear relationship between performance and increasing concentration in a bank?s ownership structure and the proportion of strictly independent board members on its board is a sign that there is an optimal level for these variables.

Does credit diversification drive banks’ cost of intermediation? An empirical exploration

The disparity between the interest rates on loans and deposits is a widely used indicator of how expensive financial intermediation is for a community. The nations which reflect lower intermediation costs have higher levels of banking penetration and financial development (Gupta et al., 2021). This research examines the impact of credit diversification strategy on cost of intermediation of the Indian commercial banks. Additionally, our study shows the moderating role of bank ownership in this nexus. The static and dynamic estimation of panel data of the banks during the period 2014 to 2020 are carried out to analyse this relationship. Our baseline results refute the findings of Bustaman et al. (2016) and Huynh and Dang (2021) and indicate that the more diversified a bank’s credit portfolio, the higher its cost of intermediation. Besides, the results reflect the effect of credit diversification in inflating the cost of intermediation is less severe for the banks with public ownership. Thus, this research emphasizes while promoting a diversified strategy, regulators and bank managers should carefully evaluate the positive impact of credit diversification on banks’ cost of intermediation with a caution that the positive impact is more severe for private sector banks.