Bank Size Research Articles

Green Banking and Bank Performance in ASEAN: The Moderating Role of Bank Size

Green Banking and Bank Performance in ASEAN: The Moderating Role of Bank Size

Banking Performance During the Global Financial Crisis: Empirical Evidence from Bangladesh

Purpose-The Russia-Ukraine conflict and 19 pandemics have severely damaged the world economy. Banking institutions are crucial to the functioning of any economy, and their financial standing is a vital indicator of the economy's stability. Any major development, be it political or economic, has an impact on the banking industry. The dollar rate's volatility and other issues hurt the GDP. Therefore, the study examines banking performance in vulnerable global situations before and during the pandemic. This study utilizes 7 years of panel data to analyze global financial crisis banking performance. Design/methodology- Eight ratios were used to compare the banks' profitability, efficiency, liquidity position, and default risk: return on asset, asset utilization ratio, operational efficiency ratio, debt to asset ratio, loan to deposit ratio, loan to asset ratio, credit risk, and bank size. The descriptive statistics show lower ROA and AUR values for banks, but a lower CR value suggests that pandemic-era borrowers will repay their loans on time. Findings – Due to their reliance on borrowed capital, banks may be more vulnerable to default and financial leverage since they lack the liquidity to meet unforeseen requirements for funds. This is indicated by the higher mean values of DAR, LDR, and LAR. Ratio analysis shows that pre-pandemic banks profited well throughout the pandemic. State-owned banks have a worse position in profitability, efficiency, and default risk but a better position in liquidity in both study periods. Conventional banks placed first in profitability, but Islamishariah-based banks placed first in efficiency, high liquidity risk, and low default risk. Originality –This study will help bank officials find the flaw and prevent it from improving financial performance and recovering from the global crisis. This may assist bank investors and depositors in choosing wisely.

The Impact Of Size And Other Income On Systemic Risk In Indonesia

This research aims to measure systemic risk, especially in the banking system, between 2018 and 2022. In this research, the measurement method used is SRISK, which aims to measure the potential capital shortage of a bank when there is pressure on the market. The lack of capital from a bank, which is an individual risk for a bank, also poses the potential for a contagious threat which could end up becoming a systemic risk in the banking system in Indonesia. This research shows that several banks, through SRISK calculations, have the potential for capital shortages when market pressure occurs, especially from 2019 to 2022. In this research, bank size and non-interest income are essential factors in systemic risk in the banking system. Meanwhile, business complexity does not affect systemic risk in Indonesia.

PENGARUH STRUKTUR MODAL TERHADAP PROFITABILITAS BANK PADA DUAL BANKING SYSTEM DI INDONESIA

The dual banking system in Indonesia still faces the problem of inadequate capitalization with a high level of leverage. This study aims to analyze the effect of capital structure on bank’s profitability in Dual Banking System in Indonesia. The data analysis method used is panel data regression and difference test on 8 conventional banks and 8 Islamic banks. Panel data regression is intended to identify the influence of capital structure proxied through DER and CAR ratios on profitability (ROA) with control variables of bank size and asset’s growth. The secondary data used is annual report data for the period 2013-2022 sourced from OJK. The estimation results on conventional banking show that the DER and growth variable has a significant positive impact on profitability, while CAR and bank size have no significant influence on profitability. Then, in Islamic banking, DER has a significant negative influence on profitability performance, while CAR and growth have no significant influence on Islamic bank’s profitability performance. Meanwhile, bank size is proven to affect the Islamic bank’s profitability performance. Through a t-test, there is a significant difference in profitability performance and capital structure between the two banking systems in Indonesia.

THE EFFECT OF BANK-SPECIFIC AND BANK RISK ON BANK STABILITY AS MEASURED BY NPL OF THE BANGLADESHI COMMERCIAL BANK

This paper analyzed the effects of bank-specific and bank-risk drivers on bank stability as measured by non-performing loans(NPL) of commercial banks in Bangladesh from 2011 to 2021.This study used panel linear regression, and panel corrected standard error (PCSEs) to estimate the model. The main objective of the study was to analysed the effects of bank specific and bank risk on bank stability of conventional banks in Bangladesh. Capital adequacy, asset quality, income diversification, bank competition, managerial efficiency, and profitability (ROE) are used as proxies for bank-specific and liquidity risk; Sensitivity to marketing risk is used as proxies for bank risk, while control variable is used as bank size and non-performing loan (NPL) are used as a proxy for measurement of bank stability. The main results show that capital adequacy and profitability (ROE) are negative, but asset quality, income diversification, bank competition, and managerial efficiency are positively related to the NPL. The results further evaluate those determinants of bank risk, liquidity risk, and marketing risk have a positive impact on the NPL. The control variable bank size has a negative impact on the NPL. Based on our results, authorities in Bangladesh may develop rules for managing operations and ensuring bank stability as measured by NPLs.

Risiko Bank, Struktur Kepemilikan dan Ukuran Bank terhadap Kinerja Keuangan pada Perusahaan Perbankan periode 2020-2022

This research aims to analyze the impact of bank risk, ownership structure and bank size on the financial performance of banking companies. Evaluation of financial performance using profitability ratio analysis is the main method for assessing financial management efficiency. Risks are identified as potential losses or harm that can be predicted in advance with relevant data. Differences in ownership structure impact the policies taken, while company size results in different business risks. This research adopted a quantitative approach with a sample of 28 respondents selected through purposive sampling. Data analysis was carried out using multiple linear regression. The research results show that bank risk has a negative and significant effect on financial performance, while ownership structure has a negative but not significant effect. On the other hand, bank size has a positive and significant influence on financial performance. Overall, bank risk, ownership structure and bank size simultaneously have a positive and significant impact on financial performance. In conclusion, this research provides a deeper understanding of the factors that influence the financial performance of banking companies. Keywords: Financial Performance, Bank Risk, Ownership Structure, Bank Size

Empirical Study to Evaluate Financial Fitness of Listed Commercial Banks of Pakistan

The main purpose of this research is to find the effect of financial fraud, bank size, liquidity, solvency, and efficiency on the financial performance of selected Pakistani commercial banking sector. This research is conducted for assessing the financial stability of the commercial Banking sector of Pakistan. In this research, the ratio analysis technique is adopted for investigating the financial performance of the Banking Sector for the period 2012 to 2018. This study found that bank size, financial fraud, efficiency, solvency and liquidity have a significant impact on the financial performance of commercial banks in Pakistan. This research suggested that commercial banking zone working in Pakistan should be brought into being place fraud discernment appliance by framing up a well-organized and systematic, well-established, and reliable and operating fraud detection sub-division to supervise all the transactions that are contemplated vulnerable to fraudulent practices to minimization vice for them to maximization of profits for better monetary/financial progress/performance.

Impact of size of banks and insurance companies on their profitability in Bosnia and Herzegovina

Abstract In this paper, we investigate the determinants of bank profitability by examining endogenous factors used to measure the size of a financial institution. We underscore the significance of bank employees in embodying institutional values and playing a pivotal role in sales channels, as well as the impact of technological integration on customer expectations and workforce dynamics. Utilizing a dataset from regulatory agencies, which includes information from 47 banks and insurance companies in Bosnia and Herzegovina for the year 2021, the study explores the relationship between the independent variables which include the volume of total assets and the number of employees, and the dependent variable for profitability. By calculating Return on Equity (ROE) and employing a multiple linear regression model, the study finds that a statistically significant relation between independent variables and the dependent variable does not exist. Despite this, the research highlights the need for further investigation, particularly considering the differentiation between banks and insurance companies, the potential impact of outliers, and the broader economic context of the year studied. The findings suggest that a more refined model, possibly incorporating panel data, could provide clearer insights into the profitability determinants of financial institutions in Bosnia and Herzegovina.

Do Corporate Governance and Bank-Specific Factors Matter On Banking Financial Performance?

Purpose: This study explores and presents empirical evidence on the influence of self-assessment of bank corporate governance and bank-specific factors on the financial performance of commercial banks in Indonesia. Methodology/approach: We conducted the study on 35 Indonesian public banks listed on the Indonesia Stock Exchange from 2017 to 2021. Using structural equation modeling, a thorough analysis was performed on a dataset of 160 observation samples that were carefully selected through purposive sampling. Findings: This study found that the implementation of corporate governance, which is proxied by the rating of self-assessment of corporate governance, and bank-specific factors significantly affect bank financial performance. The better the corporate governance self-assessment rating, the better the bank's financial performance. Other results indicate that bank-specific factors, as reflected by bank ownership, size, and diversification, significantly positively contribute to bank financial performance. Practical implications: This research aims to provide valuable insights that can support the Indonesian Financial Services Authority (OJK) in implementing effective corporate governance practices. It focuses on enhancing risk management, strengthening the bank's internal capacity, and ensuring compliance with regulations to promote best practices in bank management. Originality/value: This study provides new insight by examining the factors influencing financial performance in the banking sector, focusing on bank-specific factors and the regulatory aspects of Indonesian banking governance.

The Internal Determinants of Cost Efficiency in Jordanian Islamic Banks

The study aimed to identify the internal factors affecting cost efficiency in Jordanian Islamic banks for the period (2012-2021). The study expressed cost efficiency through the expenses-to-revenue ratio as a dependent variable. The independent variables were the return-on-assets ratio, return-on-deposits ratio, capital adequacy ratio, ownership rights-to-assets ratio, fixed capital cost ratio, labor costs, and bank size. The study used a descriptive-analytical approach, where data stationarity was tested, and the Autoregressive Distributed Lag Model (ARDL) was employed to determine the effect of independent variables on the dependent variable. The study found a statistically significant positive impact of the capital adequacy ratio, ownership rights-to-assets ratio, and fixed capital cost ratio. It detected a negative effect of labor costs and found no statistically significant differences in the return-on-assets ratio, return-on-deposits ratio, and bank size on cost efficiency in Jordanian Islamic banks. The study recommended working to enhance cost efficiency by improving resource distribution, enhancing technical proficiency, and refining the banks' inputs, thus increasing their competitiveness and profitability.

Determinant factors of banking profitability: an application of quantile regression for panel data

This study examines the determinants of bank profitability using a quantile regression approach, offering insights into factors affecting banks across different percentiles of profitability. Utilizing a comprehensive database from Orbis covering 1200 top-market institutions across 101 countries, the research uniquely employs dynamic panel quantile regression while addressing sample survival bias. Our findings highlight that bank size and capital adequacy negatively impact profitability, whereas market value exerts a positive influence on higher profitability banks. Credit risk affects profitability differently across levels of profitability, and inflation rate shows significance only for higher profitability banks. The study contributes to the existing literature by offering valuable insights into the factors determining bank profitability and how they behave at different percentiles in the sample, suggesting the importance of bank efficiency and competition in promoting economic growth.

Determinants of Bank Profitability—Do Institutions, Globalization, and Global Uncertainty Matter for Banks in Island Economies? The Case of Fiji

The objective of this study is to examine the influences of institutions, globalization, and world uncertainty on bank profitability in small developing economies. Consequently, we emphasize the significance of both bank-specific and other external factors influencing bank profitability. The empirical estimation is based on seven banks in Fiji—a small island economy—over the period 2000–2021. Together with bank-specific and macro factors, we account for institutions, globalization, and world uncertainty in analyzing the determinants of bank profitability. The study uses the fixed-effect estimation method. From the results, we observe that bank-specific variables, like the net interest margin, non-interest income, bank size, and capital adequacy ratio, are positively associated with bank profitability. Non-performing loans and credit risk are negatively associated with bank profitability. Macro variables, such as real GDP growth and remittances, have positive effects on bank profitability. Institutional factors, such as government effectiveness and voice and accountability, are positively associated with bank profitability. Regarding globalization, we find that it supports bank profitability. Global uncertainty and the Global Financial Crisis (2007–2008) are positively associated with profitability, whereas the global pandemic (COVID-19) is negatively associated. This study underscores the need to analyze the bank performance with factors beyond those reported in financial statements to derive a comprehensive understanding and appreciation of the complex nature of banking operations.

Factors Affecting the Liquidity Risk of Commercial Banks in Nepal

Level liquidity is an important factor that helps the growth and survival of commercial banks. This research aims to show the factor affecting the liquidity risk of commercial banks in Nepal. The panel data were used to analyze and find the results from the period 2017 to 2021. Secondary data are collected from the annual report of commercial banks. Banks’ internal factors bank size, capital adequacy ratios, non-performing loans, return on assets, return on equity, and external factor gross domestic product was used as independent variables. The dependent variable of the research is the liquidity ratio. A descriptive research design has been used to explain the data. A convenient sampling technique was used to select the 16 commercial banks as a sample from the population of 26 banks. Various statistical methods are used to describe the data and to find the result from the 80 observations. The result shows that there is a significant and negative relationship between bank size and non – performing loans with the liquidity of commercial banks in Nepal, but GDP, ROA, and ROE have significant positive effects on liquidity. To maintain the liquidity level commercial banks, need to minimize the non – performing loans. It is crucial to take into account the size of the bank, the nature of the crisis, the regulatory environment, the interconnection of the financial sector, market perception, and contagion risk when large banks have a negative impact on liquidity. Knowing these elements will make it easier to find suitable answers to the liquidity issue and lessen the effects it has on the larger financial system.

Affecting Financial Inclusion Toward Third Deposit Funds of Islamic Banking Indonesia

This study aims to analyze the effect of financial inclusion variables on Islamic banking third deposit funds. In general, the variables used in this study consisted of financial inclusion variables and non- financial inclusion variables. Proxies of financial inclusion variables consist of office networks, ATM networks and savings customers. Non- financial inclusion variable proxies consist of third deposit funds, interest rates, profitability, yield equivalent and size of sharia banking. This research is a type of quantitative research using the Vector Error Correction Model (VECM) using the Eviews analysis tool. Based on the results of data analysis, the proxy for financial inclusion variables that affect Islamic banking deposits is the office network (KTR) and the ATM network (ATM), while the proxy variable that has no effect is the deposit customer (NSB). Non- financial inclusion variables that affect Islamic banking deposits are the equivalent yield (ER) and the size of Islamic banking (SZE), while variables that do not affect Islamic banking deposits are the benchmark interest rate (BIR) and profitability (PRO).Keywords: Financial Inclusion, Third Deposit Funds, Islamic Banking

Impact of Covid-19 Pandemic on the Financial Performance of Islamic Bank in the Philippines

This paper investigated the impact of the Covid-19 Pandemic on the performance of Islamic banks in the Philippines. It used the quarterly data before and during the pandemic. To empirically measure its impact on the Islamic bank in the country, this study used significant different tests to ascertain differences in the financial performance of the bank starting from the 1st quarter to the 4th quarter of 2019 used as a proxy for pre-pandemic variable and the 1st to 4th quarter of 2020 which was during the heights of the pandemic as data that represents the duration of the crisis. The result shows that the overall bank size during the pandemic was reduced by 2.08% while changes in return on deposits and return on equity before and during the pandemic were not statistically significant. However, there was enough evidence to show that Islamic deposits, return on assets, and net income, were significantly positively affected by the Covid-19 Pandemic. Test for significant difference further ascertained that the decrease in capital adequacy ratio during the pandemic was found statistically significant. It suggested that Islamic banking in the Philippines fared differently compared to its conventional counterparts in the country.

Intellectual Capital and Bank Stability in Saudi Arabia: Navigating the Dynamics in a Transforming Economy

This research investigates the influence of intellectual capital on the stability of banks in the evolving context of Saudi Arabia’s banking sector. Against the backdrop of rapid economic reforms under Vision 2030 and the challenges imposed by the COVID-19 pandemic, this research incorporates specific metrics related to these contexts and provides a nuanced analysis of how intellectual capital and its components (human capital efficiency (HCE), structural capital efficiency (SCE), and capital employed efficiency (CEE)) affect the financial stability of Saudi banks. This research analyzes a decade-long panel dataset for ten major Saudi banks from 2012 to 2022, utilizing both fixed-effects and cross-section random-effects models to discern the impact of intellectual capital on bank stability. The findings reveal a positive overall influence of intellectual capital on bank stability; however, individual components present a complex relationship, with CEE showing a positive association and HCE and SCE demonstrating unexpected negative correlations with bank stability. The research identifies leverage (LEV) as a significant factor negatively impacting stability. Operational efficiency (OPEF) and size (SIZE) also negatively affect stability. Surprisingly, macroeconomic indicators and bank size exhibit non-significant effects on bank stability. Similarly, the direct impact of the COVID-19 pandemic was found to be non-significant, suggesting a resilient banking environment or the presence of effective mitigating strategies. As Saudi Arabia continues its ambitious economic transformation, this research underscores the critical role of effectively managed intellectual capital in ensuring the banking sector’s stability. It provides a foundation for ongoing research in this vital area.

Shadow banking and loan pricing of commercial banks: Evidence from China

We examine the role of regulatory arbitrage via wealth management products (WMPs) in the determination of lending rates in China. We find WMP yields are positively associated with lending rates whereas the effect of WMP scale varies across bank size. For the big-5 state-owned banks, the negative “transfer-effect” of high-risk high-yield loans into shadow bank credit dominates the positive “funding-cost-effect” of banks becoming more dependent on wholesale funding. For smaller banks, the positive funding-cost effect dominates. Our study provides insights into the role of regulatory arbitrage on asset structure and profit margins in the interest of banks and the regulators.

The influence of corporate governance on the performance of the United Arab Emirates and other banks in the Middle East and North Africa region: A comparative analysis

This study explores the impact of corporate governance (CG) on the performance of banks in the Middle East and North Africa (MENA) region, with a focus on the United Arab Emirates (UAE). The MENA region, characterized by diverse economic landscapes, is analysed through a comparative study encompassing 141 financial institutions across 12 countries from 2016 to 2020. Key performance indicators, such as Tobin's Q ratio (TBQ), Return on Equity (ROE), and Return on Total Assets (ROTA), are assessed in relation to CG mechanisms. The research employs principles components analysis (PCA) to delve into CG practices, covering board size, independence, diversification, meetings, remuneration, and ownership concentration. External factors such as GDP growth rate, bank size, and market capitalization are also considered. Findings indicate a stable relationship between CG and financial performance, emphasizing effective governance's significance. The UAE has emerged as a CG leader since 2007, boasting a legislative framework that strengthens practices. Disparities in CG standards across the MENA region are noted, with some countries relying on regulatory standards and others implementing comprehensive CG codes. The study highlights CG's positive impact on financial performance, particularly on ROE and ROTA, in the UAE and the broader MENA region. The UAE's robust CG mechanisms, recent regulatory changes, and investor-friendly policies make it attractive for investors. Economic factors, such as GDP growth rate and bank size, are also considered. Acknowledging limitations, such as reliance on historical data, the study suggests future research avenues, including exploring specific CG mechanisms contributing to performance improvement and investigating cultural and institutional factors' impact on governance practices.

Big data analytics usage in the banking industry in Tanzania: does perceived risk play a moderating role on the technological factors

PurposeThe main purpose of this paper is to examine the adoption of big data analytics (BDA) in the Tanzania banking industry by investigating the influence of technological, environmental and organizational (TOE) factors while exploring the moderating role of perceived risk (PR).Design/methodology/approachThe study employed a qualitative research design, and the research instrument was developed using per-defined measurement items adopted from prior studies; the items were slightly adjusted to fit the current context. The questionnaires were distributed to top and middle managers in selected banks in Tanzania using the snowball sampling technique. Out of 360 received responses, 302 were considered complete and valid for data analysis. The study employed partial least squares structural equation modeling (PLS-SEM) to examine the developed conceptual framework.FindingsTop management support and financial resources emerged as influential organizational factors, as did competition intensity for the environmental factors. Notably, bank size and perceived trends showed no significant impacts on BDA adoption. The study's novelty lies in revealing PR as a moderating factor, weakening the link between technological readiness, perceived usefulness and the intent to adopt BDA.Originality/valueThis study extends literature by extending the TOE model, through examining the moderating roles of PR on technological factors. Furthermore, the study provides useful managerial support for the adoption of BDA in banking in emerging economies.

What Is the Relationship between Corporate Social Responsibility and Financial Performance in the UK Banking Sector?

This study rigorously investigates the intricate dynamics between Corporate Social Responsibility (CSR), quantified through Environmental, Social, and Governance (ESG) scores, and financial performance (FP), measured via the return on assets (ROA) and return on equity (ROE), within the UK banking sector. Our analysis is based on a comprehensive dataset from Bloomberg. This research encapsulates data from 32 banks publicly listed on the London Stock Exchange over a six-year span from 2017 to 2022. Employing panel data regression models while controlling leverage and bank size, we delve into the relationship between banks’ CSR engagements, as reflected in their ESG scores, and their financial outcomes. Our findings indicate a negative correlation between the ESG score and both the ROA and ROE, suggesting that elevated CSR commitments may inversely impact short-term financial returns. This finding not only challenges prevailing narratives within the sector but also fosters a crucial discourse on the balance between ethical banking practices and profitability. The implications of this research study are manifold, extending to policymakers, banking executives, and investors, suggesting a revaluation of CSR strategies in alignment with long-term value creation and sustainable banking. This study not only enriches academic discourse on CSR within the financial sector but also serves as a beacon for future inquiries into the evolving landscape of responsible banking, advocating for a nuanced understanding of CSR’s role in shaping the financial and ethical contours of the banking industry.