Determinants driving bank performance: A comparison of two types of banks in the OIC

Sun, Poi Hun; Mohamad, Shamsher; Ariff, Mohamed

doi:10.1016/j.pacfin.2016.02.007

Cited by 81 publications

(90 citation statements)

References 26 publications

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“…However, the results for the model 2 align with those of studies conducted by Fungáčová and Poghosyan (2011) and Trinugroho et al (2014) which indicated that NPL has a negative relationship with NIM. For the others classes of asset, the findings correlate with several studies (Arafat et al, 2013;Sun, Mohamad, & Ariff, 2016;Were & Wambua, 2014). Following the argument presented by Arafat et al, we concluded that the positive relationship between NPL and NIM model is probably caused by problems related to intermediary functioning in Indonesia BPRs.…”

Section: Discussionsupporting

confidence: 90%

Bank Performance and Its Underlying Factors: A Study of Rural Banks in Indonesia

Chou

Buchdadi

2016

AFR

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This study determines the effect of variables recommended by the central bank of Indonesia on the performance of rural banks (BPRs) which has the particularity that serve the needs of communities in rural areas, small and medium enterprises (SMEs) in the form of deposits (savings and time deposits) and credit. The analysis technique employed in this study is panel data regression using expenses ratio (BOPOs), capital adequacy ratios (CAR), nonperforming loans (NPLs), loan-to-deposit ratios (LDRs) as independent variables. Return on asset (ROA) and net interest margin ratio (NIM) are used as the proxies of BPRs performance. The data used are from 164 BPRs operating in Java island between 2009 and 2012 period (totaling 656 company years). The results showed that BOPOs and NPLs played crucial role in explaining the BPR performance in Indonesia. The findings in this study indicate that efficiency and prudence in management policies for banking industry in Indonesia becomes more important.

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Section: Discussionsupporting

confidence: 90%

Bank Performance and Its Underlying Factors: A Study of Rural Banks in Indonesia

Chou

Buchdadi

2016

AFR

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“…This result is also consistent with the findings reported in Sun, Mohamad and Ariff (2017) and Lee and Isa (2017). In fact, the positive relationships for the lag efficiency and margins are an indication of the continuous efforts of management to strive for better performance to enhance their competitiveness in the market (Sun et al, 2017). In addition, margins of the banks as a measure of stability, in Table 8 (Models 1-2), show that Islamic subsidiaries of conventional banks and standalone Islamic banks dummy variables (Model 1, Table 8) have a positive and significant relationship with the banks' margins, reflecting the superiority of their margins over the conventional banks with a coefficient (t-value) of 0.021 (2.057) and 0.048 (2.671), respectively.…”

Section: Results Of Empirical Modelssupporting

confidence: 94%

“…With respect to the stability as measured by bank margins (Table 8, Models 1-3), it is noticed that the margins of the past years are positively related to the current margins, which underscores the significance of the spillover from the past margins on the current margins. This result is also consistent with the findings reported in Sun, Mohamad and Ariff (2017) and Lee and Isa (2017). In fact, the positive relationships for the lag efficiency and margins are an indication of the continuous efforts of management to strive for better performance to enhance their competitiveness in the market (Sun et al, 2017).…”

Section: Results Of Empirical Modelssupporting

confidence: 91%

Efficiency, Asset Quality and Stability of the Banking Sector in Malaysia

Ariff

Shawtari

2019

MJES

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Malaysia practices a dual banking system, where conventional banks coexist with Islamic banks. While conventional banks are well established, Islamic banks are growing rapidly. Since Islamic banks consist of two types, namely stand-alone or wholesome Islamic banks and Islamic subsidiaries of conventional banks, it would be revealing to examine if Islamic subsidiaries of conventional banks differ from standalone Islamic banks in terms of efficiency, stability and assets quality. A few studies in the literature that examine the issue have focused on comparisons between Islamic banks and conventional banks, with no consideration given to the differentiation between the two categories of Islamic banks. In this paper, we attempt to examine the differences among the players in the banking sector in Malaysia. This paper extends the traditional analysis of conventional versus Islamic banks to comparisons between stand-alone Islamic banks and Islamic subsidiaries of conventional banks. Using dynamic panel data "generalized methods of moments" (GMM), the study reports that there are differences among different types of banks, viz. conventional banks, Islamic subsidiaries of conventional parents, and stand-alone Islamic banks. It shows that Islamic subsidiaries of conventional banks perform better than stand-alone Islamic banks as well as their own conventional parents. Furthermore, the results show that Islamic subsidiaries are more stable in term of their financing income compared to the rest of the banks, while the stand-alone banks have lower asset quality in comparison with both Islamic subsidiaries and their parents.

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“…Contrary to traditional econometric methods (OLS, fixed effect, and generalized effect), GMM solves the endogeneity problem in the independent variables using a series of instrumental variables generated by lagged variables. Additionally, GMM estimator technique is used by many previous studies (see ,e.g., Chiaramonte et al, 2013;Farhi & Borghi, 2009;Sun, Mohamad, & Ariff, 2017) due to its robustness and relevance in estimating regressions.…”

Section: Estimation Methodsmentioning

confidence: 99%

Analyzing the effect of derivatives on the financial soundness of commercial banks in Italy: An approach based on the CAMELS framework

Keffala

2018

Rev Financ Econ

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Italian economy is among the biggest economies in the Europe which suffered from the repercussions of the global financial crisis during this last decade. The weakness of Italian banking system coincides with the common debate about the implication of derivatives in the distress of banks’ soundness. Thus, the aim of our research is to examine the effect of derivative instruments on the banks’ soundness in Italy. To reach our goal, the CAMELS approach is employed to define the soundness of Italian commercial banks. To overcome the endogeneity issue of variables, an appropriate econometric procedure, namely the dynamic Generalized Method of Moments (GMM system) is applied using data from 22 commercial banks in Italy over the period 2005–2015. Explanatory variables are defined by derivative instruments (forwards, swaps, options, and futures), bank‐specific variable (bank's size as non‐CAMELS variable), industry‐specific variables (CR3, CR5, and HHI as indicators of bank's sector and market concentrations), and country‐specific variables (GDP and inflation). The main results reveal that the majority of the CAMELS indicators are favorably affected by derivative instruments especially forwards and options. The most important conclusion is that using derivative instruments does not threaten the financial soundness of commercial banks in Italy. As major implication decision‐makers and experts—after the global financial crisis—should not consider derivatives in part as responsible of the fragility of the Italian banking system.

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Determinants driving bank performance: A comparison of two types of banks in the OIC

Cited by 81 publications

References 26 publications

Bank Performance and Its Underlying Factors: A Study of Rural Banks in Indonesia

Bank Performance and Its Underlying Factors: A Study of Rural Banks in Indonesia

Efficiency, Asset Quality and Stability of the Banking Sector in Malaysia

Analyzing the effect of derivatives on the financial soundness of commercial banks in Italy: An approach based on the CAMELS framework

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