Efficiency Of Financial Institutions Research Articles

Justice and finance: Does judicial efficiency contribute to financial system efficiency?

Efficient financial systems play a crucial role in promoting economic growth and development. This study explores the impact of judicial efficiency (JE) on financial system efficiency (FSE) and its components, financial institutions efficiency (FIE) and financial markets efficiency (FME), across 108 countries over the period from 2004 to 2020. Utilizing a fixed effect regression for our baseline analysis and a two-stage least squares (2SLS) regression to address endogeneity, we find robust evidence that JE has a positive and significant effect on FSE and its components, FIE and FME. Moreover, we find that JE's positive impact on FSE and its components holds across different levels of per capita income, including high-income, low-income, and emerging market economies. Our findings, which are confirmed by several robustness checks, highlight the universal importance of a well-functioning, efficient judicial system in driving FSE regardless of a country's economic context. The results show that countries should prioritize reforms to strengthen judicial institutions and enhance efficient contract enforcement. An efficient legal framework and judicial process are conducive to creating an environment in which an efficient financial system can develop, paving the way for sustainable economic growth.

Assessing Global Competitiveness: A Comparative Analysis of Financial Institutions Development through the Global Competitiveness Index

This study aims to investigate the relationship between a country’s financial development and its global competitiveness, specifically focusing on financial institution efficiency. The research utilizes the Global Competitiveness Index (GCI) and the Financial Market Development Index Dataset as primary sources, covering the period from 2007 to 2019. Additionally, the study seeks to analyse and compare the rankings of European Union (EU) member countries and the United Kingdom in terms of the financial markets pillar of the GCI, while also examining the disparities between the “old” GCI and GCI 4.0. This study focuses specifically on the eighth pillar of the GCI, namely “Financial mar­ket development”. It emphasizes the significance of an efficient financial sec­tor in allocating resources, facilitating business investment, and fostering pro­duc­tivity. A sophisticated financial market, encompassing elements such as sound banking, regulated stock exchanges, and venture capital, plays a pivotal role in driving private sector investments. Transparency, credibility, and ade­quate regulation within the banking sector and financial markets are essential for protecting investors and ensuring the overall stability of the economy. By focusing on the financial institutions pillar within the EU and using the Glo­bal Competitiveness Index as a benchmark, this study can contribute valuable in­sights to policymakers and stakeholders, aiding them in making informed decisions to strengthen the EU’s financial sector and overall economic competiti­veness.

Dynamicity and nonlinearity in the association between different facets of financial development and macroeconomic volatility: evidence from the World Economy

ABSTRACT This paper attempts to explore dynamicity and nonlinearity in the association between financial development and macroeconomic volatility, considering different aspects of financial development. The data to this end comprises a panel of 98 countries from 1991 to 2016. This paper uses an objective trichotomous development taxonomy to classify the countries according to their overall financial development and income. Dynamic panel regressions ensure that the role of overall financial development in smoothing macroeconomic volatility dwindles as the level of overall financial development increases. Overall financial development begins to amplify volatility after a certain point. Other aspects of financial development also affect volatility in a similar fashion. Nonlinear estimation results show that most of the measures of financial development are associated with macroeconomic volatility in a U-shaped manner. On the contrary, we find an inverted U-shaped association between financial institution efficiency and macroeconomic volatility. The findings are found to be robust to an alternative country classification system based on income and an alternative measure of volatility. To minimise macroeconomic volatility, policymakers should try to increase financial institution efficiency beyond its threshold point and keep all other aspects of financial development at their optimal level.

Financial Services Digitainability: Financial Inclusion and Efficiency in EU Countries

Digitalization of financial services is one of the biggest challenges of the last decade, both in the EU and globally. The rapid development of digital technologies undoubtedly creates a favourable environment for significant progress in the financial sector, moreover, the Global Financial Crisis (GFC) and the pandemic have served as additional catalysts. However, several aspects on the way to financial services digitainability are still insufficiently explored. Considering the latest trends in the financial sector and advances in digital transformation, this study aims to identify the key drivers for the implementation of digital financial services and initiatives that managers should pursue to effectively transform business processes. The methodological base of the research consists of an extensive analysis of current publications in such areas as digital transformation, sustainable development, digital financial services, etc. The article investigates two aspects of financial sustainability: financial inclusion and operational efficiency of financial institutions, based on Eurostat data on financial services provided in the EU during 2011 - 2021, the Digital Economy and Society Index variables, and European Central Bank data on operational expenses. Correlation and regression analysis methods are used to study the relationships between variables under investigation, as well as statistical tests to acquire necessary evidence for statistical inferences about the proposed hypotheses. The results of the study provide the possibility to judge current trends in the use of digital financial services in the EU countries, determine the main drivers of sustainable digital financial services, as well as to observe the benefits of digital transformation in the financial sector.

Internal Audit Function and Budgeting Efficiency in Financial Institutions: A Case of Rwanda Social Security Board

The main purpose of this research is to examine Internal audit function and budgeting efficiency in financial institutions in Rwanda specifically in Rwanda Social Security Board (RSSB). The research used descriptive research design with a mixed approach of qualitative and quantitative data. The formula developed by Taro Yamane was employed to determine the sample size (n=52). The findings showed that internal audit plan provides guidelines for auditors’ regular audits (mean 4.29); and internal audit reviews for budgets were made available (mean 4.32). It was also revealed that internal audit advised on budgeting (mean 4.25); internal audit provided assurance to the budgeting efficiency (mean 4.15); the internal audit assured budget management that there was an effective internal control for budgeting (mean 4.21); the internal auditor established audit objectives and scopes accordingly (mean 4.41); and internal audit prevented risks and fraudulent malpractices occurring when budgeting (mean 4.34). and those internal auditors follow up on the agreed management action plan based on audit recommendations (mean 4.24); internal auditors provide follow-up reports within a specified duration of time as guided by the organization’s policies for the exercise (mean 4.01); follow-up reports were shared (mean 4.61). According to the research, there is a strong positive correlation between RSSB's internal audit frequent review and budgeting efficiency (r= .713 r= .000); strong positive degree of relationship between internal audit recommendation and budgeting efficiency (r = .634, r = .004) and strong positive correlation between internal audit follow up and budgeting efficiency (r= .784; r = .000). The study concluded that internal audit, through regular reviews, provision of recommendations, and follow-up contributed to the efficiency of budgeting at RSSB. The study recommended that RSSB should strengthen its internal audit plan as a measure of ensuring that auditors are guided on the strategic follow-up plans to adopt and capture recommendations effectively. Key words: Internal audit, Budgeting efficiency, Public institutions, RSSB

Can financial efficiency and environmental regulation promote R&D innovation? From the perspective of value chain decomposition.

There is a plethora of current research on economic or financial resources for fostering innovation. These studies lack the micro-analysis and, more importantly, disregard the effect of environmental control. This study will offer a new analytical paradigm by linking financial growth, environmental regulation, and innovation growth throughout the value chain. Using the information on 30 Chinese provinces collected between 1990 and 2020, we develop a dynamic panel data model to examine the interplay between financial effectiveness, ecological regulation, and research and development (R&D) innovation. We assess the impact that the efficiency of financial organizations and the stock market have on R&D's ability to influence R&D innovation. There are positive spillover effects for stock market efficiency, which boosts the development and conversion of R&D innovation; there are positive spillover effects for financial institution efficiency, which hurts the conversion of R&D innovation, and there is an adverse effect on environmental regulation efficiency. To what extent environmental rules affect the commercialization of research and development innovation is unclear; human capital is an effective motivator for the advancement of R&D innovation, and the volume of FDI may increase the commercialization of R&D innovation.

Modeling the tourism-financial development association in developing countries

ABSTRACT This article explores the relationship between tourism demand and financial development using Fiji as a case study over the period 1980–2017. The ARDL bounds approach is used for estimation and causality is identified using the Toda-Yamamoto augmented VAR approach. We develop a financial development index using Principal Component Analysis that considers the size of the financial market, financial institution depth, and financial institution efficiency. The results show that tourism demand promotes financial development very strongly. The Granger causality results suggest that tourism demand Granger causes financial development. The findings imply that financial development is dependent on tourism demand in Fiji.

Inflation uncertainty, macroeconomic instability and the efficiency of financial institutions

PurposeThe study examines the effect of macroeconomic risk, inflation uncertainty and instability associated with key macroeconomic indicators on the efficiency of financial institutions among economies in sub-Saharan Africa (SSA).Design/methodology/approachData for the empirical inquiry were compiled from 35 SSA economies from 1996 to 2019. The empirical estimates were carried out using pooled ordinary least squares (POLS) with Driscoll and Kraay’s (1998) standard errors.FindingsReported empirical estimates show that macroeconomic risk and exchange rate volatility constrain the efficiency of financial institutions. Further results suggest that inflation uncertainty has a significant influence on the efficiency of financial institutions among economies in the subregion. Additionally, reviewed empirical estimates show that institutional quality positively moderates the nexus between inflation uncertainty and financial institution efficiency. At the same time, political instability is found to worsen the adverse effect of macroeconomic risk on the efficiency of financial institutions.Practical implicationsFor policymakers and governments, improved institutional structures are recommended to ensure the operational efficiency of financial institutions, especially during an inflationary period. For decision-makers among financial institutions, the study recommends policies that have the potential to make their institutions less vulnerable to macroeconomic risk and exchange rate fluctuations.Originality/valueThe approach adopted in this study differs significantly from related studies in that the study examines and reviews interactions and relationships not readily found in the reviewed literature.

Empirical Investigation of the Impact of Energy intensity and Financial Institutions Efficiency on Environmental Degradation in Pakistan

Pakistan’s is relentlessly affected by climate change and is looking for foreign assistant to deal with climate change challenges. Also, Pakistan is trying to tackle with climate change domestically. Environmental degradation consequently leads to climate change domestically as well as globally. Environmental degradation is extensively studied in empirical literature. Efficient use of resources only can ensure to lessen environmental degradation and its effects in terms of climate change. Henceforth, the current empirical study is analyzing the impact of energy intensity and financial institutions efficiency on environmental degradation in Pakistan. The energy intensity is considered as a factor of environmental degradation as it is one of the proxy for energy efficiency. Moreover, for overall economic activities impact on environmental degradation, this study considered GDP as a control variable. The time series techniques such as unit root and bounds cointegration techniques are applied for non-stationarity, cointegration and results estimates. The result of this study documented that energy intensity, financial institutions efficiency and GDP are factors of environmental degradation and energy intensity and GDP are aggravating environmental degradation whereas financial institutions efficiency has abstained it in Pakistan.

Risk Hazard of Banking in Emerging Countries

The development of Islamic banking has been examined. Many researchers have been dedicated to researching how this growth generates microeconomic consequences on financial institution efficiency. This paper embodies a comprehensive analysis of Basel II standard implementation impacts gap in hazards between Islamic and conventional banks in Asia countries (Indonesia, Malaysia, Singapore, Thailand, and Philippines, Brunei Darussalam). Basel II requirements make contributions to expand the distance in hazard between conventional banks and Islamic Banks at the rate of the latter. Four arguments may be supplied to provide an explanation for why Basel II requirements can contribute to making Islamic banks exceptionally riskier than conventional banks. the connection between Islamic banking and hazard is conditional on the regulatory framework. A mapping descriptive examination analyzing the international locations of every form of bank and the 12 months of implementation of Basel II regulation. This method was utilized in the Basel II implementation in a few of the Asia nations of our pattern for the duration of the length of examination from 2015 to 2020. The treatment group consists of banks in nations with an implementation of Basel II for the precise year with a substantial 10%; those findings also are located whilst one by one thinking about small banks and massive banks, therefore, assisting the view that the connection between Islamic Banking And Hazard is conditional to the regulatory framework.

Digital Transformation as a Driver of the Financial Sector Sustainable Development: An Impact on Financial Inclusion and Operational Efficiency

The increase in studies on how digital transformation based on the application of digital technologies affects the sustainable development of various sectors of the economy has been observed. Although digital transformation is important for the financial sector sustainable development, the drivers and links between them are weakly addressed by researchers. The study is aimed at exploring how digital transformation due to the application of innovative technologies and solutions, especially digital payments, is leading to the financial sector sustainable development through financial inclusion and operational efficiency. The current research presents the study of the financial sector digital transformation and its sustainable development based on a systematic literature review, a secondary data analysis, and expert interviews to provide further research directions and draw practical suggestions for professionals on the financial sector digital transformation toward sustainable development in the future. A systematic literature analysis is performed based on text analytics, a bibliometric analysis, and network maps aimed at acknowledging the existing research outcomes and identifying the research gaps on the digital transformation agenda in the financial sector. The collected data on the digital payments’ dynamic in the EU were analyzed with the use of statistical methods, including a correlation and regression analysis. Structured expert interviews were used to validate research findings and to highlight key issues of the digital transformation in the financial sector of Baltic countries. The authors have paid special attention to the sustainable development of the financial sector’s economic dimension and its efficiency indicators, such as financial inclusion and digital payments’ intensity. A social dimension is limited toward financial inclusion based on digital payments’ offering. The research results indicated recent trends in digital transformation and types of usage of digital technologies in the EU and Baltic countries to ensure the sustainable development of financial institutions. Furthermore, the results revealed a significant increase in the digital payments’ intensity during the last years in the EU, as well as a close relationship between digital payments with financial inclusion and operational efficiency of financial institutions.

Does Good Financial Development Attract Tourists? Evidence From ASEAN Countries

This study aims to examine the effect of financial development on tourism demand in member countries of Association of Southeast Asian Nations (ASEAN). The indicators are financial development index; financial institution depth index; financial institutional access index; and financial institutions efficiency index. Several control variables employed in this study are consumer price index, health expenditure, poor air quality, and trade openness. This study uses panel data between 2010 and 2018 from 10 ASEAN countries. Data are sourced from international institutions such as the World Bank, United Nation of World Tourism Organization (UNWTO), International Monetary Fund (IMF), and World Health Organization (WHO). The method used in the analysis is the static panel data regression. The results show that financial development has a positive effect on tourism demand. In terms of control variables’ impact, consumer price index, health expenditure and trade openness have a positive impact, whereas poor air quality has a negative impact. The current study’s implication on policy making is to develop the financial sector by increasing the number of ATMs and improving the mobile banking facilities

Financial inclusion in developing countries: Do quality institutions matter?

This study examines the dynamic impact of institutional quality (control of corruption, government effectiveness, political stability, regulatory quality, rule of law, and voice and accountability) on financial inclusion across seventy-three developing countries. We conduct multiple dynamic-panel-data approaches to address potential heterogeneity, cross-sectional dependency, and endogeneity issues. Our findings reveal that institutional quality promotes both the access to and the use of formal financial services in developing countries. More specifically, economic growth, human development index, domestic credit, financial development index (the depth & access to finance, and the efficiency of financial institutions and financial markets), and remittances significantly contribute to financial inclusion. Our findings also confirm our proposition that human development plays a significant role in driving financial inclusion. This study provides several practical policy implications to developing countries aiming to strengthen their institution-induced financial market deepening.

Green growth and environmental quality in top polluted economies: the evolving role of financial institutions and markets.

An efficient financial system is crucial for the attainment of green growth and superior environmental quality. Therefore, our focus in this analysis is to estimate the effect of financial institutions and markets on green growth and environmental quality in highly polluted economies from 1991 to 2019. Estimates of the variables are collected with the help of the ARDL bounds testing approach. Findings of the ARDL model imply that a financial institution's efficiency helps improve green growth in the USA, China, and Japan in the long-run. However, the efficiency of the financial markets causes the green economy to grow in the long run in China and Russia only. On the other side, in the CO2 model, the long-run estimated coefficients of a financial institution's efficiency are negatively significant in Japan and China only, implying that a financial institution's efficiency significantly reduces CO2 emissions. Similarly, the long-run estimates of financial markets are significantly negative in the context of China and Japan only in CO2 emissions.

Financial Efficiency and Its Impact on Renewable Energy Demand and CO2 Emissions: Do Eco-Innovations Matter for Highly Polluted Asian Economies?

The analysis aims to examine the impact of eco-innovation and financial efficiency on CO2 emissions and renewable energy consumption in highly polluted Asian economies, including China, India, Russia, and Japan. For empirical analysis, we have applied the ARDL pooled mean group (ARDL-PMG) model. The long-run estimated coefficient of environmental innovations is positively significant in both renewable energy models and negatively significant in the CO2 emissions model. These results imply that environmental innovations help facilitate renewable energy consumption and reduce CO2 emissions. On the other side, the estimates of financial development are insignificant in both renewable energy and CO2 emissions models. However, the estimates of financial institution efficiency and financial markets are positively significant in both renewable energy and CO2 emissions models, implying that financial institutions and market efficiency increase renewable energy consumption and decrease CO2 emissions.

Determinants of Peer-to-Peer Lending Expansion: The Roles of Financial Development and Financial Literacy

To explore the determinants of the global peer-to-peer (P2P) lending expansion, this study examines factors that impact P2P lending using a sample of 62 economies over the period 2015–2017. We find that greater financial institutions efficiency, higher financial literacy, and less access to formal financial services are positively related with the expansion of P2P lending. This paper provides empirical evidence that the effects of financial development and financial literacy on P2P lending are different between emerging and advanced economies. We also present evidence that better information technology infrastructure and high new business density are positively associated with the expansion of P2P lending, suggesting that physical infrastructure is an essential prerequisite for it, while this is more likely to happen in dynamic business environments.

Innovation and efficiency in financial institutions.

This paper proposes a new methodology that combines standard production theory with Multiple-Criteria Decision Analysis (MCDA) methods to rank banks based on their capability of using investment in new technologies to reduce the other inputs' usage, for a given level of output. Banks are first ranked based on their investment in innovation (innovation rank); afterwards, we calculate the overall rank by combining two factors of production, viz. labor and assets, using the PROMETHEE II approach that belongs to the family of the outranking methods. We then use directional efficiency measures to measure the banks' efficiency by means of relation between two ranks, for a given level of the outputs. We apply the methodology to a sample of US and EU banks sourced from Orbis BankFocus. The key findings suggest there are four types of banks in our sample: (a) banks whose innovation rank is positively correlated with the overall rank; (b) banks exhibiting a negative correlation between two ranks: their overall ranks are low while still exhibiting high innovation ranks; (c) banks with high overall rank but low innovation rank and (d) banks with the worst ranks both for the innovation rank and the overall rank. The least efficient banks belong to this group.

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

PurposeThis paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996).Design/methodology/approachThe purpose of this paper is to evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996).FindingsThe results suggest that institutional quality has significant positive effect on financial institution efficiency, supporting the view that improved and supportive structures of governance tend to promote operational efficiency among financial institutions among economies in SSA. In addition, improvement in individual governance indicators such as corruption control, government effectiveness, regulatory quality and rule of law was also found to support or enhance efficiency of financial institutions among economies in the subregion. Macroeconomic uncertainty on the other hand is found to impede efficiency of financial institutions; the same condition (macroeconomic uncertainty) is further found to negate any positive impact corruption control, government effectiveness, regulatory quality and rule of law have on operational efficiency among financial institutions in the subregion.Originality/valueUnlike most of related studies, this study adopts a different approach on the dynamics of financial institutions. Approach pursued in this empirical inquiry examines how the regulatory environment within which financial institutions operate, the form of governance and the quality of government institutions influence efficiency of financial institutions among emerging economies in Sub-Sahara. Empirical analysis conducted examines effects of variables that are unique to this study; these variables are either constructed or econometrically derived specifically for various interactions verified in the study. For instance, institutional quality variable is an index constructed specifically for this study using principal component analysis approach.

Ownership structure of oil revenues: Political institutions and financial markets in oil-producing countries

This study examines the impact of the ownership structure of oil revenues on financial markets and institutions, and the intermediating role of political institutions. Using the fixed-effects model and GMM for robustness, we analyse data from 82 oil-producing countries. We find several key results. Firstly, government ownership of oil revenues undermines the efficiency of financial institutions when the quality of political institutions is weak, but enhances their efficiency when political institutions are strong. Secondly, the impact of private ownership of oil revenues is negative on the depth of and access to financial institutions when the quality of political institutions is weak, but positive when political institutions are strong. We observe similar threshold effects for the depth of and access to financial markets in the subsample of developing countries. We conclude that oil-producing countries need solid political institutions to benefit from oil wealth and to boost financial development.

Impact of financial development on the energy intensity of developing countries

Climate change is an important and urgent challenge facing the world, affecting the survival and development of human beings from multiple dimensions such as environment and economy. Carbon emissions are a barometer of climate change, and energy consumption is closely related to carbon emissions. Reducing energy consumption can reduce carbon emissions, thereby optimizing the human living environment. Compared with developed countries, the carbon emissions and energy consumption of developing countries are still growing strongly, so it's significant to study the energy consumption of developing countries. Energy intensity can be reduced through reducing energy intensity, and financial development can have an impact on energy intensity. So, using panel data from 67 developing countries from 1995 to 2018, this study selected six financial development indicators and uses the system Generalized Method of Moments (sys-GMM for short) establishes a dynamic panel model to study the impact of financial development on energy intensity from the six aspects of access, depth and efficiency of financial institutions and financial markets, which are more implementable and more realistic for formulating relevant financial policies to reduce energy intensity. We introduced the index of industrial structure upgrading and studied the interaction between financial development and financial development in the impact of financial development on energy intensity for the first time. The findings revealed that improving financial institutions' access, depth, and efficiency, as well as financial markets' access, depth, and efficiency, might dramatically lower developing countries' energy intensity. The improvement of industrial structure resulted in a reduction in the energy intensity of financial development. Furthermore, the 67 developing countries were grouped from five different perspectives, and the influence of financial development on energy intensity reduction was found to be robust. Therefore, the research results significantly reduce energy intensity for financial development in developing countries.