Determinants of the Cost of Financial Intermediation: Evidence from Emerging Economies

Round 1

Reviewer 1 Report

Previous studies are more focused on cost effeciency. Your paper  is focused on profit efficiency which is good. 

Literature review must include the intermediation approach (Sealey and Lindley, 1977).

Author Response

Dear respected reviewer, we appreciate your valuable comments and suggestions. Your insightful comments and suggestions helped us to improve our study. Based on your comments and suggestions, we made changes and presented their point by point as follows.

Query: The literature review must include the intermediation approach (Sealey and Lindley, 1977).

Answer: Thanks for your suggestion.

We have made citation of your suggested paper; please find in the Literature review:

Similarly, Sealey Jr and Lindley (1977) present the bank dealer through a production function, where deposit and lending represent the inputs and outputs of financial institutions.

Sealey Jr, C. W., & Lindley, J. T. (1977). Inputs, outputs, and a theory of production and cost at depository financial institutions. The journal of finance, 32(4), 1251-1266.

Author Response File: Author Response.docx

Reviewer 2 Report

1. The introduction section is very long. Much of the discussion can be transferred to the literature review section which is missing in the current version. Focus more on the research problem and highlight original contributions in the introduction.

2. Authors have used an adequate amount of proxies and applied rigorous empirical techniques to study the research question. I suggest authors include citations to indicate past studies that have used similar proxies in past studies. Please do this for all variables.  

3. Please include more robust proxies for the cost of financial intermediation.

4. Compare your study findings with past findings. 

Author Response

Please see the attachment

Author Response File: Author Response.docx

Reviewer 3 Report

The paper is very interesting; the idea seems simple, but the econometric models proposed takes into account some relevant variables.

 A few observations:

1) In the introduction (rows 31-36), formulations and ideas appear that may suggest that, at times, the authors make a kind of marketing to promote banking and banks - a research paper would involve a more pronounced neutrality in relation to the object researched; for example, the authors are sure that "the banking industry ensures the growth ...". I think that it would be better to write ”the banking industry contributes to growth ...”;

 2) The title is about the costs of the financial intermediation and the first variable proposed for analysis is the NIM: the title could be adapted to take into consideration that.

 3) The rows 50-51: The ideas in the sentence ” There are fewer chances of regulatory arbitrage by financial innovation in underdeveloped capital markets and, therefore, are weak, causing a larger portion of firms and individuals to depend on banks to solve their external financing needs”  can be interesting, but it would be useful to be based on a relevant reference.

 4) The introduction has, at times, allure of literature review.

 5) The presentation of the references seems to be slightly disturbed: for example, Line 81: Saunders'sHo and Saunders (1981) or Line 130 Huizinga'sHuizinga'sAsh Demirgüç-Kunt and Huizinga (1999)

 6) Neither in the introduction nor in the data section, do not explicitly appear the criteria according to which the countries whose banks are included in the analysis are chosen

 7) Another methodological issue: it does not appear explicitly that the data collected for banks are from the individual or consolidated financial statements;

 8) Would it be interesting to take into account the belonging of banks to a group with the parent company outside the analyzed countries? The results of the models may also be influenced by this aspect, because belonging to a group can significantly influence the intra-group transfers, the level of interest and of some costs (transfer pricing).

 7) At the enumeration of the BRICS countries, 5 countries appear, but – on the Line 704 -  the authors say ”BRICS (Brazil, Russia, India, China and South Africa) has the top 10 emerging...

Author Response

Please see the attachment. 

Author Response File: Author Response.docx