Performance Of Banking Industry Research Articles

Monetary Policy, Digitalisation and Banking Industry Performance in Nigeria

In the evolving financial landscape of Nigeria, the interplay between monetary policy and digitalization significantly influences the performance metrics of banks. This study explores the multifaceted impact of these two critical factors on the Nigerian banking sector. Monetary policy, orchestrated by the Central Bank of Nigeria, regulates the economy's money supply, affecting banks' lending behaviors and liquidity. Digitalization, on the other hand, offers a transformative potential for banks to enhance operational efficiency, customer experience, and service delivery through technological advancements. The study examines how money supply, lending rate and digitalization (proxied by mobile cell subscription) affect banks’ financial performance, focusing on bank credit and liquid assets, while controlling for inflation and exchange rate variables. It also examines the interaction between digitalization and monetary policy variables on bank performance. Employing an interactive multiple regression model, the study analyzes time series data from 1996 to 2022 sourced from the World Bank. Findings indicate that while stringent monetary policies can constrain bank performance by tightening credit and reducing liquidity, digitalization provides an opportunity for banks to counteract these effects through enhanced efficiency. However, the successful integration of digital technologies is contingent upon adequate investment, regulatory support, and strategic alignment with the banks’ core objectives. The study concludes that Nigerian banks must adeptly manage monetary policy fluctuations and leverage digitalization to sustain and enhance performance. These insights could guide policy formulation and strategic decision-making within the banking industry.

The impact of Covid‐19 on banking groups’ balance sheets in the euro area

AbstractMost studies have found that the Covid‐19 pandemic did not negatively impact the euro area banking industry's performance at an aggregate level. This study explores whether this finding still holds using the return on assets of 16 banking groups operating in the euro area and considering bank‐specific factors, idiosyncrasies related to different exposures of their portfolios to the business cycle and weaknesses stemming from underlying structural vulnerabilities. The banking groups are classified into clusters using unsupervised learning techniques. This research contributes to the empirical literature on the determinants of banks’ performance by highlighting the importance of banks’ heterogeneity, notably controlling for differential performance due to asset quality, solvency and business model. In addition, this paper shows that the magnitude of return on assets’ exposure to the business cycle varies across banks and that inflation in the euro area matters only for a subset of them. Importantly, the study sheds some light on the possible reasons for the mixed results in the literature regarding the role of non‐interest income, the T1 capital ratio and inflation. Finally, no significant effects of the Covid‐19 variables on banks’ return on assets are found during the first seven quarters of the pandemic.

CSR Disclosure and Bank’s Financial Performance Nexus: Evidence from Pakistan.

Present research intends to evaluate the nexus among the corporate social responsibility (CSR) disclosure and financial effectiveness of banking industry in Pakistan. This investigation applies a quantitative research approach using panel data from a sample of Pakistan’s commercial banking institutions over timeframe limited from 2009 to 2020. The outcomes of mixed effect model visualize that there is inverse significant association among CSR disclosure ROE. Whereas no statistically significant linked in the context of short-term financial performance, by using a proxy of ROA. The results suggesting that the focus on CSR events and initiatives may have a detrimental effect on financial effectiveness. It is generally acknowledged that CSR offers numerous non-financial benefits, such as enhancing social media campaigns and luring ethical investors from both domestic and foreign markets. In developing countries context (i.e., Pakistan), we can conclude that the “cost of the CSR initiatives” and “shift of focus view” can affect the performance of banking industry. The lack of a positive correlation among corporate social responsibility (CSR) and financial performance in the Pakistani financial services sector can be attributed to a lack of interest and engagement in socially conscious investing. These findings indicate that the adoption of socially responsible investment has not gained significant cultural traction in Pakistan. The results emphasize the importance of banks, regulators, and stakeholders reassessing the balance between social responsibility and financial performance, considering the possible negative consequences of revealing CSR initiatives.

Does board knowledge matter for ESG performance in the European banking industry?

AbstractThis study investigates the influence of the knowledge endowment of directors on the environmental, social, and governance (ESG) performance in the banking industry. Applying the generalized method of moments (GMM) two‐step analysis, we analyzed a sample of 115 banks listed in Europe between 2014 and 2022. Building on the Resource Based View and Resource Dependence Theory, we find empirical evidence that board knowledge in terms of cultural, industrial, and financial background affects ESG performance in the banking industry, providing several contributions to the extant knowledge management and corporate governance literature. The research is intended to stimulate the development of practical knowledge management strategies inside companies to improve directors' decision‐making toward corporate social responsibility‐oriented initiatives.

INSTITUTIONAL ENVIRONMENT AND MARKET STRUCTURE AS DRIVERS OF BANKING INDUSTRY PERFORMANCE

We analyze the effects of market concentration, income diversification, and institutional environment on banking industry performance. We used a sample of 168 countries for the 1994-2019 period and the GMM estimators for dynamic panel data regressions. Our results show that market concentration and diversification have a positive effect on bank performance. The institutional environment, both public-political and private-regulatory, has a negative effect on bank profitability, showing that these financial institutions obtain higher returns in countries with institutional weaknesses. When countries have a high institutional quality, the positive impact of market concentration and income diversification is reversed. Strengthening countries’ institutional quality makes it possible to combine competition between banks and specialization in traditional activities with higher performance. These results are relevant for bank stability and financial policy design, given that the institutional framework includes both direct and indirect channels that affect the general behavior and strategies of banks in the industry.We analyze the effects of market concentration, income diversification, and institutional environment on banking industry performance. We used a sample of 168 countries for the 1994-2019 period and the gmm estimators for dynamic panel data regressions. Our results show that market concentration and diversification have a positive effect on bank performance. The institutional environment, both public-political and private-regulatory, has a negative effect on bank profitability, showing that these financial institutions obtain higher returns in countries with institutional weaknesses. When countries have a high institutional quality, the positive impact of market concentration and income diversification is reversed. Strengthening countries’ institutional quality makes it possible to combine competition between banks and specialization in traditional activities with higher performance. These results are relevant for bank stability and financial policy design, given that the institutional framework includes both direct and indirect channels that affect the general behavior and strategies of banks in the industry.

A Comparative Analysis on Islamic Bank Performance and Efficiency Risk: Pre and Post IFSA 2013

It is recognized that performance of the banking industry has an impact to the economic growth of a developed economies. The performance of the bank may impact the growth of the economy, as profits may shape the customers’ decision on investments and savings. Regulation affecting the design of banking governance structure; hence, it plays a vital role in determination of banking industry performance. IFSA 2013 was established to promote financial stability and compliance to Shariah and further strengthen the regulation of Islamic financial institutions. This paper aims to examine whether IFSA 2013, bank’s risk-taking behavior and efficiency will enhance or impede performance of Islamic banks in Malaysia.

Antecedents of Sales Performance in the Malaysian Commercial Banking Industry

Sales performance is important to every salesperson as a key performance indicator for their yearly performance. However, nearly half of them are still unable to fulfill it. Hence, this study aims to investigate the personal factors that influence the sales performance of salespersons in the banking industry. The study examines the direct relationship between improvisational behavior, adaptive selling, and self-efficacy in relation to sales performance among salespersons working in various local commercial banks in Malaysia. In these banks, despite the increasing importance of sales performance, almost half of the salespeople still fail to meet their annual performance target. A survey design with clustered random samples was utilised for this study. Questionnaires were used to collect data from salespersons in Malaysian commercial banks in the Klang Valley. The data was then analyzed using Structural Equation Modelling (SEM) with SmartPLS 4.0. In this study, three hypotheses were developed and tested through a two-stage evaluation. The results show that improvisational behavior is the most significant predictor of sales performance, followed by adaptive selling and self-efficacy. The results of the study provide managers with novel concepts to understand the factors that influence a salesperson's sales performance in the Malaysian banking sector.

The Impact of Inflation Rate and Interest Rate on Islamic and Conventional Banking in Afghanistan

Since the first bank was established in 1933, Afghanistan's banking sector has seen a number of variations but hasn't been able to grow to its full potential because of the civil war. The implementation of dual banks in Afghanistan is investigated in this study in relation to the effects of inflation and interest rates. This research took data from World Bank Data (WBD) over a period of nineteen years. For the banking sector, inflation, which is the general rise in prices of goods and services over time, presents considerable difficulties. The objectives of this research are to analyze the effect of inflation and interest rates on conventional and Islamic banks in Afghanistan, identify potential differences between these two banking models, and provide insights for policymakers and practitioners. A mixed-methods approach is used in the research to analyze quantitative data and qualitatively examine the unique difficulties that banks in Afghanistan's economic atmosphere encounter. The findings contribute to the understanding of the relationship between interest rate, inflation rate, and the performance of both banking systems in Afghanistan. The paper concludes with recommendations for policymakers and banking institutions to enhance the stability and growth of the banking sector in Afghanistan. Interest is described as "a prefixed rate for use or borrowing of money" from an Islamic perspective. This "prefixed rate," known in Islamic economics as "riba," has been described as "something undesirable." Furthermore, by using the time series regression data technique on the annual data from 2003 to 2021, this research examines the effect of CPI inflation rate and interest rate of Banking in Afghanistan.

The impact of cryptocurrencies capitalization on banking deposits variability in the UAE: evidence from the NARDL approach

PurposeThis study aims to analyze the effect of cryptocurrency capitalization market development on bank deposits variability in the United Arab Emirates (UAE) spanning the period 2005M1–2020M4 using the novel nonlinear autoregressive distributive lag (NARDL).Design/methodology/approachThe study employs the NARDL recently developed by Shin et al. (2014) to estimate the long and short-run relationships between the variables rather than the widely known ARDL (Pesaran et al., 2001), which suffers from a complex structure in the estimation equation that usually includes lags and differences in both short and long terms. The implementation of NARDL required several proceedings after plotting the descriptive data, commencing with unit root tests, selection of lag length, estimating the long-and-short variables coefficients, heteroscedasticity test and Wald test for symmetries.FindingsThe long-run estimations of the positive and negative asymmetric coefficients indicate that cryptocurrencies capitalization has a negative impact on bank deposits in the UAE. Further, the short-run estimations coefficients exhibit that both significant positive and negative partial sum squares of cryptocurrencies decrease bank deposits.Research limitations/implicationsThe study has applied to the UAE spanning the period 2005M1–2020M4 using the NARDL.Practical implicationsThe short-run estimations coefficients exhibit that both significant positive and negative partial sum squares of cryptocurrencies decreases bank deposits, which means that the increase in the magnitude of cryptocurrencies capitalization stimulates depositors and speculators to adjust their portfolios towards contracting their deposits in banks to invest partially in cryptocurrencies, on the other hand, the decline in cryptocurrencies capitalization process spur depositors and speculators to reduce their deposits for purchasing cryptocurrencies at lower prices.Social implicationsThe study infers that individuals and businesses are cautious when investing in cryptocurrencies, and they need more certainty and trust to include these types of assets in their portfolios. The fluctuation in cryptocurrencies capitalization prompts speculators to change their deposits according to the cryptocurrencies' prices.Originality/valueThis study explores the short-and long-run asymmetric impacts of cryptocurrencies capitalization development on bank deposits volatility in the UAE, based on a NARDL, for providing a manifest depiction of whether the cryptocurrencies industry might be a threat to conventional banking system performance in the potential future.

Impact of Key Bank Risk Components on Banking System Performance in Nigeria: A Discriminant Analysis Technique

Using discriminant analysis technique, this study evaluates the impact of key bank risk components on the banking system performance in Nigeria. The performance of the banking sector was evaluated to determine the extent to which each of the key risk components impacts on it. The findings revealed that credit risk, compliance risk and liquidity risk made outstanding contributions of 95.6 percent to the total discriminant score for the function, implying that successful performance of banking sector hinges mostly on the three risk factors. Credit risk

The impact of innovative work behavior, perceived Leadership 4.0, and corporate social responsibility on sustaining banking industry performance in Nigeria within the 4IR Era

Despite the increase in business performance research, only some studies have examined the combination of innovative work behavior, Leadership 4.0, and corporate social responsibility as performance factors in Nigeria’s banking industry in the current 4IR. This study aims to sustain performance in the banking industry of Nigeria. Four hundred (400) bank employees were randomly selected for this study from a sample of cooperating banks (Zenith Bank Plc, Guarantee Trust Bank Plc, United Bank for Africa Plc, and First Bank of Nigeria Plc) in the Nigerian states of Oyo and Lagos. One Hundred (100) participants were chosen from each bank. Additionally, the survey was given out to randomly chosen bank employees using structured questionnaires. Participants were selected using a simple random sampling technique; 386 of the 400 surveys were appropriate for analysis. To do the analysis, SPSS version 29 was used. According to the study’s findings, innovative work behavior had a 77% influence on performance variance within the banking industry in the current 4IR, Leadership 4.0 had an 88% influence, and corporate social responsibility had a 71% influence. Accordingly, the results show that more significant innovation in work behavior, adoption of Leadership 4.0, and involvement in CSR significantly predict the maintenance of performance in the Nigerian banking industry. Additionally, the findings indicate that adopting Leadership 4.0 predicts a more significant variance in performance in the banking business, followed by demonstrating innovative work behavior and involvement in corporate social responsibility. AcknowledgmentThe author thanks Professor Wilfred Ukpere and the Department of Industrial Psychology and People Management (University of Johannesburg) for funding and publishing this study.

Does alternative digital lending affect bank performance? Cross-country and bank-level evidence

This paper examines the effect of alternative digital lending provided by BigTech and FinTech firms on bank performance using cross-country and bank-level data. Using a sample of 67 developed and developing countries, we document a negative relationship between this type of digital lending and banking industry performance. The results are economically meaningful because a one-standard-deviation increase in alternative digital credit implies, on average, an 18.08% and 23.27% decrease in the return on assets (ROA) and net interest margin (NIM) of the banking system, respectively. These effects are larger in countries with less stringent banking regulations and less solid banking sectors, and in developing countries. Using bank-level data from 6205 commercial banks, we also show that the negative effect is observed on ROAs and NIMs at the bank level. Furthermore, we demonstrate that the growth in alternative digital lending negatively affects banking credit, suggesting a substitution effect. The findings remain robust after controlling for endogeneity issues and conducting several robustness tests.

The performance of the euro area banking system: the pandemic in perspective

AbstractThis research explores the performance of the euro area banking system between 2002:Q3 and 2021:Q1 using banks’ return on assets as a gauge. It finds that despite the Covid-19 pandemic, the banking sector’s performance has not been negatively affected in a statistically significant way. In addition, it shows that while the global financial crisis and the sovereign crisis both introduced significant uncertainty in the performance of the banking system in the euro area, such uncertainty has not been replicated during the worst part of the Covid-19 pandemic. From a purely technical viewpoint, uncertainty in the banking system’s performance in the euro area highlights the relevance of using methodological approaches that control for the endogeneity of most bank-specific determinants of return on assets and that are robust to changes in unconditional variance due to regime changes, to future random shocks or both.

Corporate Governance and Its Relationship with Financial Performance in Iraq

It is expected that banks should operate with a recognized standard of corporate governance. The importance of excellent governance processes in banks cannot be overstated because they are essential to gain and maintain the confidence and the customers satisfaction. This paper aims to explore the relationship between corporate governance (CG) and financial performance (FP) of Iraqi listed banks. To obtain this goal, two econometric models were enhanced to measure the association between the variables by applying multiple linear regression. The secondary data was obtained from the audited annual financial statement of ten listed banks in the Iraqi stock exchange in the period 2017-2021. Four corporate governance proxies, such as (CEO Duality, board size, audit committee meetings and independent board) are tested on two indicators of financial performance (return on assets and return on equity). The finding illustrated that CEO Duality, board size, and audit committee meetings have a positive and significant influence on the financial performance of banks. On the other hand, a negative and significant association can be observed between the independent boards and banks’ financial performance. Hence, the study pointed out that the financial performance of banking industry has been impacted by all of the components of corporate governance selected in this research.

RISK MANAGEMENT AND PERFORMANCE OF THE NIGERIAN BANKING INDUSTRY

The study examines the relationship between risk management and the performance of the Nigerian banking industry. The panel data analysis technique based on the fixed effects estimation was employed to analyze the Nigerian banking industry performance. Risk management related factors such as credit risk, liquidity risk, market risk, interest rate risk and operational risk. A total of 18 most active deposit money banks listed on the Nigerian Stock Market for a period of 22 years (2000 to 2021) were used in the analysis. The empirical findings revealed that credit risk and operational risk variables were negative and do not have any significant relationship with the performance of the Nigerian banking industry while liquidity risk and market risk have significant positive effect on bank performance, interest rate risk has significant negative relationship with banks performance in Nigeria within the period of study. The study recommends among others that, banks’ management should have proper understanding of how credit policy affects the operations of their banks to ensure judicious utilization of deposits and maximize profit. Improper credit risk management reduces bank profitability, affects the quality of its assets and increases loan losses and non-performing loan which may eventually lead to financial distress.

The Influence of Human Resource Management in Banking

In this study, we examined how HRM practises in Kuwait's banking sector affected employees' affective, continuing, and normative organisational commitment Permanent, full-time, and part-time employees are available members managers and non-managers alike from The study included five organisations.Kuwait is dominated by large private banks. The link between these variables was investigated using both exploratory factor analysis (EFA) and hierarchical regression analysis. The findings revealed that, due to factors like culture and values, 50% of the variables agreed with prior study, while 50% of the variables did not. The findings have important ramifications for both the international trade and Kuwait's banking industry. Due to the fierce global competition, businesses are becoming more aware of the importance of HR. Furthermore, efficient One important source of competitive advantage that helps firms succeed is human resources. As a result, By utilising cutting-edge techniques like coaching, HRM is making investments in its people resources to help them grow abilities and improve organisational performance. In this essay, the impact of coaching on worker performance in Lebanon's banking industry is examined. By researching coaching creative and motivating intervening strategies that result in improved employee performance, It aims to close the market gap in Lebanon. This study examines how coaching influences employee creativity and motivation, which has an effect on employee performance, using a case study that is qualitative technique within an experimental framework.

Executive compensation and firm performance: Evidence from Nepalese commercial banks

NRB provision to relate executive’s fixed annual compensation with staff salary and total assets of the respective Banks is different from those of other country (Bhatta, 2010). This is the first study to examine the relationship between executive compensation and firm performance in Nepalese banking industry. Data are collected from 21 commercial banks from the study period 2014/15 to 2020/ 21. Panel data are analyzed through pooled OLS and fixed effect model by using three control variables (i.e. Leverage, size and risk). Result showed that executive compensation is not influenced by firms performance in Nepalese commercial banks. Result also revealed that pay performance relationship is not influenced by size of the firms. It is concluded that possible reason for this insignificant relationship is contradict and impractical compensation directives issued by NRB, as claimed by (Bhatta,2010)

Intervening Role of Sustainability Practices in the Nexuses of Responsible Leadership and Environmental, Task, and Contextual Performance

Purpose: The current study assessed the function of responsible leadership in the banking industry using the stakeholder theory. The current study also looks into the connection between responsible leadership and task, contextual, and environmental performance.
 Methodology: The banking industry's 389 branch employees, including branch managers, business development officers, general banking officers, branch operation managers, cash officers, and relationship managers, were surveyed using a survey questionnaire approach to gather data. Mplus was used to analyze the data using the structural equation modeling method.
 Findings: The study's findings showed that ethical leadership had a direct influence on a firm's environmental (0.204), task (0.365), and contextual performance (0.188), as well as indirect effects through varied sustainability policies.
 Implications: it implies the significance of sustainable policies concerning responsible leadership and a company's success. The current study is a pioneering effort that added to the body of knowledge on the relationship between organizational tasks, contextual performance, and environmental performance in Pakistan's banking industry. It also evaluated the role of sustainability strategies in the interim.

Credit Risk Management Can Gear Up Bank Performance – Moderating Effect of Interest Rate in Developed Countries

This research explores the role of interest rate as a moderator in credit risk management, influencing the performance of banking industry in selected developed countries using a two-step GMM model. The annual data of the top 10 banks of the selected 10 developed countries ranging from 2001 to 2020 was used. The developed countries or G-10 are Belgium, Canada, France, Germany, Italy, Japan, Sweden, Switzerland, the United Kingdom, and the United States, which are the originators of the Basel Accords. Bank performance, proxied by ROA, ROE, ATO, and NPM, is dependent. Interest rate is a moderator, independent and indexed, developed after netting off lending interest rate (LIR), interest rate spread (IRS) & net interest margin (NIM). The credit risk management index (CRM index) was derived after netting off the effects of extra ordinary financing of net loans and leases, negativity of nonperforming loans, and secured cushioning of risk-weighted assets. The results confirmed that CRM improves the growth of banking, especially in case of ROA, ROE, and NPM, improves more by the induction of the moderator of the interest rate index and enhances more with the induction of the interaction. This research guides for rearranging the determinants of CRM, identifying loopholes of CRM, fixing interest rates, and looking after natural fixation of interest rate. CRM policies should be stringent, security analysis must be centralized, offered interest rate must be natural and savings must be used in a productive usage rather than multiple financing at lower interest rates. The research contributed two indexes, the CRM index and the interest rate index (IR index), which were developed by NPLs, NLLs, RWAs and LIR, IRS, and NIM, respectively. The results highlighted that loanable fund theory is starving without remedial measures of CRM for leakage of “credit”, drainage of “capital” or seepage of “money”. The researcher selected ten developed countries with the 10 highest scoring banks in a period of 2001-2020 and used a two-stage GMM technique.

The Impact of COVID-19 on Bank Efficiency in the Western Balkans: A DEA Approach

Abstract This paper aims to assess and compare the relative efficiency of commercial banks in six Western Balkan developing countries (North Macedonia, Serbia, Montenegro, Bosnia and Herzegovina (B&H), Kosovo1, and Albania), using the leading nonparametric methodology Data Envelopment Analysis (DEA) for the period 2016-2020, and investigating the impact of the COVID-19 pandemics on the performance of banking systems in these countries. The output-oriented DEA model has been implemented with interest expenses and non-interest expenses as inputs and interest revenue and non-interest revenue as outputs. Our findings show that the average efficiency of the six Western Balkan banking systems differs, and Kosovo’s banking system has noted the highest average efficiency in the whole observed period (2016–2020). In contrast, the banking system in Bosnia and Herzegovina noted the lowest average efficiency. The COVID-19 pandemic decreased the relative efficiency of the banking sectors in all six of the Western Balkan countries observed, except Kosovo. However, additional research that includes all pandemic years is recommended to assess the impact of the COVID-19 pandemic on the banking systems in the Western Balkans. This study provides invaluable insights for academic members, banking management and regulatory bodies, governments, and the interested public. It is the first empirical study that includes a glimpse of the first impact of the COVID-19 pandemic on banking systems in the developing countries of the Western Balkans.