Influence Bank Performance Research Articles

Influence of Intellectual Capital on Financial Performance in the Banking Sector in Indonesia

The aim of this research is to examine the influence of intellectual capital on the financial performance of banking companies which is moderated by good corporate governance. The method used in this research is multiple linear regression analysis with moderating variables using Moderated Regression Analysis (MRA). The population in this study was 45 banking companies. The banking sector is one of the sectors that bridges between people who have excess funds and people who need funds. Not only is the company's financial performance a reference for the company's success, but company resources can also provide increased financial performance for the company's sustainability. Intellectual capital is one of the factors that influences bank performance. The research results show that Intellectual Capital has a positive effect on financial performance and Good Corporate Governance. However, Good Corporate Governance does not moderate the relationship between Intellectual Capital and financial performance. These findings underscore the importance of Intellectual Capital in improving financial performance and Good Corporate Governance practices, but do not support the moderating role of Good Corporate Governance in this relationship.

Geopolitical risk and banking performance: evidence from emerging economies

PurposeThis study delves into the critical issue of banks' stability and profitability, which are crucial elements for fostering economic growth and preserving depositor confidence. Specifically, we scrutinize the impact of geopolitical risks on the profitability and solvency of banks operating in emerging economies across the Middle East and Africa.Design/methodology/approachEmploying a two-step Generalized Method of Moments (GMM) approach, we analyze a comprehensive dataset comprising 125 banks spanning 13 emerging economies in the Middle East and Africa, covering the period from 2003 to 2019.FindingsOur study reveals a significant sensitivity of Middle Eastern banks to geopolitical risks, wherein effective anticipation or adaptation to these risks positively influences bank performance. Conversely, the impact of geopolitical risk on African banking profitability appears inconclusive and statistically insignificant. These nuanced findings underscore the complex interplay between geopolitical dynamics and financial performance in diverse regional contexts, with implications for policymakers and industry stakeholders.Practical implicationsOur findings underscore the need for nuanced policy responses and risk management strategies tailored to the unique challenges posed by geopolitical dynamics in emerging markets. Furthermore, they highlight the importance of continued research efforts to deepen our understanding of these complex interactions and inform more effective decision-making in the financial sector.Originality/valueAmidst growing recognition of the importance of geopolitical risks in financial markets, empirical studies exploring their precise impact on bank performance remain scarce. This study fills this gap by offering a pioneering investigation into the influence of geopolitical risks on bank profitability and solvency, using advanced econometric techniques and a substantial, diverse sample of banks in emerging economies across the Middle East and Africa.

The role of corporate social responsibility as a moderating factor in influencing bank performance in Indonesia

An important factor in increasing public trust in banks is to show bank performance, so it is necessary to know the factors that influence bank performance. Therefore, it is important to attract the attention of bank management. This study aims to determine the factors influencing bank performance by using social responsibility as a moderating variable. This study involved 20 banks in Indonesia and used a quantitative approach. Secondary data sources were used for data collection and analyzed using a regression equation model. The results show that non-performing loans and bank size have no effect on bank performance. Meanwhile, loan-to-deposit ratio and corporate social responsibility have a positive effect at the 1% significance level. The results of testing the moderation effect obtained t-statistic values of –0.365 and –4.269. These results show that social responsibility has a negative effect, does not moderate the relationship between non-performing loans and bank performance, but has a negative effect, moderating the relationship between the loan-to-deposit ratio and bank performance. These findings have policy implications for bank performance through the implementation of corporate social responsibility policies. AcknowledgmentsThe authors would like to thank the DPPMP of Stikubank University for supporting the funding of this research. Thanks also to the NGEJUS - FEB Unisbank team who helped provide the facilities needed for this study.

Factors that Influence Banking Performance in Indonesia

This research aims to examine the influence of ESG Score, NPL, Bank Size, Bank Capital, Liquidity Risk, Bank Liquidity, revenue growth, Bank Leverage, Economic Growth, Inflation, Diversification, Labor Productivity, and ESG Score Moderating on Bank performance, which is shown with the achievement of Return on Assets. The research sample used in this research is banks listed on the Indonesia Stock Exchange for the period 2018 to 2022. Data was taken from time series data which contains data from 2018 to 2022 for the independent variable and bank performance as the dependent variable. The research methodology used is Ordinary Least Squares using Eviews 12 software. The findings and contributions in this research are that ESG Score, Non-Performing Loans, Bank Leverage, Economic Growth, and Inflation influence bank performance. Meanwhile, Bank Size, Bank Capital, Liquidity Risk, Bank Liquidity, and revenue growth do not have a significant effect on changes in bank performance. Bank Leverage, Economic Growth, and Inflation have a positive and significant effect on changes in bank performance, while ESG Score and Non-Performing Loans have a negative and significant effect on changes in bank performance. Banks can take advantage of Bank Leverage, Economic Growth, and Inflation opportunities to improve their performance so that investors are interested in buying bank shares. Low and controlled Non-Performing Loans will increase banking profits, thereby improving the bank's performance. It is hoped that the results of this research can provide input for banks and investors to consider ESG Score, Non-Performing Loans, Bank Leverage, Economic Growth, and Inflation in managing their business and in making investment decisions.

DETERMINANTS OF BANKS’ PROFITABILITY – EVIDENCE FROM GO PUBLIC BANKS IN INDONESIA

Bank performance needs to be monitored because of the role of banks as intermediary institutions that collect funds from surplus parties and channel them to deficit parties. This business characteristic makes the banking sector regulated by the government to maintain economic stability and meet the interests of society. Banking performance during 2018-2022 is engaging to study because there is a significant force, namely the COVID-19 pandemic, which impacts economic stability in Indonesia. This research was conducted to obtain empirical evidence of the influence of banking-specific factors and industry-specific factors on banking performance. This research uses quantitative methods by collecting financial reporting data from companies in the banking sub-sector. The banking-specific factors that influence bank performance are capital measured by CAR, liquidity measured by CDR, firm size measured by bank size, asset quality measured by NPL, cash ratio, leverage measured by the DER, management productivity measured by the BPE and the industry-specific factors that influence bank performance, namely GDP, inflation rate and effective tax rate. ROA measures banking performance. Data collection and processing were carried out using IBM SPSS Statistics 25 software. The study's results showed the banking-specific factors that significantly influenced bank performance were CDR, bank size, NPL, DER, and BPE. In contrast, the industry-specific factor was only GDP, which significantly influenced banking performance.

Ownership structure and bank performance: the impact of market competition

ABSTRACT This paper investigates whether and how ownership concentration, as an intearnal mechanism of corporate governance, and market competition, as an external mechanism of corporate governance, interact to influence bank performance. In other words, we test whether ownership concentration and competition are complementary or substitutes. To do so, we use a unique hand-collected database covering commercial banks based in 17 Western European countries from 2006 to 2019. Consistent with previous studies, we find that ownership concentration and market concentration increase the profitability and risk-taking behaviour of banks. Furthermore, no evidence of non-linearity of competition is found for our sample of European banks. Regarding the interaction effect, our results indicate that market competition seems to foster the profitability of banks with concentrated ownership. In addition, we find that risk-taking behaviour of banks with controlling shareholders increases when they operate in competitive markets. These results suggest that ownership concentration and market competition are complementary, and hence banks may benefit differently from these corporate governance mechanisms to improve their performance.

Do financial innovations influence bank performance? Evidence from China

PurposeThe rapid growth of Fintech presents a growing challenge for banking institutions, particularly those with more traditional, service backgrounds. This paper aims to examine the relationship between Fintech innovation and bank performance by exploiting novel Chinese market data.Design/methodology/approachGuided by the work of Dietrich and Wanzenried (2011, 2014) and Phan et al. (2019), the authors construct a regression model to investigate the effect of Fintech innovation on the profitability of Chinese listed banks. The authors include their measures of Fintech innovation in each of their selected structures.FindingsResults indicate that Fintech innovation is negatively associated with bank performance and that state-owned banks, joint-stock commercial banks and long-established banks are more negatively impacted by Fintech innovation relative to city and rural commercial banks and younger banks.Originality/valueRisk tolerance levels, internal structure and efficiency and recent debt repayment performance channels are each shown to be significant, robust explanatory factors underpinning such results.

Corruption, lending and bank performance

This paper uses a sample of 7235 banks from 160 countries between 2000 and 2016 to investigate the link between corruption, lending and bank performance. It considers both country- and bank-level corruption. The study finds that while corruption increases bank lending, it has an adverse impact on bank profits and risks (credit, solvency and distance to default). Corporate lending is found to be most influenced by corruption. Bank-level corruption influences bank performance in both developed and developing countries whereas country-level corruption has a lesser effect on lending in developing countries. The study also finds that greater bank competition, market concentration and improved regulatory environments reduce the effect of corruption on bank lending and performance. Policy makers should focus on enhancing regulatory rules and institutions in order to deal with the adverse impact of corruption on bank performance.

Islamic Commercial Bank Performance: The Nexuses by Financial Ratios, Macro Economics, And Financial Technology

The objective of this study is to examine the relationship between various factors and the performance of Islamic commercial banks in Indonesia over the next 12 periods. The variables considered include Non-Performing Assets, Capital Adequacy Ratio, Insolvency-risk, Inflation, Financial Technology, and Bank Size. The research methodology employed is a quantitative approach with a descriptive analysis. The sampling technique utilized is saturated sampling, resulting in a total of 96 data points. The findings indicate that the Non-Performing Assets (NPA) variable has a significant impact on Return on Assets (ROA), while the ROA variable does not significantly affect the NPA variable. Additionally, the inflation variable does not have a statistically significant effect on ROA, and vice versa. In the short term, the variables that influence bank performance are NPA, Capital Adequacy Ratio, Insolvency-risk, Financial Technology, and Bank Size. In the long term, significant factors influencing bank performance are NPA, Insolvency-risk, Financial Technology, and Bank Size. The Impulse Response Function (IRF) test demonstrates that ROA shows a positive response to the impact of NPA, Capital Adequacy Ratio, Inflation, Financial Technology, and Bank Size, while it exhibits a negative response to shocks caused by inflation. Throughout the study period, the variable with the greatest contribution remains Financial Technology, followed by other variables. Ultimately, the aim of this study is to provide insights for future policy implementation and decision-making within companies

Differential Impact of Fintech and GDP on Bank Performance: Global Evidence

Using the World Bank Global Findex Database for 91 countries in 2014, 2017, and 2021, we examine whether fintech levels influence bank performance and whether fintech’s interaction with GDP per capita causes differential effects on bank performance globally. Since fintech levels were already very high for rich countries when the World Bank started providing fintech development statistics in 2014, we estimate AbFintech by regressing fintech levels on GDP per capita by year. AbFintech is the difference between the fintech level and its fitted values. Then, using multiple regression analyses, we investigate the impact of AbFintech on bank performance worldwide, focusing on the differential effects of AbFintech and GDP levels on bank performance. We find AbFintech significantly increases bank performance, primarily in less developed countries. Specifically, AbFintech increases banks’ ROA in the least developed countries and net interest margin in 75th percentile countries. Also, AbFintech decreases the cost-to-income ratio in 75th percentile countries, while it increases the ratio in the most developed countries. The resulting policy implication is that banks in less developed countries benefit most from investing in fintech innovation since they can provide a broader customer base, including formerly unbanked or underbanked customers, with more convenient services at lower costs.

The Effect of Credit Risk And Efficiency on Bank Performance in Indonesian Banking: With Liquidity as A Mediation Variable

Bank performance is important in the stability of a country. If a bank's financial performance is poor, it will have an impact on channeling funds to who need funds and will hinder the economy of a country. Therefore, this research was conducted to examine the factors that influence bank performance. This research has developed novelty that is of from research before with the use of an intermediary variable is Liquidity. This research uses secondary data in the form quarter time series from 2013 to 2019. The population and samples in this study are 41 conventional banks. The sampling technique used is exhaustive sampling method. The data analysis technique used is Path Analysis and Sobel Test to measure Intervening variables. The results of research on substructure I that partially Credit Risk and Efficiency have a negative and significant effect on Bank Performance, while the level of Liquidity has no effect on Bank Performance. In substructure II, Credit Risk and Efficiency do not affect the Liquidity Level. For the path analyze results in this research using the single test, it is found that the liquidity level does not interfere in the effect of credit and efficiency on bank performance.

Evaluating the relationship between entrepreneurial marketing, competitive advantage, and Islamic banks performance

The purpose of this paper is to analyze the effect of entrepreneurial marketing on competitive advantage and Islamic bank performance in Indonesia with the moderating role of vigilant leadership. We used a convenience sampling method to collect data from 204 Islamic bank branches in Indonesia. To test the hypotheses, we employed Smart-Partial Least Square (Smart-PLS) software. The findings indicate that entrepreneurial marketing directly or indirectly (through competitive advantage) influences bank performance. Vigilant leadership does not moderate the influence of entrepreneurial marketing on bank performance. Therefore, Islamic banks in Indonesia need to develop entrepreneurial marketing practices to increase their competitive advantage and bank performance. This study is the first to examine the effect of entrepreneurial marketing on organizational outcomes in Islamic banking and among the first to use vigilant leadership as a research variable in the banking context.

Residential Mortgage Portfolio, Product Innovation and Performance of Commercial Banks in Kenya

This study sought to investigate the relationship between residential mortgage portfolios, product innovation, and performance of commercial banks in Kenya. The study was anchored on the Modern Portfolio Theory, Agency Theory, and Asymmetric Information Theory. The study adopted a correlational descriptive research design and data collected from the annual residential mortgage surveys conducted by the central bank of Kenya (CBK) on commercial banks covering a 13-year period from 2006 to 2018. Further, the financial statements of commercial banks and Kenya Bankers Association database were used as a source of secondary data. Data were analyzed via panel data approaches. The Baron and Kenny (1986) approach was used to test the hypothesis. The results revealed that residential mortgage portfolio attributes, namely: portfolio quality and mortgage interest return significantly influence bank performance. The effect of mortgage terms on the relationship between mortgage portfolio quality and performance was negative and statistically significant. Loan to value (LTV) ratio was however found not to significantly intervene in the relationship between residential mortgage portfolios and the performance of banks operating in Kenya. From the findings, the study suggested that bank managers pay attention to the institutional environment and product characteristics in designing their mortgage loan portfolios.

An empirical investigation of Islamic marketing ethics and convergence marketing as key factors in the improvement of Islamic banks performance

Purpose This paper aims to investigate the influence of Islamic marketing ethics and convergence marketing on competitive advantage and bank performance. Design/methodology/approach This study is based on a survey of 204 Indonesian branch managers from the Islamic banking industry. Results were produced with the partial least square approach. Findings Results revealed that Islamic marketing ethics and convergence marketing have sufficient confidence to have significant influences on competitive advantage, producing a positive association with a competitive advantage. However, Islamic marketing ethics and convergence marketing did not influence bank performance directly. Competitive advantage positively mediated the relationship. Furthermore, organizational digital literacy did not moderate the relationship between convergence marketing and bank performance. Research limitations/implications This study contributes to the conceptualization of convergence marketing and the identification of its effects on competitive advantage and bank performance. The identification of convergence marketing in this dissertation contains dimensions of mobile, security, foreign currency, holistic and interactivity as different aspects from the steps of Islamic banks to digitize their services to the internet in a single application. The results also indicate that convergence marketing does not have a direct effect on bank performance but has an indirect effect through competitive advantage. Convergence marketing must first create a bank advantage over its competitors to have a good effect on bank performance. Practical implications This study offers many opportunities for Islamic bank marketers to improve performance. Many Islamic banks currently do not implement Islamic marketing ethics consistently and thoroughly. The results of this study encourage Islamic banks by showing that the more intensive and consistent they are in implementing Islamic marketing ethics, the better their competitive advantage and the higher the performance. This effort can be done in various ways, such as offering tariffs/ratios of services transparently to customers, not exaggerating the benefits of the products offered to distort customer expectations, building brands that can strengthen customer confidence in Islamic banks and only offering products and services with high-quality standards. Limitation and future research This study uses a sample of Islamic banking so that it is still limited to certain types of banks. Future research needs to conduct model testing in different contexts such as conventional banking. In addition, further research needs to use the capabilities or capabilities of bank IT as a moderator in the effect of convergence marketing on bank performance. Future research also needs to control for more variables and use a scale that is more complex than the binary scale (for example, the percentage of share ownership or territory in the scope of the province or district/city). Originality/value This research views the Islamic bank competitiveness through the lenses of Islamic ethical theory and convergence marketing theory.

DOES BANK EFFICIENCY ENHANCE BANK PERFORMANCE? EMPIRICAL EVIDENCE FROM INDIAN BANKING

This paper examines the effects of cost, revenue, profit efficiency, and stability inefficiency on bank profitability in India over the period 1997 to 2017. Additionally, this study examines the effect of efficiency on profitability for banks according to their ownership and for periods with (and without) the global financial crisis. The cost, revenue, and profit efficiency scores for 70 banks in India are estimated using stochastic frontier analysis. Our key findings are as follows. First, we find that cost, revenue and profit efficiencies positively influence the profitability conditions of Indian banks. Second, banks that are inefficient adversely influence bank performance, although the global financial crisis did not seem to impact the efficiency-profitability relationship. Finally, we find that bank ownership matters for the association between its efficiency and performance.

Cultural differences and cross-border investment project performance: an analysis of the Polish banking sector

In recent decades, the Polish banking sector has experienced a large number of mergers and acquisitions (M&As) as well as the establishment of several new banks. The success of such investment projects can be influenced by numerous factors, including the cultural differences between the country of the bank initiating the transaction and Poland. The objective of this article is to assess the influence of these cultural differences on the performance of cross-border investment projects carried out in the Polish banking sector from 1994 to 2018. The results of this study confirm that cultural differences influence bank performance: the culturally closer the countries are, the better the banks perform. Specifically, the dimensions of power distance, individualism, uncertainty avoidance and masculinity are the most relevant to bank performance. Future research should be focused on determining the role that cultural differences exert on the cross-border consolidation of the European banking sector.

Board characteristics and efficiency of value added by banks: Evidence from an emerging economy

This paper estimates the efficiency of value added by banks using their total resources (physical capital resources and intangible resources) and finds an association between board characteristics and efficiency of value added. The paper is grounded in the theory of resource and knowledge based view of the firm, and agency theory, and tries to establish links between these two theories. This study departs from existing literature of examining the effect of board characteristics on financial performance, corporate sustainability, and corporate environmental responsibility, and tries to understand the relationship between board characteristics and the efficiency of value added by banks through their resources. This is also the first study of its kind to study the relationship between board structure characteristics and value creation in Indian banks using the Value Added Intellectual Coefficient (VAIC) methodology. Using the data for 41 commercial banks in India from 2008 to 2017 and by employing Prais-Winsten Regression, this study finds that board meetings and CEO-Chairman duality significantly and positively influence the efficiency of value added by banks through their total resources and intellectual capital resources. At the same time, independence in the boards negatively influences the efficiency of value added through physical capital resources. Overall, the findings of the paper indicate that board governance influences bank performance measured in terms of efficiency of value added. Policymakers, regulators, and bank managers should frame appropriate policies to ensure more board meetings, and the presence of board duality.

Do family ownership and control influence bank performance and risk-taking A cross-country analysis of emerging economies

Do family ownership and control influence bank performance and risk-taking A cross-country analysis of emerging economies

Fintech credit, bank regulations and bank performance: a cross-country analysis

PurposeThis study is the first to investigate whether fintech credit influences bank performance, considering the moderating impact of bank regulations.Design/methodology/approachThis study uses an aggregate dataset of 73 countries from 2013 to 2018 to examine the nexus between fintech credit, bank regulations and bank performance. For robustness tests, the authors introduce different proxies of fintech credit, perform sub-sample analysis and substitute control variables, as well as conduct their empirical strategy to tackle potential endogeneity issue.FindingsThe authors document some significant findings. First, the authors’ evidence implies that fintech credit tends to reduce bank profitability, while improving bank risk-related performance. This suggests that as fintech grows, it competes with banks and takes some share of profits, but it also benefits banks in terms of stability. Second, stricter regulations contribute positively to bank stability. Third, the authors argue that the impact of fintech credit on bank performance may depend on the degree of banking regulation, and find that fintech credit would impose a more positive influence on bank stability as more stringent banking regulation is present.Originality/valueThis study is the first to investigate whether fintech credit influences bank performance, considering the moderating impact of bank regulations. The findings imply that fintech credit tends to be more beneficial when bank regulations become stricter. Therefore, they bring relevant implications to the regulators, as well as bank and fintech managers with regard to the potential cooperation.

Impact of Bank-Specific, Corporate Governance and Environmental Factors on Bank Efficiency and Profitability in Pakistan

The study aims to investigate the impact of bank-specific, board structure, gender diversity, and environmental factors on bank efficiency and profitability in Pakistan by taking a sample of seventeen commercial banks for the period 2013-2018. Data envelopment analysis (DEA) and return on assets (ROA) are used as a proxy to measure bank efficiency and profitability. Panel estimation techniques and Generalized Method of Moments (GMM) are used to conceptualize the research framework and to test the hypotheses. The findings indicate a negative relationship of non-performing loans, advances, level of involvement of women into other committees, and CSR index with ROA; while more presence of women on board reveals a positive and significant impact on ROA that is consistent with critical mass theory. However, CEO duality shed a positive impact on technical efficiency; while bank size signifies an inverse relationship with ROA and technical efficiency. Moreover, deposit influences ROA positively; while board size finds a positive and significant relationship with ROA and technical efficiency. The findings are important for various stakeholders as they can efficiently take their decision-making to better understand the factors influence bank performance. This study recommends future researchers do the same research by inculcating a larger sample size.