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Int. J. Financial Stud. 2017, 5(4), 32; doi:10.3390/ijfs5040032

Impact of Cost Efficiency on Bank Capital and the Cost of Financial Intermediation: Evidence from BRICS Countries

1
School of Management, Huazhong University of Science and Technology, Wuhan 430074, China
2
Department of Accounting & Information Systems, Comilla University, Comilla 3506, Bangladesh
3
International School, East China Jiao Tong University, Nanchang 330013, China
*
Author to whom correspondence should be addressed.
Academic Editor: Nicholas Apergis
Received: 5 July 2017 / Revised: 9 November 2017 / Accepted: 24 November 2017 / Published: 1 December 2017
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Abstract

Over last two decades, emerging and developing nations have desperately endeavored for efficient banking sectors. In this study, we argue that bank efficiency generates incentives that can impact banks’ capital holdings and the cost of financial intermediation. Analyzing a panel dataset of 1190 banks from BRICS (Brazil, Russia, India, China, South Africa) countries over the period 2007–2015, we find robust evidence that more efficient banks hold higher capital and charge lower financial intermediation costs. In an extended sample over the period 2000–2015, we observe that cost efficiency had a marginal positive impact on bank capital during the global financial crisis of 2007–2009. We also observe that on average, banks increased the cost of financial intermediation during the crisis, however, greater efficiency helped banks to not charge higher intermediation costs. Our results imply the beneficial impact of bank efficiency for bank stability and real economy. View Full-Text
Keywords: bank efficiency; the cost of financial intermediation; bank capital; financial crisis; emerging markets bank efficiency; the cost of financial intermediation; bank capital; financial crisis; emerging markets
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MDPI and ACS Style

Rahman, M.M.; Ashraf, B.N.; Zheng, C.; Begum, M. Impact of Cost Efficiency on Bank Capital and the Cost of Financial Intermediation: Evidence from BRICS Countries. Int. J. Financial Stud. 2017, 5, 32.

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