Industry-specific Factors Research Articles

Determinants of Interest Rate Spread: Some Empirical Evidence from Kenya’s Banking Sector

This paper analyzes the role played by bank and industry-specific factors as well as macroeconomic variables in the determination of interest margins in Kenya’s banking sector. Decomposition of the spread using income and balance sheet of the banking sector as a whole and panel data analysis of 39 commercial banks yielded consistent results which highlight the significant role played by bank and industry specific factors and macroeconomic variables in interest rate spread determination. It is shown that between 7 – 10 per cent of the interest margin was attributable to operating costs. Moreover, a 1 per cent increase in operating costs translates to 0.38 per cent increase in interest margins for the sample of banks studied. In addition, a 1 per cent increase in non-performing loans leads to an upward adjustment of interest margins by 0.12 per cent. Macroeconomic factors also contribute to changes in the interest margin. A 1 per cent increase in Treasury bill rates leads to an upward adjustment of interest margins by 0.1 per cent. Likewise, a 1 per cent increase in GDP growth and exchange rate variability results in 0.05 and 0.06 per cent increase in interest spread respectively. In contrast, a 1 per cent increase in loans-liabilities ratio (reflecting degree of intermediation) results in interest margin reduction by 0.17per cent. The results therefore emphasize the need to improve banking sector efficiency, deal with non-performing loans and maintain general macroeconomic stability.

Influence of Macro Economic Factors, Banking Industry Factor, and Banking Specific Factors on Banking Profitability in Indonesia: Panel Data Analysis

This study aims to investigate the influence of macroeconomic factors, industry specific factors and specific factors in the bank's profitability of Indonesian banking. This research was conducted with a purposive sampling method, where the sample used is a bank listed on the Indonesia Stock Exchange and publicizing the full financial statements from 2006 to 2011. Based on those samples criteria, obtained samples of 18 banks. Data analysis method used in this research is the analysis of panel data. The analysis shows fixed effect method produces the best model for predicting the profitability of banks in Indonesia compared to method of pooled and random effect.The results are consistent with the theory underlying profitability of the bank, which was conducted by Ho and Saunders (1981), known by the dealership theory. The theory states that as financial intermediaries, bank expects to get a positive net interest margin (NIM) to face uncertainty generated by the unsynchronized between the deposits offers and credit demands. That consistency is shown with the support of the results of empirical testing of hypotheses related to the operating costs and capital adequacy for dependent variable which measured by the NIM. For the dependent variable of profitability as measured by ROA, consistency is supported by the empirical testing of hypotheses related to credit risk, operational costs, inflation and economic growth. The theory underlying negative impact of market concentration conducted by Bain (1951) known as the structure conduct performance theory is not supported by empirical results.

Environmental implications for online retailing

Recent press has highlighted the environmental benefits associated with online shopping, such as emissions savings from individual drivers, economies of scale in package delivery, and decreased inventories. We formulate a dual channel model for a retailer who has access to both online and traditional market outlets to analyze the impact of customer environmental sensitivity on its supply. In particular, we analyze stocking decisions for each channel incorporating price dependent demand, customer preference/utility for online channels, and channel related costs. We compare and contrast results from both deterministic and stochastic models, and utilize numerical examples to illustrate the implications of industry specific factors on these decisions. Finally, we compare and contrast the findings for disparate industries, such as electronics, books and groceries.

High-growth firms in changing competitive environments: the US pharmaceutical industry (1963 to 2002)

Firms across sectors and regions are highly skewed in their ability to engage with innovation and even more skewed in their ability to translate investments in innovation into higher growth. Recent attention has been placed on the importance of ‘high-growth firms’ (HGF) for innovation policy. Our paper explores under what conditions HGF matter for translating R&D investments into economic growth and how this depends on firm-specific and industry-specific factors. We use quantile regression techniques to study the R&D–growth relationship in HGF compared to low-growth firms. Unlike previous studies, we pay particular attention to whether this relationship depends on the particular period in the industry’s life cycle. We focus on the US pharmaceutical industry from 1963 to 2002 and find that the R&D–growth relationship is sensitive to the changing competitive environment over the industry’s history, which suggests that innovation policy must focus not only on firm attributes but also competitive structures.

Industry-specific effect of CSR initiatives: hotels and airlines

Purpose– This study aims to examine the relationships between a firm's corporate social responsibility (CSR) activities and its performance and risk. The authors hypothesize that industry-level effects are highly determinant of the sign and magnitude of these relationships to establish a ranking of industries to identify the position of the most prominent tourism-related industries: hotels and airlines. Based on the cybernetic model of decision making and the heuristics thereof, shareholders base their investment decisions derived from CSR announcements on the idea that the industries behave differently; their fixed costs being a relevant factor.Design/methodology/approach– The authors estimate the industry-specific effects of CSR initiatives on firms' performance and risk using a sample of 583 announcements from the Spanish Stock Market.Findings– The results show that while CSR announcements have a positive effect on performance when the authors do not account for industry-specific factors, once the authors incorporate these factors into the analysis, the authors find that firm performance and risk vary quite substantially as a function of the industry to which the firm belongs. Interestingly, while the hotel industry presents an average behavior (standing at 9th position in returns, 15th in terms of risk, and 8th according to the ratio returns/volatility), the airline industry presents the worst situation of all industries: last in performance and last in risk.Practical implications– The results help managers assess their decisions and allocate CSR resources optimally.Originality/value– This article is the first attempt to empirically test and comprehensively detect the different relationships between CSR and firm performance across industries.

The determinants of commercial banking profitability in low-, middle-, and high-income countries

Abstract Using a broad bank-level dataset and the GMM estimator technique described by Arellano and Bover (1995) , this paper analyses how bank-specific characteristics, macroeconomic variables, and industry-specific factors affect the profitability of 10,165 commercial banks across 118 countries over the period from 1998 to 2012. Grouping the countries according to three income levels, we show that the determinants of bank profitability included in our model can explain existing profitability differences among commercial banks in low-, middle-, and high-income countries. The profitability determinants vary quite widely across the different levels of income in terms of significance, sign and size of the effect. The level of income has thus an important impact on the determinants of bank profitability.

Credit Risk Determinants for the Bulgarian Banking System

Using an autoregressive distributed lag model, this paper examines the factors that influence the credit risk of the Bulgarian banking system over the decade 2001–2010, as measured by non-performing loans. Recent papers aim to identify the determinants of non-performing loans using a cross-country modelling framework. As the South East European region (SEE) is non-homogeneous, our analysis is country-specific and captures the timeline between the bank privatisation era up to the global financial crisis and the ensuing Greek crisis. The contribution of our paper is twofold: it uses the ARDL modelling framework that is scarcely employed in related studies but also investigates spillover effects from the Greek crisis in view of the material presence of Greek banks in Bulgaria. In accordance with previous studies, the findings suggest that the credit risk determinants of Bulgarian banks should be sought endogenously in macroeconomic variables and industry-specific factors but also in exogenous factors. We evidence a pronounced role of the global financial crisis and the country’s bank regulatory framework. The Greek debt crisis appears to play an immaterial role indicating that Greek banks have not been a Trojan horse in the Bulgarian banking system.

The Determinants of Commercial Banking Profitability in Low-, Middle-, and High-Income Countries

Using a broad bank-level dataset and the GMM estimator technique described by Arellano and Bover (1995), this paper analyzes how bank-specific characteristics, macroeconomic variables, and industry-specific factors affect the profitability of 10,165 commercial banks across 118 countries over the period from 1998 to 2012. Grouping the countries according to three income levels, we show that the determinants of bank profitability included in our model can explain existing profitability differences among commercial banks in low-, middle-, and high-income countries. The profitability determinants vary quite widely across the different levels of income in terms of significance, sign and size of the effect. The level of income has thus an important impact on the determinants of bank profitability.

Spatial Agglomeration of Manufacturing in Greece: Sectoral Patterns and Determinants

This article aims to demonstrate how the industry characteristics of manufacturing sectors affect the patterns of their spatial agglomeration. It also addresses several intricate issues concerning the measurement of localization economies and estimation of their main determinants in manufacturing industries. The original empirical analysis employs annual industrial data from the Hellenic Statistical Authority (ELSTAT) during the period 1993–2006 in Greece at the prefecture level, i.e. for 51 prefectures. The data processing reveals three important findings. The first is the temporal persistence of localization economies in the Greek manufacturing. The second refers to the high level of agglomeration associated with the high-technology industries as well as the resource- and scale-intensive industries. Lastly, there are significant effects of industry characteristics related to knowledge externalities, labour skills and productivity, scale economies and own-transport expenditure on spatial agglomeration, as resulted from the use of alternative geographic concentration indices and panel data models. Results obtained have implications for policy-makers, who can enhance the regional manufacturing activity by affecting these industry-specific factors. Amongst others, planning measures and policies which aim at promoting the local development and regional convergence should focus on reducing transport costs for firms or sectors, by improving the infrastructure capacity, interconnectivity and quality of services.

Mergers and Acquisitions in the Software Industry

This paper analyzes approaches investigating success drivers of mergers and acquisitions (M&A) in the software industry. The literature review covers a classification of research papers in the generic and software industry specific M&A research discipline. The results accentuate that the impact of success factors depends on the research context and that many factors have not been examined so far with respect to the software industry. Building on these insights, the resulting areas for research are pointed out. The investigation of software industry specific factors, in particular, promises to contribute to the analysis of variance in M&A performance.

Industry- and firm-specific factors of innovation novelty

This article investigates the underlying factors that might shape the firm�s choices with respect to degrees of innovation novelty. Using a sample of 2983 firms observed under the Portuguese Community Innovation Survey, we assess the relative relevance of a set of firm- and industry-specific factors in explaining firms� choices about incremental or radical innovation. The results indicate that both the firm�s idiosyncratic historical factors giving rise to heterogeneous R&D capabilities and the industry context have power to shape the firm�s innovation choices, even though firm-specific factors appear to be more powerful. The estimated impacts on firm�s innovation novelty are, nonetheless, significantly moderated by the type of firm and industry.

How Does Asset Structure Correlate with Capital Structure? – Cross-Industry and Cross-Size Analysis of the EU Countries

Assets structure has been widely reported by corporate finance literature to significantly affect financial structure of firms. However, according to the capital structure theories and empirical research in the field, the direction of the relationship between assets tangibility and capital structure is not obvious. This study aims at verifying the significance and the direction of the way assets structure correlates with capital structure on a large sample of private firms across 9 EU countries. The correlation between several assets structure ratios and capital structure ratios is examined across countries, industries and size groups of firms in order to find out how the country-specific factors, the industry-specific factors and the factors related to firm size influence this relationship in the period 2000-2010. The data is provided by the BACH-ESD database published by the European Commission. Findings provide evidence that the firm size has relatively the weakest impact on the way assets structure correlate with capital structure. However, both the direction and the significance of the relationship are considerably influenced by country and industry specificity.

Sustainable development of global supply chains—part 1: sustainability optimization framework

In global industry supply chains, environmental sustainability optimization addresses the overall consumption of resources and energy, the reduction of carbon emissions and generated waste to name a few. In this paper, we propose a holistic sustainability optimization framework for strategic network design of industry supply chains under consideration of economic, social as well as ecologic objectives. The framework is flexible to incorporate multiple sustainability indicators, alternative sustainability optimization strategies as well as a variety of internal and external industry-specific factors which impact the sustainability of the entire industry supply chain in the long-term. The core of the framework is an end-to-end closed-loop value chain model consisting of process, transport and product-in-use modules. For the first time, the product-in-use impact (“use” vs. “make”) is integrated in one network design approach. In addition, the model fully closes the loop from sourcing of raw materials via manufacturing towards reverse value chain steps such as disposal and recycling. Finally, we propose the minimize-time-to-sustainability approach as new optimization strategy for long-term network design problems focusing on minimizing the time, industry supply chain structures need to transform into sustainability steady states for all defined sustainability indicators such as CO2e emissions, costs or social indicators based on defined target values. In part 2 of this paper the application of the optimization framework to the European automotive industry is shown.

What Drives Firm Growth? Comparing Factors of Intensive and Extensive Firm Growth

This paper compares the determinants of firm’s extensive and intensive growth based on population data of manufacturing firms registered in Slovenia in the 1994-2003 period. The former is measured in terms of employment and the latter is defined in terms of total factor productivity. After controlling for possible endogeneity of explanatory variables and accounting for growth persistence a firm’s extensive growth is found to be stronger in younger and more productive firms, using more capital intensive technology and exporting larger share of their output. Intensive growth is also more pronounced in firms with more capital intensive but it is characterized with inverted U-shaped relationship with its size. However, significant differences among the factors of intensive and extensive firm growth are revealed, especially with respect to industry-specific factors. The industry-level markup size and intra-industry concentration of foreign firms affect significantly only the intensive firm growth, while firm’s age and its export orientation are found to be important factors only for the firm’s extensive growth. The results support the great importance of external factors for firm’s learning process and, consequently its TFP growth, in particular competitive pressure in the market and foreign firms’ presence rather than ability of learning through firm’s own exporting activity or from its eventual foreign owner.

What Drives IP without IP? A Study of the Online Adult Entertainment Industry

Existing copyright policy is based largely on the utilitarian theory of incentivizing creative works. This study looks at content production incentives in the online adult entertainment industry. A recent trend of industry-specific studies tries to better understand the relationship between intellectual property (IP) and creation incentives in practice. This study makes a contribution to the literature by analyzing a major entertainment content industry where copyright protection has been considerably weakened in recent years. Because copyright infringement is widespread and prohibitively difficult to prevent, producers have been effectively unable to rely on the economic benefits that copyright is intended to provide.Qualitative interviews with industry specialists and content producers support the hypothesis that copyright enforcement is not cost effective. As a result, many producers have developed alternative strategies to recoup their investment costs. Similar to the findings of other scholarly work on low-IP industries, this research finds a shift toward the production of experience goods. It also finds that some incentives to produce traditional content remain. The sustainability of providing convenience and experience goods while continuing content production relies partially on general, but also on industry-specific factors, such as consumer privacy preferences, consumption habits, low production costs, and high demand. While not all of these attributes translate to other industries, determining such factors and their limits brings us toward a better understanding of innovation mechanisms.

Single Market Non-Compliance: How Relevant is the Institutional Setting?

This paper investigates the role of the national institutional setting of EU member states in explaining Single Market non-compliance regarding non-tariff barriers in intra-EU trade. This study uses data on infringements to Single Market law on the free movement of goods. After controlling for country and industry-specific factors, we show that domestic institutional characteristics are relevant to explain non- compliance ensuing from trade protection measures implemented by EU countries. While government independence from political pressures and higher levels of representativeness and accountability reduce the propensity of member states to infringe upon Single Market laws on the free movement of goods, better regulatory quality increases the probability of non-compliance at industry level, suggesting that increases in competition generate protectionist measures that violate Single Market law.

Idiosyncratic Effect of Corporate Solvency Management Strategies on Corporate Performance Valuation – A Study of Chemical Industry

The study identifies and evaluates the association among corporate solvency management strategies and the corporate performance valuation in Chemical industry of Pakistan. The study uses purposive sampling or judgmental sampling for selecting 30 sample companies from the sector; covering 10 years financial statements data ranging from year 2002 to 2011. Balanced panel data is taken for the purpose of study. Levin, Lin & Chu test is used to check the stationarity of data whereas White Test is used to check the heteroskedasticity of data. Panel Least square technique with fixed effects is used to generalize the relationship between studied variables. The study observed that the performance of the chemical sector in terms of market to book value is affected by internal firm and industry specific factors related to solvency management strategic decisions. Findings of the study provide with the overview of historic performance and the potential performance of the selected sector to help policy makers including finance, economics and industry experts for

Why is the Cost of Financial Intermediation Rising in Botswana?

The Botswana banking system has witnessed substantial deregulation in the past three decades with the entry of foreign banks, mergers and acquisitions in the banking system and policy aimed at deregulating interest rates by moving towards more market determined interest rates. These measures should increase competition and reduce inefficiency in the banking system both resulting in lower costs of financial intermediation. However, the cost of financial intermediation has not only remained high but is also rising. This work uses data from the three largest banks from Botswana to investigate the impact of bank specific, industry specific and macroeconomic factors in determining the cost of financial intermediation. Our results show that balance sheet factors, industry specific and macroeconomic variables account for wide bank spreads and hence the high cost of financial intermediation in Botswana. The paper concludes by suggesting that better focused regulatory oversights by the central bank, a reform plan that will boost the supervision of the panoply of non-bank financial institutions and a further strengthening of the fiscal and exchange rate to ensure sustainable macroeconomic position will help to contain the rising cost of financial intermediation.

Market Structure and Market Performance

I review studies of the determinants of market performance in the aircraft, passenger airline, supermarket, liner shipping, and hospital industries, and of mergers and market performance in markets for fast food, soft drinks, and retail gasoline. Common factors are that more competitive market structures accompany better market performance, and that firm conduct and industry-specific factors play independent roles.

E-Transparency Of Croatian Banks: Determinants and Disclosure Contents

Banks are the most important financial intermediaries and major providers of institutionalized loan financing in the economic systems worldwide. Externalities of their activities affect the economy deeply. Therefore, regulation of their behavior is of utmost importance for the general public. In addition, national and supranational prudential authorities request various forms and extents of mandatory disclosure. Nevertheless, voluntary disclosure is being recognized by the banks as a mechanism of asymmetric expectations’reduction and confidence enhancement of current and potential both shareholders and stakeholders. Upgrading information availability and updating its quality might be a useful way of reducing the probability of systemic banking crisis as well as a useful tool for improving market discipline. However, the causes and consequences of banks’ disclosure of accounting and other information are still challengeable issues in financial literature. In that regard, the purpose of the paper is to explore the determinants of Croatian banks’ online disclosure of financial information. Bank specific and industry specific factors of disclosure are being empirically examined using univariate and multivariate statistical methods. Further research objective is to compare the volume and the structure of mandatory disclosed information using content analysis. It is expected that banks with higher transparency achieve significantly better financial performance. However, the paper does not empirically investigate benefits or drawbacks of both mandatory and voluntary disclosure. For all the aforementioned reasons the paper might be provide useful insights for academics, students of economics and, most of all, for the general public, especially depositors as major providers of bank funds.