Other people’s money: The profit performance of Bangladeshi family dominated banks

Mahbub, Tasmina; Matthews, Kent; Barker, Kate

doi:10.1016/j.jbef.2018.11.005

Cited by 7 publications

(17 citation statements)

References 61 publications

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“…This is, perhaps, not surprising, since all the banks are operating in a competitive market, where persistent differences in efficiency levels are unlikely to be sustainable. However, Mahbub et al (2019), suggest that FAM banks may have different objectives to NF banks revealed in comparatively higher cost and lower profit performance. The finding that FAM banks had higher inefficiency levels in Salary in the period up to the GFC, is consistent with their finding.…”

Section: Conclusion and Discussion Of Resultsmentioning

confidence: 99%

“…Mahbub, et al (2019) find evidence of rent-seeking and featherbedding of personnel in family dominated banks in the form of over-manning and over-payments for family related staff.11 On the recommendation of an anonymous referee, we conduct a similar exercise using a combination of the input and output orientation in DEA for each time window and find no significant difference in the efficiency levels based on a Kruskal-Wallis rank sum test. The details are available on request.…”

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confidence: 96%

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Inefficiency patterns in family-owned banks in Bangladesh

Asmild

Kronborg

Mahbub

et al. 2021

JES

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PurposeMulti-directional efficiency analysis (MEA) is an alternative methodology to data envelopment analysis (DEA) that investigates the improvement potentials in each input and output dimension and identifies a benchmark proportional to these potential improvements. This results in a more nuanced picture of the sources of the inefficiency providing opportunities for additional conclusions about which variables the inefficiency is mainly located on. MEA provides insights into not only the level of the inefficiency but also the patterns within the inefficiency, i.e. its sources and location. This paper applies this methodology to Bangladeshi banks to understand the differences in the inefficiency patterns between different subgroups.Design/methodology/approachThis paper analyses the difference in the pattern of inefficiency between the older family-dominated banks and the newer non-family-owned banks in Bangladesh using the recently developed MEAs technology, which enables analysis of patterns within inefficiencies rather than only levels of (in)efficiency. The empirical results show that whilst there are few significant differences in the levels of variable-specific efficiency scores between the two subgroups, there are clearer differences on the inefficiency contributions from particular outputs in most of the study period and also on most variables in the time window of 2007–2009. This finding provides clues to differences in business models and management practice between the two types of banks in Bangladesh.FindingsThe empirical results show that whilst there are few significant differences in the levels of variable-specific efficiency scores between the two subgroups (older family-dominated banks and the newer non-family-owned banks), there are clearer differences on the inefficiency contributions from particular outputs in most of the study period and also on most variables in the time window of 2007–2009, during the Global Financial Crisis (GFCs). This finding provides clues to differences in business models and management practice between the two types of banks in Bangladesh.Practical implicationsDEA is a conventional tool for benchmarking in management science. However, conventional benchmarking exercises based on DEA do not reveal significant differences in the sources of inefficiency that show differences in business models. While DEA remains the most utilized technique in the efficiency literature, we think that a more flexible and deeper analysis requires something like MEA.Originality/valueThe contribution is twofold. First, examination of performances of family-owned firms is a well-established but analysis of performances of family-dominated banks is relative scarce. Secondly, isolating the sources of inefficiency which differs between types of banks even if there is no difference in inefficiency levels is absolutely new for a complete data set of conventional banks in Bangladesh. It turns out that there are few (significant) differences between the groups in terms of the inefficiency levels, whereas clear patterns emerge in terms of differences in inefficiency contributions between family-dominated and non-family-owned banks, during the Global Financial Crisis

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Section: Conclusion and Discussion Of Resultsmentioning

confidence: 99%

mentioning

confidence: 96%

Inefficiency patterns in family-owned banks in Bangladesh

Asmild

Kronborg

Mahbub

et al. 2021

JES

Self Cite

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“…Author/s Capital Robin, Salim, & Bloch, 2018;Fang, Lau, Lu, Tan, & Zhang, 2019;Pathan & Faff, 2013;Mahbub, Matthew, & Barker, 2019;Alam, Zainuddin, & Rizvi, 2019;Kutubi, Ahmed, & Khan, 2018;Köster & Pelster,2017;Bandt, Camara, Maitre, & Pessarossi, 2018.…”

Section: Variablementioning

confidence: 99%

“…Credit risk Robin, Salim, & Bloch, 2018;Fang, Lau, Lu, Tan, & Zhang, 2019;Mahbub, Matthew, & Barker, 2019;Chen, Liang, & Yu, 2018;Gerhardt & Vennet,2017;Ghosh, 2018;Bandt, Camara, Maitre, & Pessarossi, 2018;Boubakri, Mirzaei, & Samet, 2017. Loans to total assets Ghosh, 2018;Hung, Jiang, Liu, Tu, & Wang, 2017;Bandt, Camara, Maitre, & Pessarossi, 2018.…”

Section: Variablementioning

confidence: 99%

Untitled

2020

jrems

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This paper intends to review research on the performance of banks to identify gaps in the current body of knowledge to justify future research directions. We use a systematic literature review method and review 164 articles from refereed journals. Content analysis reveals that most of the studies are empirical focusing on two aspects i.e. financial performance and efficiency of banks. These studies consider the impact of particular events and contexts on performance and efficiency while testing research hypotheses. However, often there is a lack of a theoretical backing for these studies. We argue that the considered events and contexts affect the risk transformation process under the financial intermediation theory. The efficiency of banks reflects the risk transformation process and causes performance. On the other hand, traditional performance indicators were based on financial measures that do not reflect the components of the risk transformation process. A sound comprehensive risk-based composite measure is required to fill this gap.

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“…But one additional feature that separates GEN1 banks from GEN23 banks is that the former have a corporate governance structure of a board of directors with family connections. This difference in governance structure gives rise to differences in credit and risk management behaviour between the two (Mahbub et al, 2017) that results in significant differences in performance.…”

Section: Bangladesh Bankingmentioning

confidence: 99%