Bank Managers Research Articles

The interaction between financial, market and environmental components in the banking sector of the Serbia

Banks are one of the essential institutions in the financial systems worldwide, whereby profitability is the ultimate goal for banks’ business. To provide success, bank management should create an attractive market portfolio that will continuosly generate profit. However, banks have to support eco-friendly initiatives and projects and try to implement corporate social responsibility in their business. The goal of the research is to investigate the connection between financial, environmental and market components in the banking sector of the Serbia from 2014 to 2021. The empirical findings of T-test indicate that banks with green loans in portfolio registered higher profitability compared to banks that do not offer this loan type. The obtained results of correlation show that green loans and market share are positively correlated to bank profitability indicators. This does not mean that green loans are a factor that shapes banks' profitability, but that their presence in the portfolio does not negatively affect the level of the bank's realized profit.

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.

Integrating ESG Factors Into Cost‐Efficiency Frontier: Evidence From the European Listed Banks

ABSTRACTThis paper provides the first in‐depth analysis of the effects of incorporating environmental, social, and governance (ESG) factors into the cost‐efficiency frontier of banks. Drawing on both shareholder and stakeholder theories, the research addresses the increasing regulatory and market pressures for banks to incorporate ESG components into their operational processes. Using data from 42 European listed banks spanning the 2006–2021 period and a stochastic frontier approach (SFA), the study introduces two novel ESG‐related variables in the stochastic frontier function: (i) a variable measuring the contribution of ESG factors to banking output production and (ii) a variable measuring the risks associated with ESG controversies. Additionally, it evaluates the impact of executive remuneration tied to ESG goals on cost efficiency, addressing a critical gap in the literature. The findings reveal that ESG‐related frontier variables significantly influence the banks' cost function. Furthermore, the results show that banks with a stronger commitment to ESG principles achieve higher cost efficiency in the long term, despite short‐term cost increases associated with ESG investments. Moreover, the results highlight that executive compensation linked to ESG targets negatively affects cost efficiency. By filling these gaps, the paper significantly contributes to the literature, offering valuable insights for bank managers tasked with balancing short‐term costs against long‐term efficiency gains through strategic ESG investments.

Patronizing Islamic finance services by Cameroonian small and medium-sized entrepreneurs: examining the level and the role of Islamic finance awareness

Purpose This study aims to analyze the level of Islamic finance awareness by Cameroonian small and medium-sized entrepreneurs (SMEs) on the one hand, and the effects of this awareness on the entrepreneurs’ decision to patronize (adopt) Islamic finance, on the other hand. Design/methodology/approach This study uses primary data collected from a cross-section of 1,358 SMEs in eight regions of Cameroon using self-administered structured questionnaires. The authors apply mean computation analyses and a binary logistic model to test the study hypotheses. The authors also check for endogeneity and carry out sensitivity analyses. Findings The results show that the level of Islamic finance awareness among Cameroonian SMEs can be regarded as average. Furthermore, after dividing the sample into two groups based on the religion of the entrepreneur, it is revealed that the awareness level among Muslim entrepreneurs is considered higher than that of the non-Muslims, with a below-average level of awareness, thereby underlying the place occupied by the Islamic religion as a driver of the decision to engage in the Islamic mode of finance. The application of the simple logistic model reveals that awareness enhances the adoption of Islamic finance by Cameroonian SMEs and that these effects are modulated by the Islamic religion and the educational level channels. Practical implications Policymakers and bank managers are encouraged to prioritize more consumer awareness programs as a means of promoting the adoption of Islamic finance by SMEs in Cameroon. Future research in this area should equally consider the supply-side aspects of Islamic finance such as bank managers whose perception and awareness are equally key toward ensuring a more holistic agenda for the promotion of Islamic finance services. Originality/value To the best of the authors’ knowledge, this is the first study that analyzes the awareness level of SMEs in the context of a non-Muslim-dominated sub-Saharan African country.

The Impact of Transformational Leadership on Employee Resistance in Bosnia and Herzegovina’s Banking Sector

Adequate management of organizational changes is a crucial determinant of business success for banks today. Transformational leadership aligns with the conditions of dynamic changes in banks by creating an appropriate business climate of trust, thus impacting the achievement of the organization’s goals and results. Today, banks strive to be leaders in change, continuously providing innovative business solutions, which require proper management. Given the strategic decisions of banks to pursue new ideas and new ways of conducting business, which alter culture, climate, and value systems, it is crucial to apply the appropriate leadership style to effectively achieve desired results and business objectives. The problem in achieving these tasks is the occurrence of employee resistance to change, hence the significant role of the leader as the bearer of change. This paper presents the results of empirical research conducted in the banking sector in Bosnia and Herzegovina, aimed at determining the impact of transformational leadership on employee resistance to change in banks. The research included 90 respondents from 15 banks (65% of the total number of banks). Each bank included 6 respondents, with managers as the first stratum and employees as the second stratum. The authors believe that the application of transformational leadership in the banking sector can lead to a reduction in resistance to change, as well as expand scientific knowledge in the field of leadership in banking and create concrete recommendations for bank managers to apply in practice to improve business operations. Demonstrating transformational leadership as the dominant style of leading changes in the banking sector and determining its impact on employee resistance is the fundamental goal of this paper. It provides bank managers with valid information on the adequacy of applying appropriate leadership styles, thus offering a reliable basis for decision-making related to the process of implementing changes and ultimately achieving better business results.

Research on the Risk Management of Commercial Bank Green Bonds under the "Dual Carbon" Goals

Against the backdrop of the "carbon neutrality and carbon peak" dual carbon goals, as mentioned in relevant studies, the importance of green bonds to the sustainable development of commercial banks has become increasingly prominent and has become a key financial means to promote their green development. This is an important feature of the green finance field at the current stage of development. However, there are certain risks in using green bonds as a green financial tool at present, and these risks may stem from various factors such as market uncertainty and project complexity. Therefore, research on the risk management of commercial bank green bonds is not only an inevitable choice for commercial banks to achieve sustainable development but also a key link in ensuring China's social and economic development. The research results will have a profound impact on the financial industry and the overall economic situation. The proposal of the dual carbon goals has not only provided new opportunities for the development of green bonds, such as attracting more social capital to invest in green projects, but also provided a new direction for the risk management of commercial banks, prompting banks to shift from traditional risk assessment to comprehensive risk management that combines environmental and social factors. This paper aims to analyze the new development opportunities for commercial banks under the dual carbon goals, explore the significance of commercial bank-issued green bonds in promoting the achievement of the dual carbon goals, as well as their mutual effects, and elaborate on the specific paths through which green bonds empower the risk management of commercial banks. Meanwhile, this paper will put forward relevant development suggestions for commercial bank risk management, with the expectation of providing references for commercial banks to build exchange rate risk management systems.

DU PONT SYSTEM ANALYSIS IN MEASURING COMPANY FINANCIAL PERFORMANCE (CASE STUDY OF BANK CENTRAL ASIA AND BANK RAKYAT INDONESIA PERIOD 2021-2023)

The two largest banks in Indonesia are Bank Central Asia (BCA) and Bank Rakyat Indonesia (BRI). The financial performance of both is a key indicator to assess the health and operational effectiveness of a bank. This study uses the DuPont Analysis approach to examine the financial performance of BCA and BRI. Secondary data from the annual financial statements of both banks for 2021–2023 are used in this investigation. In 2021–2023, BCA's average net profit margin (NPM) was 61%, according to the study's findings, while BRI's NPM was 38%, increasing to 63% in 2023. When compared to the industry standard of 0.05-0.1, the TATO of both banks is in a reasonable range, with BRI showing a more productive performance. Meanwhile, the average return on equity (ROE) is 3%, higher than BRI's 2.5%. According to DuPont's analysis, BCA appears to be superior to BRI in terms of operational efficiency and profitability, as evidenced by its better NPM and ROE. For investors and bank management, among other stakeholders, these findings offer important insights into the dynamics of banks’ financial performance and the potential impact of various initiatives on their bottom lines.

Application of Logistic Regression in Enhancing Digital Credit Risk Management in Commercial Banks

Application of Logistic Regression in Enhancing Digital Credit Risk Management in Commercial Banks

Intellectual Capital and Maqashid Sharia Performance of Islamic Banking in Indonesia: the Moderate of Islamic Sustainable Development Goals (SDGs)

Objective: This study aims to obtain empirical evidence on the influence of intellectual capital on the performance of maqashid sharia with Islamic Sustainable Development Goals (SDGs) as a moderating variable. Theoretical Framework: This research is based on resource-based theory (RBT), legitimacy theory and maqashid sharia theory. Method: The iB-VAIC method for intellectual capital is measured based on capital employed, human capital, and structural capital. This study also uses a moderating variable, namely the disclosure of sustainable development goals (SDGs) of the type of Islamic corporate social responsibility (iCSR). The bank performance variable is measured using the maqashid sharia approach that Mohammed & Taib (2015) developed. Secondary data in the form of annual reports of 9 Islamic commercial banks in Indonesia were collected from 2015-2020 and analyzed using multiple regression analysis. Results and Discussion: The research results show that (1) intellectual capital has a negative effect on the performance of maqashid sharia, (2) the amount of Islamic corporate social responsibility (iCSR) disclosure has a positive effect as a moderating variable in the relationship between intellectual capital and maqashid sharia performance. Research Implications: These findings can help Islamic bank managers improve their corporate performance by effectively utilizing their iCSR and IC. Originality/Value: To our knowledge, this is the first study to examine the influence of intellectual capital on maqashid sharia performance by using disclosure of Islamic sustainable development goals (SDGs) of the type of Islamic corporate social responsibility as a moderation variable in the Islamic banking context in Indonesia.

Determinants of Profitability in Indonesian Islamic Banks

This study aims to analyze the effect of Capital Adequacy Ratio (CAR), NonPerforming Financing (NPF), Operating Costs to Operating Income (BOPO), and Financing to Deposit Ratio (FDR) on the profitability of Islamic commercial banks for the period 2019–2023. A quantitative approach is used, using secondary data sourced from the annual financial reports of 12 Islamic banks registered with the Financial Services Authority (OJK). The research findings reveal that CAR has a significant positive effect on ROA, indicating that higher capital buffers increase profitability. Conversely, NPF has a negative impact on ROA, highlighting the adverse impact of credit risk on bank performance. BOPO has a significant negative impact on ROA, emphasizing the importance of operational efficiency in increasing profitability. FDR shows a positive and significant relationship with ROA. These findings provide practical insights for bank management and regulators to improve operational efficiency and credit quality, which ultimately supports the sustainable growth of Islamic banking in Indonesia.

The influence of bank-specific variables on banks’ stability: Evidence from Saudi Arabia

The goal of this study is to find out what makes Saudi Arabian banks unstable by using a panel data analysis with ten banks’ carefully chosen annual data from 2009 to 2022. Based on the fixed effect model, this study indicates that Saudi Arabian bank stability is unaffected by liquidity risk but is statistically and negatively impacted by credit risk and bank size. Conversely, capital adequacy and funding risk positively and statistically impact bank stability in Saudi Arabia. In light of these findings, we strongly recommend making capital adequacy requirements obligatory for bank management, given their beneficial effect on bank stability. This study recommended that bank management adopt practices such as safe loan provision and prompt customer repayment to mitigate credit risk. Bank managers have to guarantee liquidity adequacy in their banks and improve credit standards by increasing client supplemental requirements. While our study found that liquidity risk does not directly affect banks' financial stability, we propose that bank management should also focus on finding effective ways to generate client deposits to enhance financial stability further.

Legal and Ethical Dimensions of Islamic Microfinance in Poverty Alleviation: A Critical Analysis

According to the World Bank’s (2019) study, poverty accounts for more than 70% of the total population in Nigeria, implying that over 130 million people in the country, live in poverty. This pathetic situation is further aggravated by financial exclusion whereby low-income people are neglected away from the financial system because they are considered uneconomical to serve or too difficult to reach. According to the World Bank’s Global Findex, 1.7 billion adults globally are financially excluded, living without formal credit or savings (FINCA International, 2024). Recently, microfinance has emerged as an important instrument of poverty alleviation in the developing countries with more than 7000 micro lending institutions providing loans to more than 25 million poor individuals across the world (Dahiru and Hassan, 2008). Despite the number of microfinance banks in Nigeria with over 800 of them in the country, Microfinance banks’ contribution to Nigeria’s economy is less than 1% (National Bureau of Statistics (NBS), 2020). The question now is, where lies the problem? Through a doctrinal approach, it is observed that the system of operation and management of Microfinance banks in Nigeria has eroded their primary objective (financial inclusion). This is mainly due to the imposition of high interest rate by Microfinance Institutions, poor risk management mechanism, weak organizational structure, insufficient capital, shortage of experts, among others. With its success in some parts of Nigeria such as Al-Barakah Microfinance Bank in Lagos state, Islamic microfinance is recommended to be the real solution in achieving financial inclusion through its products that are interest-free and customer-friendly to the poor and middle-class citizens, in a bid to ensure optimum poverty alleviation in a well regulated and ethical business environment.

The effects of technology investment on financial stability: Evidence from commercial banks in Vietnam

This study examines the effects of technology investments on financial stability at commercial banks in Vietnam. Financial services provided by banks are vital to the growth and development of the Vietnamese economy. Due to competitive constraints and the need to keep up with fast-moving FinTech startups, Vietnamese banks have made digital transformation a top strategic goal. Therefore, the study aims to investigate the impact of technology investment on the financial stability of commercial banks in Vietnam from 2012 to 2023. The research used financial data from 26 joint-stock commercial banks and panel data analysis with the ordinary least squares (OLS), fixed effect model (FEM), random effects model (REM), and generalized method of moments (GMM) to look into the link between bank stability and technology spending. The findings reveal that while technology investment significantly enhances operational efficiency and market competitiveness, it poses risks, particularly during the initial stages of digital transformation. The results show a significant negative effect of technology investment on financial stability, highlighting the need for strategic planning and robust regulatory frameworks. These insights provide valuable recommendations for bank management and policymakers to balance technological advancements with financial stability, especially in economic disruptions like the COVID-19 pandemic. Finally, the practical implications help commercial banks strive to increase asset size and expand operations to strengthen financial capacity, increase brand recognition, create solid customer trust, improve competitiveness, and bring high profits.

THE IMPLEMENTATION OF GOOD ENVIRONMENTAL GOVERNANCE IN WASTE MANAGEMENT

Waste is a national problem in Indonesia that has not found an optimal solution and tends to get worse. Effective waste management for environmental preservation and extinction is one of the principles of good environmental governance. An important part of good governance is collaboration between the private sector and the community to achieve effective, efficient, and appropriate waste management. This study aims to assess the implementation of waste management in Tuah Karya Village. This study uses a qualitative descriptive method with data collection techniques including observation, interviews, and documentation. The results of the study show the implementation of Good Environmental Governance in waste management in Pekanbaru, with a focus on the steps that have been taken by local governments to build effective waste management in their respective regions. Several areas in Pekanbaru have implemented good waste management practices, such as building waste banks, recycling waste into new products, and promoting waste reuse. This study examines the forms of implementation of Good Environmental Governance in waste management in Pekanbaru. In the case of Waste Bank management in Tuah Karya, based on the principles of good environmental governance, it turns out that one of the seven principles, namely access to information, has not been able to achieve the goal of realizing a Smart City in Pekanbaru. This is because many residents are still unaware of the existence of the Waste Bank, and many are reluctant to participate. These challenges make it difficult for the Waste Bank to contribute to the ideals of Smart City in Pekanbaru.

Assessing the Financial Health of Urban Co-operative Banks using Altman Z-Scores

The long-term sustainability of banks is determined by measuring their financial health. This study was initiated due to the recent bank scams in the co-operative banking sector in Kerala, which raised a need to prove the financial stability of Urban Co-operative Banks (UCBs), which are an integral part of the Indian banking sector. The financial soundness of sixteen UCBs in Kerala is assessed in this study over ten years from 2012-13 to 2021-22 using Altman Z scores, re-estimated Altman Z scores using Binary Logistic Regression (BLR) and Multilayer Perceptron Neural Network (MLPNN). BLR was used to classify banks into grey and distress zones, and MLPNN was used to identify nonlinear relationships in the data. The study’s findings show that the re-estimated Altman Z score model using BLR exhibited high predictive accuracy in predicting distressed and non-distressed UCBs; therefore, it may be considered a reliable tool for predicting financial distress in UCBs. The MLPNN model needs further improvement in the inclusion of new variables, which will be included within the future scope of the research. The bank management and other stakeholders will be able to monitor the financial stability of UCBs with the help of the study findings.

The role of banks and local government in developing MSMEs for sustainability competitive advantage

Abstract This research aimed to examine the role of banking and local Government in developing MSMEs in Madura to enhance their competitive advantage for sustainability. Researchers used purposive sampling to collect samples from various MSMEs in the Pamekasan and Sumenep districts. This research was conducted in Sumenep and Pamekasan Regency with one hundred samples of MSME entrepreneurs, local Government, and the management of the local bank of Sumenep and Pamekasan Regency. The data was collected using interviews, field observations, questionnaires, and documentation. The data was analyzed using a mixed method with an exploratory design model. The results of this study indicated that banks significantly influence the development of MSMEs in the Pamekasan and Sumenep districts, with a positive regression coefficient of 0.417 and a significance test result of 0.000. Nevertheless, the local Government has an influence. Still, it is insignificant in developing MSMEs in the Pamekasan and Sumenep districts, with positive regression coefficients of 0.104 and a significance test result of 0.091. The findings of this research provided solutions to enhance the competitive advantage of MSMEs in Madura, ensuring their continued existence and sustainability. This included increasing MSME entrepreneurs’ understanding of how to obtain accessible and appropriate capital for the smooth operation of their businesses and encouraging them to seek information on competitors, innovation, and other related issues.

Ảnh hưởng của phong cách lãnh đạo tới hiệu quả hoạt động các ngân hàng thương mại cổ phần tại Việt Nam

This paper evaluates the impact of transformational and digital leadership styles on performance effectiveness, including customer relations and internal operational processes, among 251 employees and managers in joint stock commercial banks during the 2023 2024 period in Vietnam. The estimation of multidimensional variables using the PLS SEM model indicates that digital leadership style has a positive impact on both internal processes and customer relations. Meanwhile, transformational leadership style only affects customer relations. Additionally, unidimensional analysis reveals that among the factors of transformational leadership style, only the leader’s attention to employees positively impacts on customer relations. Based on the empirical results, the study proposes several solutions to enhance digital leadership style and improve performance effectiveness in joint-stock commercial banks in Vietnam.

Internal Audit Governance Factors and their effect on the Risk-Based Auditing Adoption of Commercial Banks in Jordan

IntroductionThis paper aims to explore the impact of internal audit governance factors on the risk-based auditing adoption of commercial banks in Jordan. The population targeted in this paper were managers of the accounting and finance departments in the commercial banks listed on the Amman Stock Exchange. MethodsUsing the purposive sampling method, 339 responses were obtained in the final sample, which constituted a validity rate of 73.7%. Structural equation modeling (SEM) was adopted as a statistical approach for hypotheses assessment. ResultsThe findings of this paper confirmed the positive impact of internal audit governance factors, including internal audit attributes, audit committee attributes, risk management system, and internal control system, on risk-based auditing adoption. ConclusionA set of recommendations was provided to bank managers, such as enhancing the Board's supervision and monitoring of the internal audit function's actions by encouraging Board members to grasp risk-based auditing thoughts and the value it delivers to the Bank.

An assessment of the Impact of Training on the Employees’ Performance

This research aims to investigate the influence of training on the employees’ job performance. The research is quantitative as it is based on empirical evidence collected from employees in the banking sector in Lakki Marwat. Samples were taken from accessible groups, i.e., groups of individuals with similar characteristics. Following the convenience sampling method data was collected through structured questionnaires and SPSS was used for our analysis. The outcomes of the study indicate that training content, trainers, and training process significantly enhance staff performance in the banking sector of the rural area of Lakki Marwat. This research confirms that training practices, trainers, and training processes contribute a substantial part to the success of employees’ performance. Banking managers should focus on the performance of employees as it can in turn enhance banking performance. This research provides several significant implications for practicing managers, responsible heads, bank managers financial managers, etc. who are concerned with the improvement of employees’ performance. Despite having significant implications, this research is not free of a few constraints that can be addressed in future studies and future investigations. For instance, this study has been conducted in the rural area of Lakki Marwat and has ignored the other rural areas. To articulate the results in a better way, it is recommended to conduct the study in other areas. Future researchers can consider motivation, salary, and leadership. The study recommends conducting a comparative study between various rural areas and urban areas to discover more beneficial results.

Sharia Principles In Risk Management In Islamic Banking: A Literature Review

Islamic banking operates based on sharia principles, which strictly prohibit practices such as riba (interest), gharar (excessive uncertainty), and maysir (gambling). These prohibitions directly influence the approach to risk management. This study aims to review existing literature related to the application of sharia principles in risk management within Islamic banking. To thoroughly explore the topic, this study employed a library research method, which involved collecting, analyzing, and synthesizing information from various academic sources, including scholarly journals, books, and research reports. The findings reveal that Sharia principles not only provide a unique framework for risk management but also strengthen the financial stability of Islamic banks by avoiding speculative practices and excessive uncertainty. Furthermore, the Sharia Supervisory Board (known as DPS) plays a crucial role in ensuring compliance with these principles. Thus, the application of Sharia principles in risk management significantly contributes to the sustainability and stability of Islamic banking. However, challenges remain, such as the limited availability of Sharia-compliant financial instruments. This study recommends further study to develop innovative and Sharia-compliant risk management instruments and strategies to support the future development of Islamic banking