The Impact of the Bank Regulation and Supervision on the Efficiency of Islamic Banks

Noor, Nor Halida Haziaton Mohd; Bakri, Mohammed Hariri; Yusof, Wan Yusrol Rizal Wan; Noor, Nor Raihana Asmar Mohd; Zainal, Nurazilah

doi:10.13106/jafeb.2020.vol7.no11.747

Cited by 10 publications

(20 citation statements)

References 54 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Similarly, results shown in columns (2)–(5) reveal that at the 1% alpha level, corruption control, government effectiveness, regulatory quality and rule of law, respectively, exert significant positive effect on financial institution efficiency among economies in SSA. These findings are consistent with expectations and theoretical supposition as alluded to by Beck et al (2001), Rajan and Zingales (2001) and Mohd Noor et al (2020). The results highlight the view that improved institutional and governance structures to some extent spurs effectiveness and efficiency in various facets of governmental and regulatory organizations, leading to delivery of strategies that improve key sectors of an economy including the operations of financial institutions.…”

Section: Empirical Analysissupporting

confidence: 89%

“…The results showed that financial reform, ownership and listing of banks significantly affect bank efficiency; the study again found no conclusive evidence in relation to the nexus between size and efficiency. Mohd Noor et al (2020) found from a study that used data from 108 Islamic banks from 26 countries that supervisory power, activity restrictions and private monitoring exert significant positive effect on Islamic banks’ efficiency. The study again revealed that less stringent capital requirement improves the technical efficiency of Islamic banks for Middle East and North Africa and middle-income countries.…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

Abaidoo

Agyapong²

2022

JFRC

View full text Add to dashboard Cite

Purpose This paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996). Design/methodology/approach The purpose of this paper is to evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996). Findings The results suggest that institutional quality has significant positive effect on financial institution efficiency, supporting the view that improved and supportive structures of governance tend to promote operational efficiency among financial institutions among economies in SSA. In addition, improvement in individual governance indicators such as corruption control, government effectiveness, regulatory quality and rule of law was also found to support or enhance efficiency of financial institutions among economies in the subregion. Macroeconomic uncertainty on the other hand is found to impede efficiency of financial institutions; the same condition (macroeconomic uncertainty) is further found to negate any positive impact corruption control, government effectiveness, regulatory quality and rule of law have on operational efficiency among financial institutions in the subregion. Originality/value Unlike most of related studies, this study adopts a different approach on the dynamics of financial institutions. Approach pursued in this empirical inquiry examines how the regulatory environment within which financial institutions operate, the form of governance and the quality of government institutions influence efficiency of financial institutions among emerging economies in Sub-Sahara. Empirical analysis conducted examines effects of variables that are unique to this study; these variables are either constructed or econometrically derived specifically for various interactions verified in the study. For instance, institutional quality variable is an index constructed specifically for this study using principal component analysis approach.

show abstract

Section: Empirical Analysissupporting

confidence: 89%

Section: Literature Reviewmentioning

confidence: 99%

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

Abaidoo

Agyapong²

2022

JFRC

View full text Add to dashboard Cite

show abstract

“…However, inflation, stock exchange listings and revenue diversification were found to have significant negative impacts on cost efficiency. Mohd Noor et al . (2020) studied similar interactions using data from 108 Islamic banks in 26 countries.…”

Section: Related Literaturementioning

confidence: 99%

Inflation uncertainty, macroeconomic instability and the efficiency of financial institutions

Abaidoo

Agyapong

2023

JED

View full text Add to dashboard Cite

PurposeThe study examines the effect of macroeconomic risk, inflation uncertainty and instability associated with key macroeconomic indicators on the efficiency of financial institutions among economies in sub-Saharan Africa (SSA).Design/methodology/approachData for the empirical inquiry were compiled from 35 SSA economies from 1996 to 2019. The empirical estimates were carried out using pooled ordinary least squares (POLS) with Driscoll and Kraay’s (1998) standard errors.FindingsReported empirical estimates show that macroeconomic risk and exchange rate volatility constrain the efficiency of financial institutions. Further results suggest that inflation uncertainty has a significant influence on the efficiency of financial institutions among economies in the subregion. Additionally, reviewed empirical estimates show that institutional quality positively moderates the nexus between inflation uncertainty and financial institution efficiency. At the same time, political instability is found to worsen the adverse effect of macroeconomic risk on the efficiency of financial institutions.Practical implicationsFor policymakers and governments, improved institutional structures are recommended to ensure the operational efficiency of financial institutions, especially during an inflationary period. For decision-makers among financial institutions, the study recommends policies that have the potential to make their institutions less vulnerable to macroeconomic risk and exchange rate fluctuations.Originality/valueThe approach adopted in this study differs significantly from related studies in that the study examines and reviews interactions and relationships not readily found in the reviewed literature.

show abstract

“…Recently, the researcher has also shown interest in empirically testing the association between regulation and other dimensions of the banking industry. For example, association between bank regulation and efficiency (Noor et al [24], Li, [25], Dudchenko et al [26], Chortareas et al [15], Djalilov and Piesse [3], Triki et al [16]), bank regulation and level of completion (Li,[25], Hakenes and Schnabel [27], Degryse and Ongena [28], Agoraki et al [29], Yin [30]), bank regulation and financial stability of banks (Anarfo et al [31], Schnabl and Sonnenberg [32], Fraccaroli et al [33]), and bank regulation and risk-taking behavior (Brandao-Marques et al [34], Bartholdy and Justesen [35] 2021, Louhichi et al [36], Hilscher et al [37]) were a few focus areas which are also being scrutinized in the bank regulation literature. Furthermore, Figure 1 represents the research trend in bank regulation and supervision literature (see Additional Points).…”

Section: Relevant Literature Reviewmentioning

confidence: 99%

Examining the Development of Banking Sector Regulations and Supervision Practices across BRICS and G7 Countries

et al. 2021

View full text Add to dashboard Cite

The study examines the development in the banking regulatory practices across BRICS nations over the period 2000–2019. The convergence and sustainability of the regulatory framework in BRICS nations to G7 norms have also been assessed. The analysis is based on five key regulatory measures, which include activity restrictions, entry requirements for a new bank, foreign bank entry restrictions, capital stringency, and deposit insurer powers. The study constructs the regulatory indexes based on the central bank responses to the Bank Regulation and Supervision Survey (BRSS) conducted by the World Bank. To estimate the indexes, the study follows Barth, Caprio, and Levine guidelines. The result reveals that the regulators of BRICS countries impose higher restrictions on bank activities than in the G7 nations. Furthermore, the United Kingdom and Brazilian bank regulators are more liberal and imposed fewer restrictions on insurance activity only. In addition, getting a bank license is tough in both regions. Regulators allow only fit and proper applicants into the banking domain. Furthermore, the authors find that the requirements for capital are becoming more restricted in BRICS nations between 2003 and 2019 to align with Basel capital accords, relative to G7 nations. The study documents a convergence in the banking licensing requirements, and limitations on foreign bank entry and official supervisory powers in the BRICS countries with the G7 nations. The study suggests that the regulators must offer freedom to banks’ activities with increasing supervision, and it boosts the competition in the banking sector and enhances customer welfare. Furthermore, the policymakers need to redesign the deposit insurance mechanism and equip deposit insurers with more powers to enhance the safety of depositors’ interests and minimize the moral hazards in the banking sector in both regions.

show abstract

The Impact of the Bank Regulation and Supervision on the Efficiency of Islamic Banks

Cited by 10 publications

References 54 publications

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

Institutional quality, macroeconomic uncertainty and efficiency of financial institutions in Sub-Saharan Africa

Inflation uncertainty, macroeconomic instability and the efficiency of financial institutions

Examining the Development of Banking Sector Regulations and Supervision Practices across BRICS and G7 Countries

Contact Info

Product

Resources

About