State-owned Commercial Banks Research Articles

Profit maximizing behavior of banks in Bangladesh

A well-developed financial system has been widely understood as a stimulant in accelerating economic growth by easing frictions, mobilizing savings and facilitating investment in an efficient manner (Levine 1997, Rahman 2003). The financial sector reform and its follow-up developments in Bangladesh is an ongoing process. Given the current status of the financial development, this study is intended to frame a testable hypothesis such that inter-group comparisons of marginal productivity of labor and capital of banks in Bangladesh could be tested that would allow us to see if banks in Bangladesh are employing labor and capital efficiently in their profit maximizing behavior. A panel data model - seemingly unrelated regression (SUR) is used based on yearly data covering 2006-2015 for four groups of banks, namely state-owned commercial banks (SCBs), private commercial banks (PCBs), foreign commercial banks (FCBs) and specialized banks (SBs) operating in Bangladesh.The market shares (based on 2006-2015 average figure) in deposits, advances, operating income and total manpower are dominated by the PCBs, while SCBs enjoy the second position followed by FCBs and SBs. Currently 56 scheduled banks are operating in Bangladesh, among them 6 are state-owned commercial banks (SCBs), 2 are specialized banks (SBs), 9 are foreign private banks (FCBs) and 39 are domestic private banks (PCBs) of which 8 are full-pledged Islamic banks. As of end February 2016, the total number of reported bank branches including Head Offices, Islamic Windows and SME service centers stood at 9,410 with 4,072 urban and 5,338 rural branches. Although the central bank of Bangladesh has been monitoring day-to-day development of the banking activities, there is no formal assessment of banking system's profit maximizing behavior has so far been made.This paper also examines if there is any productivity - remuneration gap in labor and capital employment to know if banks in Bangladesh are operating in a competitive environment. The estimated results from Zellner's Seemingly Unrelated Regressions (SUR) procedure indicate that none of the bank groups is employing labor and capital efficiently. Operating earnings elasticities of labor are not significantly different from zero for all groups, while the same are positive for capital. The higher capital intensive banks are making more money than those with lower capital intensity. All of the banks are operating at non-optimal level in a non-competitive environment. They are over-employing labor and under-employing capital relative to the long-run profit maximizing level. The findings of the paper also confirm that there are significant gaps between productivity - remuneration for both the inputs i.e., labor and capital employment in banks of Bangladesh.Therefore, proper policy interventions are needed to enhance competitive environment among banks to ensure efficient and optimal uses of labor and capital. Appropriate policy initiatives to improve managerial efficiency and good governance for the state owned commercial and specialized banks are also recommended.

Compliance with Corporate Governance Guidelines: A Comparative Study of High-performing Private Commercial Banks and State-owned Commercial Banks in Bangladesh

Compliance with Corporate Governance Guidelines: A Comparative Study of High-performing Private Commercial Banks and State-owned Commercial Banks in Bangladesh

Financial Soundness of Vietnamese Commercial Banks: An CAMELS Approach

This study investigates the financial soundness of Vietnamese commercial banks between 2008 and 2013 using the combination of data envelopment analysis and CAMELS approach. These findings indicate that only one state-owned commercial bank is listed of the ten best-performing banks, suggesting that the implicit support from the government provides less incentive for these banks to improve their performance. In addition, the ten worst-performing banks are also indicated so that the State Bank of Vietnam should put more attention on supervising and monitoring them in order to strengthen the Vietnamese banking system.

The Relationship Between International Diversification and Business Performance of Chinese Commercial Banks

Chinese banking industry speeds up the process of internationalization as the global economy integrates and Chinese government accelerates the going out strategy. Many Chinese commercial banks explore overseas market by setting up new branches or merge and acquisition. Under the background, this paper uses empirical study to analyze the relationship between the degree of banks’ internationalization and business performance. Firstly, principal component analysis is applied to measure the degree of banks’ internationalization. Then, the paper constructs two models to analyze the panel data of five state-owned commercial banks, the second one with financial crisis as dummy variable. The results indicate that there is a U-shape relationship between the degree of banks’ internationalization and business performance in the first model without dummy variable. In the second model adding dummy variable, the financial crisis not only deteriorates Chinese commercial banks’ performance, but also makes the relationship between degree of internationalization and business performance become negative in 2008 while the degree of internationalization has positive influence on operational performance in years except for 2008.

The Impacts of Risk-Taking Behaviour and Competition on Technical Efficiency: Evidence from the Chinese Banking Industry

This paper tests the impact of risk and competition on efficiency in the Chinese banking industry over the period 2003-2013. Comprehensive types of risk-taking behaviour are considered including credit risk, liquidity risk, capital risk, and insolvency risk. Competition is measured by the Lerner index. The results are cross-checked using an alternative econometric technique as well as an alternative competition indicator. The findings show that the technical and pure technical efficiencies of Chinese commercial banks are significantly and negatively affected by liquidity risk. They further show that greater competition precedes declines in technical and pure technical efficiencies of Chinese commercial banks. The results suggest that Chinese bank efficiency is significantly affected by bank diversification, banking sector development, stock market development, inflation and GDP growth rate. The findings also indicate that, compared to state-owned commercial banks, joint-stock commercial banks and city commercial banks have lower technical and pure technical efficiencies.

Measuring the efficiency of Chinese commercial banks: An analytical model and empirical validation

In this paper, DEA model is used with the panel data of 21 commercial banks gathered during period 2006–2014 to measure the technical efficiency, pure technical efficiency and scale efficiency of commercial banks in China. Furthermore, a regression model for the factors affecting the efficiency of commercial banks is established with three levels includes the banking industry structure, the micro-level of commercial banking, and the macro-economic performance. The results show that the improvement of market competition level is beneficial to promote the efficiency of commercial banks. The risk control capacity, business innovation capability, and foreign capital involvement have positive influence on commercial banks’ efficiency. The market share and scale efficiency are inversely proportional in large state-owned commercial banks. The market share and scale efficiency are proportional in joint-equity commercial banks and municipal commercial banks. The broad money supply growth rate has positive influence on commercial banks’ efficiency improvement.

The Determinants of Bank Interest Margins: A Short-term Funding Perspective

The net interest margins (NIM) is one of the key metrics for Banks, and for those who want to evaluate the performance of a bank’s investments. In this paper, the determinants of net interest margins of China’s financial institutions are investigated, while taking into account the effects of short-term funding and the presence of foreign banks. By distinguishing different shareholding structure and comparing the banks’ net interest margins before and after the banking liberalization, we find that both short-term funding and foreign bank presence have negative impacts on the net interest margins of Chinese domestic banks. The banking sector after the financial liberalization, especially the national wide banks, has better ability to manage the financial stress. The China Construction Banks(CCBs) and Credit Cooperatives suffer higher interest margin decline than State-Owned commercial Banks(SOBs) and Joint Stock Banks(JSBs). The national wide banks need to accelerate the business diversification and increase the intermediary revenue.

Global financial crisis, ownership and bank profit efficiency in the Bangladesh's state owned and private commercial banks

This paper studies the impact of global financial crisis focusing on State Owned Commercial Banks (SCBs) and Private Commercial Banks (PCBs) ownership and others bank specific and macroeconomics factors influencing profit efficiency level of the Bangladesh banking sector. The Slack-Based Data Envelopment Analysis (SBM-DEA) method employed to compute the profit efficiency of 31 commercial banks operating in the Bangladesh over the years 2004–2011. Furthermore, the multivariate panel regression analysis framework based on the Ordinary Least Square (OLS) and Generalized Least Square (GLS) methods comprising the Fixed Effect (FE) and Random Effect (RE) models adopted to examine the determinants of banks profit efficiency. Results indicate the levels of profit efficiency on SCBs and PCBs are increasing by 3.7% and 5.8% during financial crisis years. However, over the period of post financial crisis years exhibited, profit efficiency levels on SCBs and PCBs are decreasing by 38.7% and 9.9%. Although profit efficiency levels on both ownership of banks show declining over the post financial crisis years, the PCBs still higher than SCBs (67.8%>60.1%) but insignificantly different. Furthermore, the findings reveals that the relationship of size of bank, liquidity, economic growth and market concentration are significantly negative with profit efficiency of SCBs but positive to PCBs. Meanwhile, the factors of capitalization, credit risk and inflation are significant with the positive and negative sign only to the profit efficiency of the SCBs over the period of post global financial crisis.

Lending for growth? A Granger causality analysis of China’s finance–growth nexus

China’s banking sector is dominated by four distinct organizational forms: policy banks (PBs), state-owned commercial banks (SOCBs), joint stock commercial banks (JSCBs), and rural credit cooperatives (RCCs). Economic analyses have especially focused on the development of bank efficiency and profitability over time. The equally important question, which of China’s banking institutions promote economic growth, has not been explored using macroeconomic data. Our study uses a novel data set covering the period 1997–2008 and employs Granger causality tests to estimate the finance–growth nexus of each of these bank types. Our results show that SOCBs and RCCs do not Granger-cause GDP growth and that SOCBs even have a negative effect on manufacturing growth. By contrast, PBs and JSCBs promote economic growth.

International trade financing: a comparative study on the performance of state-owned and private commercial banks of Bangladesh

We investigate the comparative performance of state-owned commercial banks (SOCBs) and private commercial banks (PCBs) of Bangladesh with respect to efficiency and profitability in financing international trade. Taking a ten-year panel data over 2003-2012 of all four SOCBs and four categorised PCBs, we apply the non-parametric approach data envelopment analysis (DEA) to measure and compare efficiency of the banks using output-oriented Malmquist Productivity Indices (MPI). Furthermore, we develop some specialised profitability ratios on trade financing business of the banks to measure profitability. Our results suggest that PCBs are more efficient and profitable compared to SOCBs' although PCBs provide less trade financing than SOCBs'. The study recommends SOCBs to progress technologically for sustaining themselves in the competitive banking sector of Bangladesh. Moreover, we identify the sources of profitability that would explain the banks' strategic position in trade financing business which would motivate more banks to support international traders through trade financing.

The Impact of Personality on Job Performance: Study on Senior Managers in State Owned Commercial Banks in Colombo District, Sri Lanka

Area of the Study This study is aimed to discuss the impact of personality of senior mangers on their job performance in the state owned commercial banks. Problem of the Study There is no any empirical research finding of the impact of personality on the job performance of the senior managers in the state owned commercial banks. Therefore, the research problem is: Does personality of the senior managers in the commercial banks affect to their job performance? Method of the study Randomly selected 103 senior managers in the state owned commercial banks in Colombo district were the sample of the study and structured questionnaire was distributed among the sample respondents to gather the primary data. The personality of the senior managers was measured using big five personality model. Descriptive statistics and correlation analysis were used to analysis the primary data gathered from the sample. Findings of the Study Mainly it was clearly found that there is a strong positive relationship between employee personality and job performance. Further the results proved that Extraversion, Agreeableness and Conscientiousness have strong positive relationship with job performance while Openness to experience has moderate relationship with job performance. It can be revealed that Neuroticism has strong negative relationship with job performance since values obtained through both Correlation analysis and Regression analysis indicated a negative relationship. Conclusion of the Study The management of the state owned commercial banks has to pay their consideration to upgrade the relevant personality traits of the senior managers for their high level job performance. Keywords: Employee Personality, Big Five Personality Model, Job Performance

The Empirical Study on the Relationship between Bank Liquidity Creation and Capital—Based on Empirical Data from 2004 to 2014 in Chinese Banks

This paper investigates the relation between bank liquidity creation and capital in China. This issue is interesting because of the potential impact on “credit weakness” problems from tighter capital requirements which proposed by new capital rules in China. We perform regress analysis in a simultaneous equations model on the panel data of Chinese banks, which mainly includes 28 commercial banks from 2004 to 2014. On the whole, we find very different relations for different types of bank. State-owned commercial banks do not have significant relationship between liquidity creation and capital. National shareholding commercial banks’ liquidity creation and capital are positive correlation. The capital of regional commercial banks has a strongly positive effect on liquidity creation, but liquidity creation has negative impact on capital. These findings support the point that the new capital rules in China do not detrimentally influence “credit weakness” problems.

Impact of the joint-stock reform of commercial banks on the effectiveness of monetary policy in China

Over the past decade, the Chinese government has conducted the joint-stock reform of state-owned commercial banks. The joint-stock reform improves the marketization level of the ownership structure of commercial banks and consequently leads to impacts on the effectiveness of monetary policy. This paper first presents the impacting mechanisms of the joint-stock reform of commercial banks on the effectiveness of monetary policy and then constructs an empirical model to test those impacts. The empirical results show that the increasing degree of joint-stock reform of commercial banks enhances the effectiveness of expansionary monetary policy but weakens the effectiveness of contractionary monetary policy in China.

The Extent of Disclosure of Different Components of Disclosure Index: A Study on Commercial Banks in Bangladesh

This discussion highlights the disclosure score of different components of disclosure index of the selected state-owned commercial banks in Bangladesh. The annual reports of the selected commercial banks were analyzed to determine the extent of disclosure score of different components of disclosure index which contained the items of information included in the disclosure index of the selected commercial banks during the period under study. An index of disclosure has constructed less than seven heading to measure the extent of disclosure score of different components of disclosure index such as company profile items, corporate structure items, accounting policy items, balances sheet assets items, balance sheet liabilities items, income statement debit items and income statement credit items. This study shows that the disclosure score of different components of disclosure index is satisfactory and there was significant and non significant difference in disclosure score of different components of disclosure index between the selected state-owned commercial banks in different years.

The Research on the Behavioral in Domestic Commercial Bank Governance Model and Enlightenment Based on Behavioral Theory

Through analysis of the particularities possessed by commercial banks comparing with general industrial and commercial enterprises, this article put forward four particularities including the high risk, the particularity of the credit market, the particularity of bank product and the particularity of the bank industry. By comparing the typical governance models of different countries, we can find some principles and ways for our state-owned commercial bank to establish effective corporation governance model.

Impact of Human Resource Information System on Firm Financial Performance

This study analyzed the impact of the applications of human resource information system (HRIS) on firms’ financial performance. Performance estimation models developed based on five years performance related data extracted from annual reports of total 41 (89%) banks operated under four strata: state-owned commercial (9%), specialized (6%), private commercial (63%), and foreign commercial banks (11%) in Bangladesh while multivariate analysis of covariance (MANCOVA) tested to examine the varied corporate financial performance according to ownership patterns. The study found direct and positive relations of HRIS applications with the firm’s financial results. However, the corporate performance does not vary significantly according to the ownership patterns. Moreover, the findings of the study may lead human resource (HR) professionals and other stakeholders to enhance their financial intelligence about its applications in business which may eventually enable them to be strategic partners in the acute global market environment.

Do Bank Mergers and Acquisitions Improve Technical Efficiency of Vietnamese Commercial Banks?

This study empirically investigates the effect of bank mergers and acquisitions (M&As) on technical efficiency in Vietnamese commercial banks. A bootstrapped Data Envelopment Analysis is employed to arrive at technical efficiency score of 136 virtual bank mergers in the Vietnamese banking industry over the period from 2007 to 2011. The findings reveal that a year before the impact of the global financial crisis (GFC), the majority of the virtual bank M&As under examination were unable to generate technical efficiency gains. However, these virtual banks mergers can lead to technical efficiency gains in a year after the GFC and in 2011. The findings also indicate that virtual mergers formed by state-owned commercial banks with other commercial banks are less efficient than the mergers created by only joint stock commercial banks. Finally, the empirical result supports the hypothesis that a merger between two efficient banks does not necessarily generate an efficient bank merger.

Technical Efficiency Measurement Incorporating Risk Preferences: An Empirical Analysis of Chinese Commercial Banks

By adjusting direction vectors, we are able to measure technical efficiency incorporating risk preference of individual banks using non-parametric and parametric approaches. Furthermore, we explore categories of commercial banks by comparing their risk preferences to the risk preference that optimizes technical efficiency. Three results emerged. First, technical efficiency scores of joint stock and city commercial banks surpassed those of state-owned commercial banks under the optimal risk preference, and technical efficiency generally improved over time. Second, the preference for risk balance was optimal for achieving technical efficiency. Third, a larger proportion of state-owned and joint stock commercial banks fall into the preference for risk neutral category than city commercial banks.

OFF-BALANCE SHEET ACTIVITIES AND BANK RISKS: AN INVESTIGATION OF THE LISTED COMMERCIAL BANKS IN CHINA (1999–2013)

Based on a broad set of 16 listed commercial banks in China during the period 1999–2013, this paper makes the empirical analysis of the relationship between the development of off-balance sheet (OBS) activities and the banks' overall risk, bankruptcy risk and credit risk. Innovation of this article is mainly reflected in: (1) Considering different types of risk variables, it gives a more comprehensive disclosure of the bank's risk characteristics. (2) Dividing the research object into joint-stock commercial banks and state-owned commercial banks, and get some new test results: The development of OBS business of state-owned commercial banks increases the overall risk, bankruptcy risk and credit risk significantly. While in joint-stock commercial banks sample, the development of OBS business reduces the overall risk significantly.

The Effect of Introducing Foreign Strategic Investors on Bank Prudence: Does One Size Fit All?

This paper investigates this question based on relevant data from China’s commercial banks over the period from 1995 to 2010. Three main results emerge from this study. First, introducing foreign strategic investors increases the ratio of total equity to total assets and the ratio of total equity to gross loans, and reduces the ratio of gross loans to total assets and the ratio of gross loans to total customer deposits in the short term. Second, introducing foreign strategic investors reduces the ratio of total equity to total assets and the ratio of total equity to gross loans, and increases the ratio of gross loans to total assets and the ratio of gross loans to total customer deposits in the long term. Third, we find that the effects of introducing foreign strategic investors on bank prudence are significantly different in between state-owned and joint-stock commercial banks and city commercial banks. The effects of introducing foreign strategic investors on all measures for bank prudence in state-owned and joint-stock commercial banks are significant in both the short term and the long term, which are consistent to our main results. But the effects of introducing foreign strategic investors on bank prudence in city commercial banks are not significant in many measures for bank prudence in both the short term and the long term. In the further analyses, we also find that the effects of introducing foreign strategic investors on bank prudence (except the ratio of gross loans to total customer deposits) are stronger in stated-owned and joint-stock commercial banks than that in city commercial banks in the short term; the effects of introducing foreign strategic investors on bank prudence (except the ratio of total equity to total assets) are stronger in stated-owned and joint-stock commercial banks than that in city commercial banks in the long term. This research not only presents empirical evidence for introducing foreign strategic investors but also provides practical suggestions for further reforms in the Chinese banking industry.