Bank Size Research Articles

Cost efficiency of commercial banks in Ethiopia: Does financial technology matter?

This study aims to assess the effects of financial technology on the cost efficiency of commercial banks in Ethiopia. Secondary panel data were collected from the audited annual reports of seventeen commercial banks for twelve fiscal years between 2011 and 2022. The cost efficiency of banks was investigated via a stochastic frontier approach. The findings indicate that commercial banks operating in Ethiopia are efficient in cost management, with an 83% efficiency rate on average. In addition to financial technology, the effects of bank size, interest spread rate, management quality, foreign exchange rate, capitalization and bank ownership are significant for cost efficiency. Notably, financial technology plays a remarkable role in the cost efficiency of commercial banks in Ethiopia. The study results show the presence of a positive association between financial innovation platforms and the cost efficiency of commercial banks. Banking services delivered via card banking, mobile banking, and internet banking improve the cost efficiency of commercial banks in Ethiopia. As a strategic resource, financial innovation in banking operations enhances the cost efficiency of banks by reducing noneconomic costs and the time needed to deliver banking services. To improve their cost efficiency, commercial banks in Ethiopia are encouraged to use financial innovation platforms to deliver financial services and update the current cost management strategy intended to reduce operating costs incurred to generate and collect loans and advances and interest expenses paid to maintain deposits and other interest-bearing liabilities.

Unveiling Efficiency: A Comprehensive Analysis of Indian PSBs through Data Envelopment Analysis (DEA) and Scaling Techniques

In today’s highly competitive and complex banking industry, the long-term viability of banks depends on their ability to operate efficiently. This has become of utmost significance in light of globalisation and liberalisation. The importance of efficiency has become even more evident since India began its financial liberalisation process in 1991, followed by a greater focus on globalisation in the 2000s, the global financial crisis of 2008, and the ongoing effects of the COVID-19 pandemic. These events have highlighted the pressing requirement for efficiency. This article evaluates the effectiveness of public sector banks (PSBs) by utilising scaling techniques and DEA assumptions. The assessment is by designated efficiency indicators and takes into account the banks’ size. The findings suggest that the interest income efficiencies of the majority of banks are typically near optimal levels. Nevertheless, a considerable proportion of banks demonstrate subpar efficiencies in generating non-interest income, failing to meet satisfactory benchmarks. The difference between the efficiencies of interest and non-interest income has a significant impact on the overall efficiency of banks, which brings it closer to acceptable levels. The panel regression analysis reveals that factors such as cost to income, spread, CASA, income per branch, NPAs, and bank size significantly influence the efficiency of banks.

Do Banks Size matter in Competitive Advantage of UK Banks Sector?

Do Banks Size matter in Competitive Advantage of UK Banks Sector?

Capital Structure and Profitability of Public and Government Banks in Nepal

The study will examine how capital structure influences Nepalese public and government bank profitability. The study's statistical analysis utilizes secondary data. Descriptive and casual comparative analysis utilizing bank website data and correlations and multiple regression models for hypothesis testing was done using software. The study sampled 6 public banks and 2 governments from the population. The capital structure and profitability were examined as a cause-and-effect connection utilizing informal comparative study. This study uses NIM as a dependent variable and leverage ratio, bank size, liquidity ratio, and capital ratio as independent variables. Mean, standard deviation, correlation, multiple regression model, and hypothesis testing are statistical methods. Excel and SPSS assess such variables. Leverage Ratio boosts Public Bank NIM but not significantly. Bank Size negatively affects NIM somewhat. NIM and Liquidity Ratio are positively correlated. Public bank NIM is little affected by capital ratio. Leverage Ratio and bank size negatively affect Nepal's government banks' NIM. NIM positively and insignificantly impacts Liquidity Ratio. Capital ratio positively affects government bank NIM. Banks should recognise other variables' importance.

Exploring the Impact of Bank-Specific Internal Factors on the Profitability: A Study of the Banking Sector of Nepal

This study aims to investigate the impact of bank-specific internal factors on the profitability of the banks. The study, which employed an explanatory research technique, used secondary data from major sample merger commercial banks' annual reports for fiscal years 2014 to 2022. The population consists of 20 scheduled banks, with a sample of five merged banks selected purposefully. Bank size, liquidity ratio, dividend payout ratio, capital adequacy ratio and non-performing loans ratio are the five independent variables that the study uses to analyze the association between Return on asset, the dependent variable. The study used descriptive statistics, multiple regression models, and MS Excel for data analysis. The findings indicate that both BS and NPLR have a noteworthy detrimental impact on ROA, whereas LR has a considerable beneficial effect. However, the results revealed no statistical significance for CAR and DPR. The study concludes that among the internal factors analyzed, LR is the most influential factor on bank profitability. These findings provide valuable insights for regulators, bank management, and other stakeholders, highlighting areas for potential performance improvement. The inclusion of macroeconomic aspects with the potential to impact the profitability of Nepalese banks should be further examined.

Impact of Internet Banking on the Financial Performance of Indonesian Banking

This research aims to identify variables that influence bank performance in banking companies listed on the Indonesia Stock Exchange. The addition of the capital adequacy ratio variable as an independent variable is a novel part of this research. This research method includes collecting data from 22 banking companies over a five year period (2019-2023) with a total of 110 data that meet the criteria by applying data processing analysis using panel data regression analysis techniques. The results of this research show that (1) The internet banking variable has a positive and significant influence on financial performance. (2) The loan to deposit ratio variable has no significant effect on financial performance. (3) The bank size variable has a positive and significant effect on banking return on assets (4) The capital adequacy ratio variable has no significant effect on banking return on assets.

EFFECT OF CREDIT RISK MANAGEMENT ON FINANCIAL PERFORMANCE OF NEPALESE COMMERCIAL BANKS

The study aims to investigate the effect of credit risk management on the financial performance of Nepalese commercial banks. For this study, secondary data and descriptive and causal-comparative research methodologies were employed. The E-view-12 student version was used to evaluate the 210 observations of balanced panel data from 15 commercial banks from FY 2010–11 to FY 2022–23. The capital adequacy ratio and credit-to-deposit ratio were shown to have statistically significant and positive coefficients. Both the capital adequacy ratio and the credit-to-deposit ratio have a substantially beneficial effect on the profitability of Nepal's commercial banks, according to the considerable positive coefficients. Therefore, banks should maintain an appropriate capital reserve to absorb a reasonable amount of losses and prioritize improvements in efficiency for expanding their lending and investment activities to enhance the bank’s financial stability and performance. KEYWORDS: Credit to Deposit ratio, Capital Adequacy Ratio, Non-performing Loan Ratio, Bank Size, Return on Assets.

Bank performance, governance structures and ICT investment among rural banks in an emerging economy

PurposeThis paper evaluates how bank dynamics, governance structures and financial sector development drive rural banks’ information and communications technology (ICT) investment in the Ghanaian economy.Design/methodology/approachData for the empirical inquiry were compiled from relevant sources including World Development Indicators (WDI), World Governance Indicators (WGI) and ARB Apex Bank from 2014 to 2020. Prais–Winsten panel corrected standard errors (PW-PCSE) was employed in estimating and verifying hypothesized relationships for the study.FindingsThe results suggest that return on assets (ROA) and bank size improve rural banks’ ICT investment. Moreover, telecommunication development and government effectiveness have significant positive impact on ICT investment among rural banks in the Ghanaian economy. The results further show that telecommunication development has a positive moderating effect on regulatory quality and ICT investment nexus among rural banks in Ghana. Financial development, inflation and liquidity risk were found to negatively affect ICT investment among rural banks in Ghana.Originality/valueThe study is premised on four main motivations; (1) the growing role that ICT plays in development outcomes and firm performance (FP), as well as its potential for comparatively increased penetration among African banks and banking institutions (2) the importance of governance for innovation and investment in ICT, (3) banking regulation and (4) gaps in the literature. Previous studies on ICT investment highlight its impact on profitability but little on determinants of banks’ ICT investment in the emerging market context, especially moderating role of governance and ICT diffusion.

Is Fintech Good for Bank Performance? The Case of Mobile Money in the East African Community

ABSTRACTMobile money, a technology‐driven innovation in financial services, has profoundly penetrated the financial landscape in Sub‐Saharan Africa, including banks. Yet, besides anecdotal evidence, little is known about whether mobile money adoption enhances or worsens bank performance. Combining hand‐collected data with balance sheet data from the Bureau Van Djik (BvD) Bankscope and Bankfocus databases for a panel of 141 banks over the period 2009–2018, we find a strong positive and significant relationship between the time elapsed since banks' involvement in mobile money and their performance considering bank profitability, efficiency, and stability. In further investigations, we explore possible channels by showing how bank size, deposit collection and diversification levels alter such an association. Our results are robust to using instrumental variables, controlling for bank and macro level confounding factors, bank fixed effects and considering alternative measures of bank performance and bank‐MNO partnerships. Overall, our findings highlight the bright side of cooperation between banks and mobile network operators in the provision of mobile money.

Intellectual capital, bank longevity, and size: Pathways to sustainable growth in Saudi banking through competitive advantage

This study aims to investigate the role of Intellectual Capital (IC), Sustainable Competitive Advantage (SCA), Duration Since Firm Establishment (DSE), and Bank Size (S) in fostering Sustainable Growth (SG) in Saudi Arabia’s banking sector. Data were collected from 2012 to 2022 from 10 commercial banks operating in the Saudi Arabian economy and listed on the Saudi Stock Exchange (Tadawul). The research employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to analyze these relationships. Findings indicate that IC significantly enhances SCA (β = 0.639, p < 0.001), which robustly promotes SG (β = 0.473, p < 0.001). Additionally, a significant direct effect of IC on SG was observed (β = 0.674, p < 0.001). A significant relationship is also observed between DSE and SG (β = 0.956, p < 0.001), highlighting the advantage of longstanding establishments in leveraging accumulated resources for growth. However, the anticipated mediating role of IC in the relationship between DSE and SG was not supported statistically (p = 0.075), suggesting the potential for other variables to influence this dynamic relation. The study underscores the pivotal role of intellectual resources in driving competitive advantages and growth sustainability in the banking industry, particularly within the rapidly evolving economic landscape of Saudi Arabia. These findings offer valuable insights for policymakers and banking institutions looking to leverage intellectual assets and competitive positioning for long-term success.

Do ESG Initiatives Improve the Performance of Saudi-listed Banks? The Moderating Effect of Bank Size

This study investigates the influence of bank size on the connection between ESG (Environmental, Social, Governance) initiatives and banks' financial performance in Saudi Arabia. Using data from 10 Saudi Arabian banks spanning 2014 to 2023, we analyze the influence of ESG initiatives by considering various indicators. Specifically, we used social responsibility (SR) initiatives to measure social aspects, environmental initiatives to measure the environmental aspect, and governance mechanisms to measure the governance aspect. Our observations indicate that environmental initiatives, social responsibility initiatives, and gender diversity have notable adverse effects on the return on assets (ROA). Additionally, social initiatives, board gender diversity, board independence, and audit committee activities have a negative impact on return on equity (ROE), whereas the number of board members had a positive impact on ROE. Bank size negatively moderates the relationship between board gender diversity and financial performance and positively moderates the relationship between audit members and ROA. These findings indicate that the impact of ESG initiatives on financial performance may depend on bank size.

Determinants of bank performance: Evidence from the commercial banks in Vietnam

This study analyzes the influence of five primary factors—inflation, capital ratio, deposits, non-performing loans, and bank size—on the performance of banks in Vietnam. Our sample encompasses 26 commercial banks from 2014 to 2023. The analysis incorporates data sourced from commercial banks’ financial statements and annual reports. Our findings indicate that banks with higher capital ratios and sizes generally exhibit superior performance. Moreover, inflation positively influences the performance of Vietnamese commercial banks throughout the selected timeframe. In contrast, non-performing loans and deposits are inverse to bank performance. Our findings offer novel insights into the factors influencing bank performance in a growing economy like Vietnam, along with recommendations for Vietnamese commercial banks and the State Bank of Vietnam to implement effective methods to improve bank performance.

Does market structure mediate relationship between merger and acquisition and performance of Islamic and conventional banks?

Purpose Merger and acquisition (M&A) plays an important role in developing the financial sector. The purpose of the paper is to analyze and evaluate the effects of M&As on the outcome of Islamic and conventional banks. Furthermore, examines the mediating role of market structure between M&A and bank outcome. Design/methodology/approach This paper uses POLS, panel data techniques and structural equation modeling to analyze a set of samples for 24 banks consisting of 10 Islamic banks and 14 conventional banks involved in M&A from 2004Q1 to 2020Q4 from 6 countries. Findings Generally, M&A improves the post-M&A performance of Islamic banks and conventional banks. However, there is size issue. Bank size positively affects Islamic bank performance while conventional does not. Furthermore, market structure mediates the relationship between M&A and the operational performance of Islamic and conventional banks. Implying that after M&A, the market becomes concentrated while it reduces competition. Research limitations/implications Number of banks are limited due to unavailability of data for pre and post-M&A. Future researches can be carried out to study the cross-border M&A along with the regulation between Islamic banks in GCC and Asia Pacific countries. Practical implications Improving operational performance plays a significant role. To enhance the performance of Islamic banking industry, M&A between small Islamic banks could be beneficial depending on the market structure. Originality/value The mediation role of market structure in between M&A and performance for Islamic and conventional banks is the main contribution of the study.

The Scale Dilemma: Investigating the Non‐Monotonic Relationship Between Bank Size and Market Value in Emerging Middle East and North Africa (MENA) Economies

ABSTRACTThis study investigates the non‐monotonic relationship between bank size and market value in the emerging economies of the Middle East and North Africa (MENA) region, with a focus on comparing Islamic and conventional banks. The analysis uses fixed‐effects panel techniques, supported by random‐effects, pooled OLS, and Hausman–Taylor methods for robustness, based on a sample of 161 publicly listed banks across 17 MENA countries from 2009 to 2022. The findings show that bank size positively influences market value initially, indicating economies of scale, but larger sizes lead to diminishing returns, reflecting a non‐monotonic relationship. This pattern is more evident for conventional banks, while the results for Islamic banks are less conclusive, suggesting the need for further investigation. Islamic banks seem to benefit less from economies of scale, possibly due to unique operational and governance challenges. This study fills a gap in the literature on the size‐market value relationship in emerging markets, offering insights into how local conditions and regulations shape bank performance. It also provides a novel comparison between Islamic and conventional banks, enhancing understanding of sector‐specific dynamics. By challenging the linear assumptions of prior research, the study highlights the complex non‐linear effects of bank size, emphasizing the role of agency conflicts and regulatory oversight in managing systemic risks. The research contributes to both empirical and theoretical discussions on banking scale management and agency theory in emerging market contexts.

THE IMPACT OF CAPITAL STRUCTURE ON BANK PERFORMANCE IN TURKIYE

The aim of this study is to examine the impact of capital structure on Turkish banking performance by using panel regression model for the period between 2012 and 2023. The ratio of return on assets (ROA) and return on equity (ROE) are used as a dependent variable which are one of the important indicators of the banking performance. There are 9 bank-spesific and 2 macroeconomic (inflation and economic growth) independent variables in the analysis. Panel data analysis results reveal that the capital structure [Debt ratio (DTA) and Debt to equity ratio (DTE)] negatively impacts business performance (ROA) of Turkish private deposit banks. The financial performance, which is measured by ROA, is significantly and negatively associated with variables such as Non-Performing loan ratio (NPL), credit risk (CIR) and cost management (OA), whereas effect of bank size (BS), economic growt (GDP) and inflation (INF) have positive impact. On the other hand, the effects of DTA, DTE, BS, NPL, CIR, OA and GDP on ROE are significant. Besides, the effects of DTA, BS and GDP are positive, whereas the effect of DTE, NPL, CIR and OA are negative. The study concludes that the capital structure proxies have impact on financial performance of Turkish private deposit banks measured both by return on assets and return on equity.

An Exploration of Corporate Social Responsibility Initiatives in Bangladesh's Private Commercial Banks

This study examined the corporate social responsibility (CSR) initiatives of 18 listed private commercial banks in Bangladesh from 2013 to 2019. Data were collected from annual reports and analyzed using descriptive statistics and Pearson’s correlation. The results indicated that Bangladeshi private commercial banks primarily focus on eight CSR areas, with disaster management being the most significant contributing factor. Islami Bank Bangladesh emerged as the highest CSR contributor, whereas Uttara Bank and Eastern Bank were the lowest. A significantly positive relationship was found between the amount of CSR contribution and bank size. However, higher profitability did not necessarily correlate with increased CSR activities. This research enhances understanding of CSR practices in Bangladeshi commercial banks and provides recommendations for potential avenues for future studies, such as the impact of CSR activities on beneficiaries' lives.

Exploring the Drivers of Bank Risk in State-Owned Commercial Banks

This paper investigates the factors that form bank risks in Bangladeshi state-owned banks. As a representation of bank risk, non-performing loans have been considered the dependent variable for this study. The relevant data have been extracted from six state-owned banks in Bangladesh from 2013 to 2022. The final dataset consists of 60 firm-year observations. The ordinary least square (OLS) regression with robust standard errors model is utilized to find the relationship of bank risks with determinants like asset size, efficiency, liquidity, profitability, leverage ratio, capital adequacy ratio, and loan to asset ratio. The findings say that bank size and loan-to-asset ratio have a highly significant positive relationship with bank risk, whereas profitability, capital adequacy ratio, and bank efficiency have a significant negative association with bank risk. On the other hand, leverage and liquidity are negatively and positively correlated with no statistical significance. To check the study's robustness, another proxy of bank risk, loan loss provision has been used and the results are almost similar. State-owned banks operate in every economy with a different mindset than the general commercial banks. Hence, policymakers should take necessary initiatives based on this study to bring down the high bank risks in state-owned banks in Bangladesh.

COMMERCIAL BANKS OF UKRAINE DURING THE WAR: NEW TRENDS AND OLD PROBLEMS

The article is devoted to the analysis of the peculiarities of the activities of commercial banks in Ukraine during the period of full-scale war. Its purpose is to identify new trends in banking activity and substantiate recommendations for restructuring the work of banks and its state regulation in the post-war period. During the study, a number of hypotheses were tested. It is proved that despite the significant number of commercial banks in Ukraine, the banking services market is actually oligopolistic. Taking into account the fact that state-owned banks, whose share in the total assets of commercial banks reaches 56%, actually pursue a coordinated policy and act as a single entity, the Herfindahl-Hirschman index for the banking sector of Ukraine is more than 3000, which corresponds to an oligopolistic market. This situation is justified for martial law, but it will require changes in the post-war period. The hypothesis that the main factor affecting the size of commercial banks’ assets is monetary aggregates was confirmed. The closest correlation was found between the size of assets and the monetary aggregate M2. This gives reason to recommend regulating this monetary aggregate as a tool for state regulation of banking assets. During the full-scale war, the tendency to change the structure of banking assets, which originated back in 2020, intensified. A sharp decrease in the share of loans granted was noted, while the share of debt securities, mainly government bonds, increased. On the one hand, this is evidence of the success of the implementation of government programs to attract funds from commercial banks for borrowing and covering the state budget deficit, and on the other hand, it distracts the banking system from fulfilling its main function - mobilizing temporarily free funds and providing loans. The high yield of government bonds, the NBU discount rate, which significantly exceeds the inflation rate, make loans inaccessible to business. And since other components of the market infrastructure (for example, joint investment institutions) are underdeveloped in Ukraine, business is actually deprived of the opportunity to attract funds for the implementation of investment projects. A study of the dynamics of bank performance indicators (ROA, ROE) for the period from 2008 to 2024 showed that after the banking crisis of 2015-2018, when the banking system as a whole operated at a loss, in the following years the situation not only stabilized, but also demonstrated that banks received excess profits. This is again a consequence of high interest rates on government securities and the concentration of profits in state-owned banks. Substantiated proposals for changes in state policy in the post-war period, which should revive the lending activities of commercial banks.

Factors Affecting Bank Profitability in Türkiye

The purpose of this study is to examine the factors affecting commercial bank profitability in Türkiye using panel data analysis for the period 2012-2023. In this framework, there are 240 observations of 20 deposit banks in the analysis. Return on assets (ROA) and return on equity (ROE) are used as an indicator of profitability and dependent variables. The results of the analysis show that bank-specific determinants such as bank size, equity size and non-performing loans play a significant impact on bank profitability. Bank size, equity size and inflation play significant and positive role in explain bank profits, while the effect of non-performing loans is negative. It means that the high profitability of Turkish banks is generally associated with well-capitalized banks with high lending capacity and low credit risk with effective cost management is important for the banking system. Finally, the estimated effect of external variables except inflation did not support the significant effect on bank performance.

The relationship between dividend policy and bank size: Evidence from Jordan

The growing need to comprehend how dividend policy affects bank size, particularly in emerging markets like Jordan, makes this study relevant. Bank size, often measured by total assets, is a key indicator of financial strength and stability. This study aims to examine the relationship between various measures of dividend policy – dividend per share, dividend yield, and dividend per share to earnings per share ratio – and bank size in Jordanian banks, using earnings per share as a control variable.The study employs ordinary least squares regression analysis to investigate the relationship between these variables over a sample of Jordanian banks. Three regression models were constructed to evaluate the impact of each dividend measure on bank size. The results indicate a significant positive relationship between dividend per share and bank size, and between the dividends per share to earnings per share ratio and bank size. The results show that approximately 43.9% of the variance in bank size is explained by the Dividends per share and Earnings per share, and a significant positive correlation is observed between total assets (bank size) and dividend per share, with a coefficient of 53%. Dividend yield, however, showed no significant impact on bank size.The results support that Jordanian banks with a sound dividend policy on dividend per share and its continuity with earnings exhibit higher asset growth. In this respect, bank growth appears to be highly dependent on a prudent dividend policy even from an emerging markets perspective.