– The study aims to investigate the relationship between competition and efficiency. Using bank-level data for Indian banks, relationship between competition and efficiency is examined by applying the Granger causality test for the period 1996 to 2011.
– Lerner Index is a measure of market power and is applied for estimation of competition. Data envelopment analysis technique is applied for measuring efficiency in the Indian banking system along with the Granger causality test to look at the relationship between competition and efficiency.
– Results show an increasing trend for competition for the period 1996 to 2004, and after that there is fall in competitive levels. Granger causality tests show that competition positively effects efficiency and vice-versa.
– This study gives an insight into the relationship between competition and efficiency, thus providing an alternative view to the structure–conduct–performance paradigm. An efficient banking system can positively impact the growth of an economy and, hence, competition and efficiency are important decision parameters for regulators and could help them in decision-making and policy formulation.
– This study has covered more than 90 per cent of the banking assets for looking at competition and efficiency in the banking sector. Policymakers can try to improve competitive levels in banking so as to improve efficiency in the banking sector which can further help in developing the investment-savings cycle.
This article analyzes the evolution of competition in the Indian banking system for the period 1994– 2011. The reform process for the Indian banking sector started in 1992, led by the Narasimhan committee report and thus the period of study is divided into three phases: deregulation and liberalization, consolidation and post-consolidation period. To evaluate competition, we apply two indicators of competition from the theory of industrial organization: concentration indices and Panzar and Rosse’s H-statistic (PRH statistic). The empirical evidence from the PRH statistic does not permit us to reject the existence of monopolistic competition. There is a steady fall in concentration ratios suggesting an improvement in competitive conditions. The PRH statistic suggests a fall in competitive condition during the consolidation phase followed by a revival in competitive conditions during the post consolidation period. This study also helps in understanding the effect of new banks’ entry in the Indian banking sector on the competitive conditions. The results obtained support the decision by Reserve Bank of India to allow entry of new private banks which will help in further infusing competition in the Indian banking sector.
The purpose of the paper is to find out empirically whether an ideal business environment coupled with adequate legal protection provides an enabling mechanism for the minority shareholders to extract dividend from the firms and, as a consequence, whether the equity value of the firms gets impacted by dividend policy.The study (a) employs Tobit model on a sample of FTSE ST companies of Singapore to show the relation between dividend and minority shareholders base and, then (b) sought to explore the relation between equity value and dividend policy in the backdrop of strong legal protection for minority shareholders through OLS and 2 SLS regression models.The study empirically demonstrates a positive relation between the dividend payout and minority shareholders base indicating that, in a civil law origin country with strong corporate governance code ensuring investors protection and property right, the minority shareholders can extract dividend from the firms that, in turn, has a favourable impact on equity valuation.Consistent with the “outcome” and “catering model,” the findings of the study indicate that the overall business environment and legal protection enable minority shareholders to assert their cash flow rights with positive valuation implication.The paper objectively reveals how superior business environment, good governance and property right impact inter‐play between dividend payout, minority shareholders base and valuation of a civil law country.
The Indian banking industry has been suffering from a huge number of nonperforming loans, and the loan asset quality has been deteriorated over the years. This has led to significant capital erosion of many banks in India. The surge in corporate defaults leading to an enormous rise in nonperforming loan assets has been impairing the performance of Indian banking industry in particular and economic growth in general. Hence, it is intuitive to ask what are the determinants of poor asset quality of Indian banks. To answer this question, using a sample of 47 commercial banks over a sample period of 2000 to 2014, our study examines the bank‐, industry‐, and macroeconomic‐specific determinants of asset quality of Indian banks. Our empirical analysis also accommodates the impact of different ownership structures (public and private sector) and the impact of financial crisis while analysing the determinants of poor asset quality of Indian commercial banks. Results reveal that bank‐, industry‐, and macroeconomic‐specific factors are responsible for the burgeoning nonperforming loan assets of Indian commercial banks. The results are qualitatively similar across different ownership structures. The findings suggest that forecasting models for nonperforming assets should also consider macroecomomic‐ and industry‐specific factors along with the bank‐ specific factors.
This article is aimed at examining the degree of efficiency exhibited by the sovereign credit default swaps (SCDS) and the sovereign bonds (SBs) pertaining to the G8 countries, namely, US, UK, Japan, Germany, Italy, France and Russia, from an Adaptive Market Hypothesis (AMH) perspective. At the outset, the authors employ rolling AR(1)–GARCH(1,1) filter so as to remove short-term dependency in the different time series considered for this study. The AR(1)–GARCH(1,1)-filtered rolling standardized residuals were then subjected to Mandelbrot’s classical R/S test so as to obtain rolling Hurst exponents. Subsequently, the evolving efficiencies of G8 SCDS and SB scrips as reflected by the scrip-wise rolling Hurst exponents are made available. In doing so, scrip-wise transient inefficiencies, as characterized by periods that exhibit strong evidence of long memory, were identified. The authors then offer a ranking of G8 SCDS and SB scrips, in the decreasing order of relative efficiency, based on proportion of scrip-wise rolling windows that exhibited strong evidence of long memory. The findings pertaining to this study are as follows. First, SBs pertaining to UK, Japan, US, France and Russia were found to be the most efficient, while SBs pertaining to Russia were found to be the least efficient. Second, when it comes to SCDS, Russian SCDS scrips were found to be relatively more efficient than the Russian SBs. Having said so, G8 SCDS scrips pertaining to the other countries were found to be inefficient vis-à-vis their respective SBs. Of all the G8 countries, US was the only country wherein no strong evidence of long memory was witnessed in SCDS and/or SB scrips. Finally, there is discernable difference in the degree of efficiency exhibited by G8 SCDS scrips vis-à-vis their underlying reference obligations (ROs).
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