Bank Competition, Foreign Bank Entry, and Risk-Taking Behavior: Cross Country Evidence

Chen, Si‐Chong; Nazir, Muhammad Imran; Hashmi, Shujahat Haider; Shaikh, Ruqia

doi:10.3390/jrfm12030106

Cited by 26 publications

(22 citation statements)

References 71 publications

(108 reference statements)

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“…Some prior studies found that banks located in countries with higher banking sector development have lower percentage of non-performing loans and are less risky (Laeven & Levine 2009;Srairi 2013). On the other hand, Chen et al (2019) observed that banking sector development increases insolvency risk and credit risk in a cross-country study.…”

Section: Definitions Of Variablesmentioning

confidence: 80%

Board Size, Chief Risk Officer and Risk-taking in Islamic Banks: Role of Shariah Supervisory Board

Najwa¹,

Ramly

Haron³

2019

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This paper aims to examine the moderating effect of Shariah Supervisory Boards (SSBs) on the relationship between board size, Chief Risk Officer (CRO), and risk-taking of 24 Islamic banks (IBs) in Malaysia, Indonesia and Brunei from 2010 to 2015. This approach integrates the arguments of agency theory and resource dependence theory. The results of panel regression indicate that the appointment of a CRO as an executive board member reduces credit risk, implying that the appointment of a CRO as a risk expert in IBs enhances the management of risk and monitoring of risk-taking activities. Further, larger board is likely to reduce insolvency risk when an SSB has higher percentage of members with supervisory Shariah experience. Next, this study observes that larger SSB size and a higher percentage of members with Shariah supervision experience moderate the relationship between the CRO and insolvency risk. Overall, this study highlights the important role of board size, CRO and SSB in the risk-taking of Islamic banks, which have received little attention in the extant literature. ABSTRAK Tujuan kajian ini adalah untuk mengkaji kesan saiz lembaga pengarah (LP) dan Ketua Pegawai Risiko (KPR) ke atas pengambilan risiko di 24 bank-bank Islam di Malaysia, Indonesia dan Brunei dari tahun 2010 hingga 2015 dan sama ada kesan tersebut disederhanakan oleh Lembaga Penyeliaan Syariah (LPS). Kaedah ini mengintegrasikan hujah-hujah teori agensi dengan teori pergantungan sumber. Hasil analisa regresi data berpanel menunjukkan pelantikan KPR sebagai ahli eksetutif mengurangkan risiko kredit. Hasil ini menyiratkan yang pelantikan KPR sebagai pakar risiko di bank-bank Islam telah meningkatkan pengurusan dan pemantauan risiko di dalam aktivit-aktivitii pengambilan risiko. Selanjutnya, saiz LP yang lebih besar boleh mengurangkan risiko insolvensi dengan syarat peratus keanggotaan LPS dari kalangan ahli-ahli yang berpengalaman di dalam penyeliaan Syariah adalah tinggi. Seterusnya, kajian ini mendapati saiz LPS yang besar dan peratusan yang tinggi ahli-ahli LPS mempunyai pengalaman di dalam penyeliaan Syariah menyederhanakan hubungan di antara KPR dan risiko insolvensi. Keseluruhannya, kajian ini menyorotkan peranan penting saiz LP, KPR dan LPS di dalam aktiviti-aktiviti pengambilan risiko di bank-bank Islam. Selama ini kajian-kajian sedia ada hanya memberikan sedikit perhatian terhadap perkara ini.

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Section: Definitions Of Variablesmentioning

confidence: 80%

Board Size, Chief Risk Officer and Risk-taking in Islamic Banks: Role of Shariah Supervisory Board

Najwa¹,

Ramly

Haron³

2019

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“…From the perspective of Claessens and Laeven (2004), the entry of foreign banks enhances the competitiveness of banking systems. Although, at other times, foreign banks may also induce undue competition (Chen et al , 2019), which increases financial fragility (Wu et al , 2017), the penetration of foreign banks appears to have led to a less competitive banking industry in Latin America (Yeyati and Micco, 2007). Foreign banks are a precondition for improved efficiency of the banking system of developing economies (Ghosh, 2016) and deregulated environment (Sturm and Williams, 2004).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Cost efficiency and welfare performance of banks: evidence from an emerging economy

Adeabah

Andoh

2020

IJMF

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PurposeThe study examines the relationship between the consequential social cost of market power (i.e. welfare performance of banks) and cost efficiency using data covering the period 2009 to 2017 from the Ghanaian banking industry.Design/methodology/approachThe study adopts the ordinary least squares (OLS), fixed effect (FE) panel regression and the quantile regression (QR) approaches to control for heterogeneity and provide increased room for policy relevance. The two-stage least squares instrumental variables (2SLS-IV) regression is used to ensure the robustness of the findings against the problem of possible reverse causality.FindingsThe results indicate a positive relationship between banks' welfare performance and cost efficiency, which suggests that greater cost efficiency hedges welfare losses. In other words, welfare gains and cost-efficient banks are not mutually exclusive. Also, the results show evidence that the sensitivity of welfare gain to cost efficiency depends on the knowledge of local market dynamics. Further, the findings from the QR estimation suggest that, but for welfare loss at low (Q.25) to the median (Q.50) quantiles, cost efficiency is a necessary and sufficient condition to hedge the welfare losses.Practical implicationsThe results demonstrate that financial consumer protection cannot be achieved without cost efficiency in the presence of both foreign banks and high market knowledge. Therefore, our paper suggests an integrated cost efficiency policy approach that has the complementary effect of a robust information sharing mechanism and incentives to hedge against welfare losses in the banking sector of emerging economies. Moreover, if welfare gain is synonymous with cost-efficient banks, then the presence of a quiet life is typical of financial consumer protection.Originality/valueThis study provides insight into the importance of cost efficiency to the public policy of financial consumer protection in an era of foreign banks' dominance. From the review of prior literature, this paper is the first to apply the QR estimation technique to examine the effect of cost efficiency throughout the conditional distribution of bank welfare performance rather than just the conditional mean effect of cost efficiency.

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“…In the second phase, the bank managers use the first phase intermediate outputs to create suitable outputs of loans and securities investments and an undesirable output of non-performing credits (Fukuyama & Weber, 2015). Chen et al (2019) concluded that capital regulation stringency and restriction on bank's activities can reduce the risk factor level successfully. This also applies to the policy implication for foreign investors and regulatory authorities.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Performance and Contribution of Japanese and Non-Japanese Financial Institutions in Developing Economies: an Empirical Research in Indonesia

Johan¹

2020

JDM

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Paper purpose is to analysis the value generated by the Japanese and Non Japanese financial institutions in Indonesia banking from 2013-2018. The paper concentrated on the 16 foreign banks contained of seven affiliates of Japanese banks and nine affiliates of Asian Non-Japanese Banks. The shareholders’ origination will be the independent parameter, and the main financial measurements are the capital structure, credit risk, efficiency, profitability, and firm size, will be the dependent parameter. This paper used non-parametric Mann Whitney Test, besides parametric by Regression of Dummy Variable. The empirical outcomes indicate that there are variances in capital structure, credit risk, efficiency, and firm size. There is no significant variance in profitability ratio. Japanese banks are more noticeable in terms of firm size and well in efficiency ratio and loan to deposit ratio. However, Japanese banks have a higher non-performing credit. The outcomes are significant at a = 1% for capital structure and efficiency ratio.

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Bank Competition, Foreign Bank Entry, and Risk-Taking Behavior: Cross Country Evidence

Cited by 26 publications

References 71 publications

Board Size, Chief Risk Officer and Risk-taking in Islamic Banks: Role of Shariah Supervisory Board

Board Size, Chief Risk Officer and Risk-taking in Islamic Banks: Role of Shariah Supervisory Board

Cost efficiency and welfare performance of banks: evidence from an emerging economy

Performance and Contribution of Japanese and Non-Japanese Financial Institutions in Developing Economies: an Empirical Research in Indonesia

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