Non-listed Banks Research Articles

Evaluating Board Characteristics’ Influence on the Readability of Annual Reports: Insights from the Egyptian Banking Sector

This study aims to examine the impact of board characteristics (BCs) on banks’ annual reports readability (BARR). Further, it examines whether bank size (BS) moderates the association between BC and BARR. The study employs a sample of 208 bank-year observations from both listed and non-listed banks in the Egyptian stock exchange (EGX), utilizing data spanning from 2016 to 2023. The study employs a random-effect regression model to test the hypotheses and discuss the results. The results suggest that BARR has a significant association with board meetings, gender and cultural diversity. Furthermore, BS played a moderating role in determining the association between BCs and BARR, supporting the second hypothesis. The findings show that the BCs and disclosure quality differ for banks of varying sizes. The findings have practical implications for the Egyptian banking sector, highlighting that board structure is critical to transparency and maintaining public trust. Additionally, the results focus policymakers’ attention on standardizing the contents and structure of banks’ annual reports, with the aim of reducing managers’ manipulation of disclosures and reducing the level of information asymmetry between stockholders, as suggested by the agency theory.

Do banks engage in earnings management? The role of dividends and institutional factors

We investigate the impact of dividend policy on earnings quality and opportunistic earnings management for individual banks across 45 developed and developing countries between 1996 and 2019. Our estimates show that high dividend payments reduce earnings management, hence mitigate agency problems. This mitigation is especially prevalent among well-capitalised and non-listed banks. Greater investor protection and government regulation appear to strengthen the negative association between dividend policy and earnings management. Our results hold robustly across many different specifications.

Gender quotas, board diversity and spillover effects. Evidence from Italian banks

We study the impact of a law, which required the increase of the proportion of women on boards of listed companies to at least one third. We look at its impact on listed banks, but also test whether it led to spillovers into non-listed banks belonging to listed groups or along board diversity dimensions other than gender. Using administrative data, we compare diversity measures of boards of listed and non-listed banks in listed groups with those in non-listed groups, before and after the introduction of the law, in a difference-in-differences specification. We find that the gender quota law only changed the composition of the boards of listed banks, with no effects on their economic performance, nor relevant spillovers on other non-listed banks in listed groups. The law also enhanced diversity on boards of directors of listed banks along individual characteristics other than gender.

Financial technology and bank stability in an emerging market economy

Using a sample of 141 banks in Indonesia during the 2004–2018 period, we investigate the impact of financial technology (FinTech) firms on bank stability. We find that more FinTech firms tend to enhance bank stability regardless of types of FinTech firms and the measurement of bank stability. Meanwhile, we also find that small banks and non-listed banks tend to benefit more from the presence of FinTech firms. Specifically, small banks and non-listed banks exhibit lower riskiness and higher capital ratios following an increase in the number of FinTech firms. This paper, therefore, emphasizes that FinTech development might be beneficial for financial stability, particularly when FinTech companies with small banks or non-listed banks.

IFRS 9 and earnings management: the case of European commercial banks

PurposeThis paper examines the impact of International Financial Reporting Standards (IFRS) 9 on earnings management (EM) using data from 2011 to 2019 of 100 commercial banks in Europe.Design/methodology/approachUsing data from 2011 to 2019 of 100 commercial banks in Europe, the authors conducted several empirical investigations to test the mediating role of IFRS 9 on earnings manipulation through loan loss provision (LLP) by banks.FindingsThe result shows that the new accounting standards (IFRS 9) significantly affect the way banks report LLP. This paper provides evidence that non-listed banks in the EU engage in EM through LLP following IFRS 9 but experience less volatility of net income following the adoption. The findings indicate that such behaviour by banks cannot be suppressed by level of audit quality; suggesting that an improvement in accounting standards might not always guarantee accounting quality.Originality/valueThis finding has some policy implications; and regulators will need to identify additional tools to regulate or supervise EM behaviour.

Economic Policy Uncertainty and Financial Innovation: Evidence from Commercial Bank in China

The empirical results show that the rise of economic policy uncertainty (EPU) makes the level of financial innovation at banks significantly improve; that is, there is an incentive effect of EPU on financial innovation at banks. In addition, the degree of incentive-induced EPU for different types of banks is significantly different. Compared with listed banks, this incentive effect is more significant for non-listed banks; rural commercial banks are the most significant incentive, followed by urban commercial banks, and state-owned banks and joint-stock commercial banks are more robust. This shows that EPU has a selective effect on bank financial innovation. Moreover, the incentive effect of EPU on financial innovation activities is affected by the return on assets and the asset liquidity ratio of commercial banks, which further validates the selective effect of financial policy uncertainty on bank financial innovation.

Economic Policy Uncertainty and Financial Innovation: Evidence from Commercial Bank in China

The empirical results show that the rise of economic policy uncertainty (EPU) makes the level of financial innovation at banks significantly improve; that is, there is an incentive effect of EPU on financial innovation at banks. In addition, the degree of incentive-induced EPU for different types of banks is significantly different. Compared with listed banks, this incentive effect is more significant for non-listed banks; rural commercial banks are the most significant incentive, followed by urban commercial banks, and state-owned banks and joint-stock commercial banks are more robust. This shows that EPU has a selective effect on bank financial innovation. Moreover, the incentive effect of EPU on financial innovation activities is affected by the return on assets and the asset liquidity ratio of commercial banks, which further validates the selective effect of financial policy uncertainty on bank financial innovation.

Does IFRS 7 Disclosure Weaken Earnings Management? Evidence from Indonesian Conventional Commercial Banks

This study examines the influence of derivative instruments, income diversification, and liquidity ratios on earnings management with IFRS 7 disclosure as a moderating variable. The sample used consists of 129 conventional commercial banks that are listed and 116 banks that are not listed on the Indonesia Stock Exchange (IDX). This study uses moderating regression analysis (MRA) with the Robustness Least Squares with S-Estimation method. This study also conducted a sensitivity analysis with previous earnings management measurements (Kanagaretnam et al., 2010) and an additional test by comparing listed and non-listed banks on the Indonesia Stock Exchange. The empirical results indicate that IFRS 7 disclosure weakens derivative instruments' negative effect and income diversification's positive effect on earnings management but does not provide a moderating effect on liquidity ratios. This study contributes to the bank management and Indonesian banks authority to provides another view of implementing IFRS 7 disclosure that have not been maximized in the Indonesian banking industry. In the future, the researchers expect the authorities to encourage all banks to disclose complete IFRS 7 disclosure to minimize information asymmetry. On the other hand, this study also contributes to the banking management to increase derivative instruments and to carry out more supervision on the provision of income diversification to minimize earnings management. Theoretically, this study contributes to the new earnings managemen t measurement by applying more prudential principles based on the IFRS framework, IFRS 9 and Basel III regulations.

The Board of Directors’ Effectiveness on the Performance of Loans in Tanzania

The study assessed the board of director’s effectiveness on the performance of loans in Tanzania. Four specific objectives guided the study as indicated by independent variables named board member’s independency, skills diversity, gender diversity and board meetings while loan performances measured by Non-Performing Loan (NPL) specified as dependent variable. Explanatory research design guided the study whereby the study selected sample of six (6) listed banks by using purposively sampling. The study found and concluded effectiveness of the board of directors is positive affecting performance of loans for listed banks through board member’s independency, gender diversity and skills diversity. The effectiveness of the board of directors on loan performance is negatively affected by board meetings. The study findings provide insights from a practical point of view on the board of directors’ effectiveness on the performance of loans in developing countries like Tanzania, thus filling the gap in the literature reviews. The study findings serve as guidance to regulators and policymakers on what set of factors to review and incorporate into policy, this will help the banks to achieve the current regulator’s requirement of NPL ratio of 5% or below. Apart from the study findings' having wider implications, the study has a few shortcomings for this reason, it would be noteworthy to extend this study to other latitudes incorporating even non-listed banks. This is because compliance of Banking and Financial Institutions (Corporate Governance) Regulations 2021 under BOT is mandatory to all financial institutions in Tanzania both listed and non-listed.

A Dataset for the Vietnamese Banking System (2002–2021)

This data article describes a dataset that consists of key statistics on the activities of 45 Vietnamese banks (e.g., deposits, loans, assets, and labor productivity), operated during the 2002–2021 period, yielding a total of 644 bank-year observations. This is the first systematic compilation of data on the splits of state vs. private ownership, foreign vs. domestic banks, commercial vs. policy banks, and listed vs. nonlisted banks. Consequently, this arrives at a unique set of variables and indicators that allow us to capture the development and performance of the Vietnamese banking sector over time along many different dimensions. This can play an important role for financial analysts, researchers, and educators in banking efficiency and performance, risk and profit/revenue management, machine learning, and other fields.

The Impacts of New Financial Instrument Accounting Standards on Chinese Commercial Banks

On March 31, 2017, the Ministry of Finance revised and issued three new financial instrument accounting standards including Accounting Standards for Enterprises No.22- Recognition and Measurement of Financial Instruments. The banks of China’s A and H stocks have implemented the new standards since January 1, 2018. From January 1, 2021, the scope of implementation of the standards covers all non-listed commercial banks. The new financial instrument standards have undergone great changes in the classification and impairment treatment of financial assets, which is bound to have a profound impact on Chinese commercial banks. This article analyzes the impacts of new standards on Chinese commercial banks from the aspects of financial asset classification and measurement, impairment, credit risk management, profit and earnings management. Finally, the paper puts forward several suggestions and measures on the system and model construction, credit policy and post-loan risk management and talent training, in order to facilitate banks smooth the transition to the new standards.

Corporate governance structure and bank performance: evidence from an emerging economy

PurposeThe purpose of the paper is to explore the association between corporate governance mechanisms and the performance of listed banks in Bangladesh.Design/methodology/approachDynamic panel data of two-step System Generalized Method of Moments (SGMM) estimators are used to analyze the influence of corporate governance characteristics on the performance of banks operating in Bangladesh over a period of eleven years from 2008 to 2018.FindingsBy employing the two-step SGMM, the authors find statistical evidence to conclude that board size has a positive impact on banks' accounting performance. However, it does not influence the market performance of banks operating in Bangladesh. The authors’ results also suggest that outside independent directors, managerial ownership and females' participation on the board are not linked with the performance of the listed banks in Bangladesh. It signifies that the mere presence of outside directors and female directors in the board does not guarantee the enhancement of banks' performance and the minimization of agency conflict between shareholders and management. The persistent characteristic of bank performance is one of the crucial findings of this paper.Research limitations/implicationsThis research has some limitations as the study's findings may not be generalized to other countries or industries because the current study considered only the small sample size based on the availability of the data and focused only on the banks listed in the DSE. Moreover, this study may not represent the whole financial industry because it includes all listed and non-listed banks and non-bank financial institutions. Hence, the findings may not be applicable to the other industries operating in different business ecosystems.Practical implicationsThe findings of this analysis have some managerial implications. This study provides managers empirical evidence regarding the influence of corporate governance elements on banks' performance, and they can now identify the factors that should emphasize enhancing the bank performance. The findings demonstrate that policymakers, regulatory bodies and bank management should pay more attention to the banks' overall corporate governance structures, especially in the case of appointing independent and female directors to challenge the executive power and to prevent the repetition of financial irregularities and loan scams in the banking industry of Bangladesh. Furthermore, the regulatory authorities should ensure the banks follow the corporate governance guidelines precisely for building a resilient banking industry to attain sustainable development goals in the long run.Originality/valueThis paper is the first empirical in-depth analysis applying the most recent data that examines the effect of bank governance elements on the performance of all the banks listed in the Dhaka Stock Exchange to the best of our knowledge.

The Bank Specific Determinants of Loan Growth and Stability: Evidence from Indonesia

Introduction/Main Objectives: This study aims to examine the specific determinants of loan growth and the consequences of excessive loan growth on bank stability. Background Problems: Bank loans play an important role in economic growth, but previous studies indicate that excessive loans lead to bank instability. Novelty: This study undertakes a comprehensive analysis, as it will discuss both the loan determinants and excessive loans simultaneously. Research Methods: This study covers more than 89% of the total loans of commercial banks (listed and non-listed banks) between 2002 and 2018 and it employs GMM in order to obtain robust estimations. Finding/Results: The growth of customers’ deposits and gross NPL are the most important factors in explaining loan growth in Indonesia. Banks with excessive loans tend to have high levels of credit risk. Conclusion: Banks’ liquidity and credit risk have important roles in explaining banks’ loans. However, excessive loans could lead to bank instability, particularly for small banks.

Pengaruh Tipe Kepemilikan Ultima Keluarga dan Negara Terhadap Risiko Likuiditas Bank

This research aims to examine the effects of family and state bank ownership on bank liquidity risk. The 20% ownership threshold determines the type of ownership, and the robustness test determined by the 25% ownership threshold, then bank liquidity risk is measured by Loan to Deposit Ratio (LDR). This study also used bank size to measure total bank assets, dummy listed or non-listed banks on the Indonesia Stock Exchange, and Capital Adequacy Ratio (CAR) as a measure of bank capital. The data used in this research are panel data of 59 commercial banks operated in Indonesia since 2010 to 2016. Using multiple linear regression analysis with Generalized Least Square estimation, the result shows that banks owned by family or state have lower liquidity risk than banks that do not belong to family or state. This research can be a reference for The Financial Services Authority and Indonesia Deposit Insurance Corporation to establish strategies and regulations related to bank liquidity risk.

Economic Policy Uncertainty and Asset Securitization of Banks

Frequent changes in economic policies will bring negative effects on the micro operating environment of banks. In this context, the functional effects of asset securitization create conditions for banks to effectively resist the adverse impact of economic policy uncertainty. In view of this, this paper examines the impact of economic policy uncertainty on the development of asset securitization of banks based on the related chain of “economic policy uncertainty—bank micro behavior change—asset securitization development”. It is found that the increase of economic policy uncertainty significantly promotes the development of bank asset securitization. Further, this paper discusses the internal mechanism of the positive impact, and finds that the adverse impact of economic policy uncertainty on the term mismatch, risk-taking and profitability of banks is an important motivation for banks to develop asset securitization, which confirms the original logic of the article, that is, the adverse impact of economic policy uncertainty on the micro operating environment of banks constitutes a series of motives for the development of bank asset securitization, and fully explains that the functional system of asset securitization can be an effective way for banks to cope with frequent policy changes. Finally, this paper studies the corresponding heterogeneity characteristics, and finds that economic policy uncertainty promotes the development of bank asset securitization, which is more significant in non-listed banks and small and medium-sized banks, because these banks lack sufficient adjustment means to adapt to the unstable political environment, and they need to use the functional system of asset securitization to deal with economic policy uncertainty. Therefore, it has a stronger impetus for the development of asset securitization.This paper holds that the main purpose of developing asset securitization is to deal with the uncertain external environment and its adverse impact on its own microstructure. Under the background that the outbreak of the COVID-19 Epidemic has led to the increase of economic policy adjustment and policy uncertainty, the regulatory authorities should not only continuously improve the institutional space for the effective function of asset securitization, but also pay attention to the “double-edged sword” feature of asset securitization, and strive to create a transparent and fair policy environment and stabilize the bank’s expectation of future policies. The conclusion of this paper expands the research field of bank asset securitization from the perspective of economic policy uncertainty, and deepens the cognition of the effect of economic policy uncertainty on bank behavior, which provides useful enlightenment for making the development strategy of asset securitization scientifically, and stabilizing bank behavior through the development of asset securitization under the background of the frequent adjustment of policies caused by the COVID-19 Epidemic.

Depositor Characteristics and the Performance of Islamic Banks

We investigate the reasons for the growing demand for Islamic banking internationally, and examine the relative economic performance of Islamic banks compared with conventional banks in managing their capital buffers and liquidity. Using data for the period 2000–2012 for 104 Islamic and 619 conventional listed and non-listed banks spread across 22 countries with both these types of banks, and using standard statistical methodology for archival data analysis, we find that religious, political, and socio-legal factors, rather than economics alone, play key roles for Islamic banks in attracting depositors. Governed by Islamic ( Shariah) laws, these banks cannot lend money and charge interest. Depositors are not debt holders as in conventional banks, but investment partners that share in the risk, or profit-loss sharing (PLS), with the bank. As Islamic banks have no debt holders, and depositors self-select to bank with Islamic banks, economic theory suggests a reduced need for excessive (less productive) liquidity buffers. However, we find that Islamic banks maintain significantly higher liquidity buffers than their conventional counterparts. A main contribution of our study is to highlight the fact that standard economic measures alone may be inadequate to assess the performance of Islamic banks.

Intellectual capital and technical efficiency of banks in an emerging market: a slack-based measure

PurposeThis paper investigates the impact of intellectual capital and its components on slack-based technical efficiency (SBM-TE) of banks.Design/methodology/approachData envelopment analysis is used to compute SBM-TE scores and the Value-Added Intellectual Coefficient (VAIC™) model is used to measure intellectual capital. An unbalanced panel of 32 banks that operated from 2000 to 2017 has been used.FindingsOverall, the efficiency scores are averaged at 79%, suggesting that an inefficient bank needs to enhance technical efficiency by 21% to be at par with the best performing banks. Beta-convergence and sigma-convergence exist among banks with faster speed evident among listed and local banks. Intellectual capital has a positive impact on SBM-TE and human capital is the main driver of technical efficiency among banks. This result is specifically evident among non-listed banks and foreign banks. Economies of scale property are also evident among the banks. Competition and asset tangibility inhibit technical efficiency among banks.Practical implicationsBanks are advised to invest in value-adding emerging technologies and their employees so as to enhance their efficiency. The study offers insights for policymakers, practitioners and researchers in emerging markets.Originality/valueThe study is premier in employing the SBM-TE to explain the intellectual capital and efficiency nexus, as well as, testing for both beta-convergence and sigma-convergence.

The Impact of Auditor Specialization and Banks’ Listing Status on Earnings Management in Vietnamese Commercial Banks

Abstract This study investigates the impact of auditor specialization and listing status on earnings management in Vietnamese commercial banks. Discretionary loan loss provisions (LLP) is used as a proxy for earnings management. Based on a sample of 21 banks in the period 2008–2017, the findings show that: First, auditor specialization does not have a significant impact on constraining earnings management in the banks. Second, listed banks engage more in earnings management. In addition, listed banks report more income-increasing LLP, while non-listed banks report more income-decreasing LLP. The results are consistent with a number of prior studies that find no evidence of specialist auditors curtailing earnings management, and listed firms participating more in managing income. The results have important implications for government authorities in improving the legal framework over the preparation of banks’ financial statements, including revision of the accounting standards and alignment of the accounting standards with other banking regulations.

Corporate Governance of the Largest Russian Banks

Corporate governance can play an important complementary role in banking regulation by limiting excessive risk-taking by managers and shareholders at the expense of creditors, including small depositors. This paper provides a detailed analysis of corporate governance in Russia’s 30 largest banks during the period from 2007 to 2017. We look at several governance features, including ownership structure, the size, composition, and compensation of the boards of directors, as well as CEO characteristics. Based on our findings, we recommend policymakers focus on strengthening the role of independent directors in non-listed banks, address signs of managerial entrenchment in state-owned banks (long tenure and compensation above the level of private and foreign banks), and improve disclosure about board independence, board committees, and the backgrounds of board members.

Corporate governance, foreign direct investment, and bank income smoothing in African countries

PurposeThe purpose of this paper is to investigate the role of corporate governance mechanisms and foreign direct investment (FDI) to restrain or stimulate the use of loan loss provisions (LLPs) by managers to smooth earnings in African banks.Design/methodology/approachThis study uses a sample of 112 listed and non-listed banks from 20 African countries, covering the period 2011–2017. Models are estimated using the pooled ordinary least squares regression, as well as Blundell and Bond (1998) system GMM.FindingsThe results suggest that bank managers use LLPs to reduce income volatility and that ownership concentration increases income smoothing. The findings also show that FDI plays a fundamental role to restrain managerial discretion in developing countries, increasing corporate governance practices in the host country.Practical implicationsThese findings are relevant for banking regulators and supervisors in order to determine which corporate governance mechanisms can be used in developing countries to increase the quality of financial reporting. A policy model that promotes FDI boosts financial reporting transparency, contributing to greater financial markets development.Originality/valueThe authors extend the existing literature on the influence of corporate governance mechanisms in limiting managerial discretion by focusing on the role that foreign shareholders may have in disciplining banks financial reporting quality in countries with weak institutional quality.