Bank Efficiency Research Articles

Exploring the Relationship Between Diversification, Risk Bank, Size Bank, and Liquidity; Evidence From Conventional Banking In Indonesia

Banking plays an important role in the economy both micro and macro. In addition, it is crucial for a country to have a strong and robust banking system. To realize a strong and robust banking banks need to maintain their efficiency. Therefore, it is necessary to identify the factors that affect efficiency, including asset diversification, risk, bank size and bank liquidity. The novelty of this research is that there is an asset diversification variable. Asset diversification can protect investors from recurring investment cycles and can save from asset failure. The sample of this research are conventional banks with a total of 10 banks that have the largest share of assets in Indonesia. In this study to identify the effect of asset diversification, bank risk, bank size, and bank liquidity on bank efficiency used multiple linear regression analysis methods were used. This study concludes that asset diversification actually reduces bank efficiency. The increased bank risk, the better efficiency. Then, the size of the bank and liquidity have no effect on efficiency. Therefore, banks need to review the diversification strategy, ensure that the risks associated with each asset and portfolio as a whole are well-identified and look for opportunities to automate repetitive processes and reduce overall operational costs. Through this research, we suggest, (i) Banks need to review the diversification strategy that has been implemented. There may be some areas or types of assets that do not fit the risk profile and objectives of the bank, (ii) Banks need to ensure that the risks associated with each asset and portfolio as a whole are well-identified, measured and managed, (iii) Banks need to look for opportunities to automate repetitive processes and reduce overall operational costs.

APPROACHES TO THE PLANNING OF THE FINANCIAL ACTIVITIES OF THE BANK IN THE CONDITIONS OF MACROECONOMIC INSTABILITY

The article outlines the main shortcomings of modern financial planning and identifies directions for improving its organization by banks. It was found that the planning process consists in systematically setting goals and determining the structural sequence of measures to achieve them. In addition, planning makes it possible to define tasks to ensure the efficient functioning of the bank in the long term and quick adaptation to the changing conditions of the external environment. The success and efficiency of banking activity is conditioned by the establishment of priorities, a list of financial services, banking products and means of their promotion on the market, which must be decided in the planning process. Therefore, the process of financial planning should determine the main directions of formation and use of the bank's financial resources and establish the principles of formation of financial relations with business partners. In order to increase the bank's operational efficiency, the planning methodology should ensure the preparation of a financial plan that reflects changes in the microenvironment under the influence of macroeconomic factors in monetary terms. The necessity of carrying out planning on the basis of regulatory cost management methods is formulated and an approach to determining the conditions of the bank's break-even operation is proposed. On the basis of the planning problems identified during the research, the application of a system of methods, which clearly delimits the scope of application for each of the selected methods, is substantiated. An important aspect of planning is the management of cash flows, which occupies a central place in ensuring the efficiency of banks' activities, managing their cost and increasing financial flexibility. When preparing a financial plan, attention should be focused on the scenario method, which allows a better understanding of the evolution of the macroeconomic environment and factors of potential threats to the bank. The scenario methodology will allow to increase, predict and develop the bank's flexibility and adaptability to various changes, which is especially important during macroeconomic instability.

Commercial banks listed on the Ho Chi Minh City stock exchange: An analysis of diversification, human capital, and performance

Both portfolio diversification and the resource-based view theories advocate for firms to engage in the diversification of their activities to mitigate risks and enhance operational efficiency. Nevertheless, the subject at hand is a matter of contention due to the existence of a perspective that advocates for the superiority of specialization over diversification. The objective of this study is to determine the relationship between income diversification, human capital, and the financial performance of Vietnamese commercial banks. Based on an analysis of data obtained from 15 commercial banks listed on the Ho Chi Minh Stock Exchange from 2013 to 2022. Panel data regression method is used. The results indicate that diversification does not exert a significant influence on the performance of banks. However, it is seen that human capital positively impacts bank performance, suggesting a favorable relationship between human capital and bank performance. According to this result, income diversification has not had an impact on the efficiency of Vietnamese commercial banks. On the contrary, human capital is a factor that positively and strongly affects the performance of Vietnamese commercial banks. The findings of this study indicate that some management implications may be considered to enhance the operational efficiency of Vietnamese commercial banks.

Internal Variables and Macroeconomic Factors as Determinants of Profitability in Islamic Banking Indonesia

The purpose of this research was to analyse the influence of internal and macroeconomic variables on the profitability of the Islamic banking industry in Indonesia. A panel data regression approach, applying fixed effect and common effect models in order to to address potential biases in the estimation was used. The research sample consisted of five Islamic banks and covered the period from Q1 to Q4 of 2022. Chow test and Lagrange multiplier test were used to compare the analysis results. The used control variables included financing quality, financing to deposit ratio, exchange rate, and gross domestic product growth. The research was also based on economic, efficiency, and productivity theories in Islamic banking. Findings, The research results showed that the Islamic banking industry in Indonesia was increasingly compliant with prevailing regulations. The Bank Indonesia's policy interest rate (BI rate) did not significantly influence the profitability. Inflation had a negative impact on profitability, while the capital adequacy ratio showed a non-linear effect. All tested control variables exhibited an influence on profitability. Financing quality and exchange rate had negative impacts, while liquidity and economic growth had positive impacts on the profitability of the Islamic banking industry in Indonesia. The novelty of the paper is visible in the panel data regression approach that uses fixed effect and common effect models and provides an effective way to address estimation bias. Additionally, this research identified control variables that have a significant impact on profitability, including financing quality, liquidity, exchange rate, economic growth, and capital adequacy ratio to present breakthroughs and innovations.

STRATEGI PEMBELAJARAN MELALUI MAGANG PROGRAM MERDEKA BELAJAR KAMPUS MERDEKA PADA PROGRAM STUDI PERBANKAN SYARIAH DI ERA PANDEMI

The development of Islamic banking in Indonesia increases the need for competent practitioners from Islamic Banking Study Program graduates. These graduates can reduce the need for basic training, thereby increasing the efficiency of Islamic banks. The government supports this through policies such as the Indonesian National Qualifications Framework (KKNI) and Merdeka Belajar Kampus Merdeka (MBKM), which aim to create a link and match between higher education and industry. Internships are a form of MBKM learning that can strengthen student competencies. The Analytic Network Process (ANP) method identifies and analyzes problems supporting MBKM in the Islamic Banking Study Program. The research shows two main issues: the duration of internships that the industry considers too long and the difficulty of ensuring learning outcomes (LLOs) by academics. The recommended strategies to overcome these problems include: Establishing good relationships with partners, Improving systems and procedures, Conducting partner selection, Increasing the number of partners. Implementing these strategies is expected to improve the effectiveness and efficiency of the learning process through internships.

Profit Efficiency and The Influence of Financial Performance Measures on Cost Efficiency of Rural Banks in Indonesia

Profit Efficiency and The Influence of Financial Performance Measures on Cost Efficiency of Rural Banks in Indonesia

Banking research in the GCC region and agenda for future research – A bibliometric examination

PurposeThis paper provides a comprehensive review of the influential and intellectual aspects of the literature on the Gulf Cooperation Council (GCC) region's banking activities.Design/methodology/approachThis study undertakes a bibliometric meta-analysis review of the GCC region banking literature, covering 199 articles published between 2004 and 2022, extracted from the Web of Science (WoS) database, followed by a content analysis of highly cited papers.FindingsThis paper identifies the influential aspects of the GCC region banking literature in terms of journals, articles, authors, universities and countries. The paper also identifies and discusses five major research clusters: (1) bank efficiency; (2) corporate governance (CG) and disclosure; (3) performance and risk-taking; (4) systemic risk, bank stability and risk spillovers and (5) intellectual capital (IC). Finally, it identifies gaps in the literature and highlights some important research issues that provide directions for future research.Research limitations/implicationsThis paper is limited to the articles indexed in the WoS database and written in English. Though the WoS database encompasses a wide range of multidisciplinary journals, there is a chance that some relevant articles are not included in the WoS database or written in another language.Practical implicationsThis study provides regulators, practitioners and academics with valuable insight and an in-depth understanding of the banking system of the GCC region.Originality/valueTo the best of the authors' knowledge, this is the first review paper on GCC region banking literature. This study provides regulators, practitioners and academics with valuable insight and an in-depth understanding of the banking system of the GCC region.

<b>Efficiency of Microfinance Banks and Institutes: In Creation of Self-Employment in Pakistan</b>

The aim of this research is to make comparison between the microfinance banks and microfinance institutes in creation of self-employment in Pakistan. The data extract from the years 2018-2022, the 4 financial banks and institutes has been taken. The different types of profitability ratio are used in this research. The population of the research is twenty-seven but the sample size of this research is eight and the random sampling technique is used. The SPSS was used and the t-test was applied to the data. To analyze for the purpose of investigating for their performances. The various ratios to apply for their productivity, rates of lending loans as well as how much people got loans from them and what are the criteria of lending loans, feasibility of lending the loans and profitability trend in each sector. This research concludes that after applying all the ratios analyzing its return and seeing the efficiency of microfinance banks and institutes, as their major focus is to make the country prosperous by lending the loan to the people as it has consumed less days to grants loans that creates self-employment in Pakistan. The researcher comes to this point that from considering all the facts and figures, terms and conditions, rules and regulations of all aspects of microfinance banks and institutes. The basis of this research, its profitability is more, the customers are more attracted towards it. The less working days it consumes than the other ones. Its liabilities and expenses are less than the others.

Impact of Merger on Efficiency of Commercial Banks: A Case Study

Impact of Merger on Efficiency of Commercial Banks: A Case Study

A frontier-based parametric framework for exploring the competition–efficiency nexus in commercial banking: insights from an emerging economy

PurposeThe present study assesses the commercial bank profit efficiency and its relationship to banking sector competition in a rapidly growing emerging economy, India from 2009 to 2019 using stochastic frontier analysis (SFA).Design/methodology/approachLerner indices, conventional and efficiency-adjusted, quantify competition. Two SFA models are employed to calculate alternative profit efficiency (inefficiency) scores: the two-step time-decay approach proposed by Battese and Coelli (1992) and the recently developed single-step pairwise difference estimator (PDE) by Belotti and Ilardi (2018). In the first step of the BC92 framework, profit inefficiency is calculated, and in the second step, Tobit and Fractional Regression Model (FRM) are utilized to evaluate profit inefficiency correlates. PDE concurrently solves the frontier and inefficiency equations using the maximum likelihood process.FindingsThe results suggest that foreign banks are less profit efficient than domestic equivalents, supporting the “home-field advantage” hypothesis in India. Further, increasing competition drives bank managers to make riskier lending and investment choices, decreasing bank profit efficiency. However, this effect varies depending on bank ownership and size.Originality/valueLiterature on the competition bank efficiency link is conspicuously scant, with a focus on technical and cost efficiency. Less is known regarding the influence of competition on bank profit efficiency. The article is one of the first to examine commercial bank profit efficiency and its relationship to banking sector competition. Additionally, the study work represents one of the first applications of the FRM presented by Papke and Wooldridge (1996) and the PDE provided by Belotti and Ilardi (2018).

Impact of Non-Performing Assets over Bootstrapped Efficiency of Banks: Analysis of Indian Domestic Banks

The present paper examines the possible impact of Non-Performing Assets (NPAs) on the efficiency estimates of banks. The bootstrapped efficiency scores of 44 domestic banks of India have been examined over a period of 12 years from 2010–11 to 2021–22. The results indicate that public-sector banks performed well in the efficiency aspect as compared to private-sector banks. The Wilcoxon signed-rank test discerned that there is a significant impact of NPAs over the efficiency estimates. The results divulge that non-consideration of NPAs leads to underestimation of the efficiency of banks. The results are expected to be fruitful for policymakers, regulators, banks, and researchers. The inference is very crucial for researchers as well as regulators while comparing the efficiency of public and private sector banks because public sector banks seriously suffer from the problem of mounting NPAs. The comparison of efficiency scores in different years unveils the strong relationship of efficiency estimates with money deposited into banks and the amount lent by banks. The outcomes of the study hold significant potential for policymakers, regulators, and banks alike, as they seek to get a comprehensive understanding of the intricate dynamics surrounding lending, deposits, and the overall efficiency of banking institutions. Further, since the impact of not including NPAs was found to be worse on managerial efficiency, the managers have to make rational use of banking inputs in order to maximise outputs. The study is likely to be a useful reference for researchers interested in researching various aspects of efficiency.

Heterogeneity and time-varying efficiency in the Ecuadorian banking sector. An output distance stochastic frontier approach

This paper estimates the efficiency of Ecuadorian commercial banks from 2007 to 2017, considering multiple inputs and outputs, several factors explaining inefficiency, technological unobserved heterogeneity, and time-varying efficiency. To do this, we used an output distance function stochastic frontier model in a Bayesian framework and considered the profitability approach. In general, the results show evidence of unobserved cross-bank heterogeneity and time-varying inefficiencies, the latter of which presented scores which were high and stable over time. One factor that significantly explains inefficiency is foreign ownership, however internal factors such operating profitability and Central Bank policy reserve requirements did not. Finally, estimated returns to scale show bimodality indicating the existence of two bank groups associated with decreasing and constant returns to scale.

Does Competition Affect Bank Efficiency in MENA Countries? A Double Bootstrapping-DEA Approach

Does Competition Affect Bank Efficiency in MENA Countries? A Double Bootstrapping-DEA Approach

Efficiency in Islamic Banks: Some Empirical Evidences in Indonesian Finance Market

Purpose: The aim of the present paper is to examine the revenue efficiency of the Indonesian Islamic banking sector. The study also seeks to investigate the potential internal (bank specific) and external (macroeconomic) determinants that influence the revenue efficiency of Indonesian domestic Islamic banks. Method/design/approach: We employ the whole gamut of domestic and foreign Islamic banks operating in the Indonesian Islamic banking sector during the period of 2009 to 2018. The level of revenue efficiency is computed by using the Data Envelopment Analysis (DEA) method. Furthermore, we employ a panel regression analysis framework based on the Ordinary Least Square (OLS) method to examine the potential determinants of revenue efficiency. The results indicate that the level of revenue efficiency of Indonesian domestic Islamic banks is lower compared to their foreign Islamic bank counterparts. Results and conclusion: We find that bank market power, liquidity, and management quality significantly influence the improvement in revenue efficiency of the Indonesian domestic Islamic banks during the period under study. Research implications: By calculating these efficiency concepts, we can observe the efficiency levels of the domestic and foreign Islamic banks. In addition, by comparing both cost and profit efficiency, we can identify the influence of the revenue efficiency on the banks’ profitability. Orinalitty/value: The preferred method allows us to distinguish between three different types of efficiency, namely cost, revenue, and profit efficiencies. Furthermore, we perform a series of parametric (t-test) and non-parametric (Mann- Whitney [Wilcoxon] and Kruskall-Wallis) tests to examine whether the domestic and foreign Islamic banks are drawn from the same population.

The Analysis of The Green Banking Implementation Model on Banking Performance at Bank Syariah Indonesia

This study aims to examine the implementation of green banking practices at Bank Syariah Indonesia, KCP Banjarnegara, and their impact on banking performance. This study uses a descriptive qualitative approach with a field research method through direct observation and interviews with the Branch Manager, Operational Staff, teller, and microstaff of Bank Syariah Indonesia, KCP Banjarnegara. Indicators of green banking activities used in this study include green Product, green Operation, green customer, and green Policy. The results of this study indicate that Bank Syariah Indonesia KCP Banjarnegara implements green banking practices based on research indicators, such as Green Product, Green Operation, Green customer, and green policy. Bank Syariah Indonesia, KCP Banjarnegara, has implemented all indicators well. This has a positive impact on the image and reputation of Bank Syariah Indonesia, KCP Banjarnegara, as a bank that cares about the environment and social responsibility. In addition, the existence of Operational Efficiency in banking has helped Bank Syariah Indonesia KCP Banjarnegara increase efficiency and reduce costs. The use of technology also speeds up the transaction process and services for customers and increases customer satisfactio.

Evolution and future trajectories of research on bank efficiency: A systematic review

This bibliometric study examines trends in bank efficiency research over the past three decades. Systematic database searches were used to identify 342 articles on bank efficiency published between 1991 and 2023. Bibliometric analysis techniques were used to analyze publication volume patterns, influential authors and journals, geographic distribution, and conceptual structure. Citation analysis and text mining shed light on the evolution of bank efficiency research. The publication rate increased between 2005 and 2016 before leveling off. Research output continues to be dominated by a handful of prolific authors and institutions, primarily in Malaysia. Recent studies have incorporated external determinants such as regulation, governance, and competition, while influential earlier works focused on internal operations. Despite the dominance of data envelopment analysis, new techniques such as machine learning are emerging. The focus of research has shifted from developed to emerging economies. Initial technical topics have expanded to include sustainability, governance, and inclusion. Differences exist in terms of qualitative factors, long-term performance, and new contexts. Future research should assess the impact of digital transformation, dynamics during economic downturns, climate-related risks, and competition from non-bank entrants based on identified trends and gaps. This study provides a quantitative analysis of the trends influencing bank efficiency research and identifies promising avenues for advancing knowledge.

Factors of Value Chain Affect Bank Efficiency

This paper aims to determine and estimate the factors in the value chain that affect the efficiency of state-owned commercial banks in Vietnam. The study employs a combination of qualitative techniques, such as conducting interviews with top executives, financial managers, chief accountants, and employee surveys, along with quantitative methods like ordinary least squares analysis. The outcomes reveal four critical segments within the value chain – the retail department, operation department, back office, and call center – all of which significantly influence the efficiency of the banks. Additionally, drawing upon value chain theory and Porter's model (1985), the author underscores the significance of implementing a robust value chain strategy. This strategic approach has the potential to substantially enhance the competitive advantages of state-owned commercial banks in Vietnam. Doi: 10.28991/ESJ-2023-07-06-010 Full Text: PDF

Impact of Merger on Efficiency, Stability, and Competitiveness of Public Sector Banks

This study examined whether the bank’s merger enhances competitiveness, stability, and an efficient banking system. Further, this paper examined the relationship between High-Powered Money and the six mentioned explanatory variables with the help of the Panel Data Model. We used the Reserve Bank of India dataset from 2009 to 2021 to explore the relationship. We observed that High-Powered Money has increased, and the closing balance of non-performing assets has decreased after the merger of the Indian banks. In addition, we have seen that high powered money has a positive and significant relationship with the capital-to-risk-weighted assets ratio and is negatively related to the Credit-Deposit Ratio and the Investment-Deposit Ratio. In addition, we observed that return on investments is positively associated with high powered money. These estimates show that Indian public sector banks have become competitive, financially stable, and efficient after the merger of banks. At the same time, we did not see a significant relationship between the return on investments and the Total Assets to Total Income Ratio.

Impact of E-Banking on Operational Efficiency of Employees in Nepalese Commercial Banks

This study investigates the influence of electronic banking methods, including ATMs, mobile banking and internet banking on the operational efficiency of employees in Nepalese commercial banks. This research focuses on its implications in Nepal, aiming to understand how the adoption of digital technologies affects the day-to-day tasks, workload distribution, and overall performance of bank personnel. Mixed-methods approach involving surveys and interviews, the study analyzes employee perceptions and experiences, shedding light on the extent to which e-banking optimizes processes, improves customer interactions, and necessitates skillset adaptations. The findings of this research contribute valuable insights to academia and the banking industry, offering actionable information to enhance the benefits of e-banking while mitigating potential drawbacks on employee performance. By comprehensively exploring the relationship between e-banking and operational efficiency in Nepal's banking, this study equips stakeholders with knowledge crucial for strategic decision-making and sustainable growth within the evolving financial technology.

Dynamics of intellectual capital and financial performance in ASEAN banks

PurposeThe purpose of this study is to examine the dynamic relationship between intellectual capital (IC) and its components on financial performance of banks within the selected eight countries of Association of Southeast Asian Nations (ASEAN).Design/methodology/approachThe study utilizes the balanced panel data of 37 publicly listed banks from eight leading ASEAN economies for the period of 2017–2021. In this sense, the authors applied the Ante Pulic's typology, i.e. value-added intellectual coefficient (VAIC™) to evaluate the efficiency of intangible and tangible assets. While, investigating the dynamic nature of relationship, the authors employed the generalized system method of moments because of its power to account for the problem of endogeneity and heteroscedasticity.FindingsThe results of the study demonstrate that banks in ASEAN countries shed a varied degree of a spotlight on VAIC™ and its components to create value. The findings revealed that structural capital efficiency is significantly associated with earning per share (EPS), return on assets (ROA) and return on equity (ROE), compared to human capital efficiency (HCE) and capital employed efficiency of ASEAN banks. These results endorse the importance of resource- and knowledge-based views of organizations to leverage the financial performance of banks. However, contrary to theoretical expectations, this study found no positive relationship between HCE with ROA and ROE. Whereas, the relationship of VAIC™ is positive and significant with EPS and ROE but it remains statistically very marginal.Research limitations/implicationsThere are some inherent limitations in this study that could be opportunities for future research. The current study uses the VAIC™ typology, but future researchers can use the modified value-added intellectual coefficient (MVAIC) or triangulation approach to enhance the validity and reliability of the study. Additionally, future research can investigate the similarities and differences among countries in terms of their cultural backgrounds and regulatory frameworks regarding the disclosure of intangibles. Furthermore, future research can increase the length and sample size of the study to enhance its generalizability.Practical implicationsThe robust empirical findings extend the academic debate on IC by unveiling the dynamic nature of relationship between IC and financial performance in context of ASEAN banking sector. The findings provide plausible recommendations for policy makers (managers, regulators and stakeholders) to understand how to increase the IC efficiently, especially human capital as a source to evaluate the firms’ ability in determining value-added and financial performance. Further, findings of this study also suggest that how can policy makers get the benefit by investing more on structural capital as a valuable strategic source to guarantee the optimal performance returns.Originality/valuePrior studies on IC have been country- and firm-specific, utilizing cross-sectional research designs. However, this research contributes to the limited literature by investigating the dynamic nature of the relationship between IC and financial performance of banks in the context of ASEAN countries using micro-panel data.