Topical Collection "Banking and the Economy"

Editor

Dr. Yong (Aaron) Tan
E-Mail Website
Guest Editor
Department of Accountancy, Finance and Economics, University of Huddersfield, Huddersfield, UK
Interests: empirical banking (bank performance, bank stability and bank competition); small businesses and hospitality management
Special Issues and Collections in MDPI journals

Topical Collection Information

Dear Colleagues

In the financial system, the banking sector plays an important role in channeling the funds from one party with extra money to one with investment opportunities, through which economic efficiency has been improved and economic growth has been achieved. The government and banking regulatory authorities pay great attention to the performance and sustainable development in the banking sector. In academia, researchers have comprehensively investigated the issues around the banking industry in order to generate policies implications to further enhance healthy development in the banking industry.

The first area in the evaluation of issues in the banking sector will be around bank performance, without which banks would not be able to function well as a financial intermediary; this will further have a negative influence on economic activity. Therefore, this Special Issue would be interested in studies investigating various aspects of bank performance, including bank efficiency, bank productivity, as well as bank profitability.

Because of the global financial crisis which happened over the period 2007–2009, in an international context, all the countries around the world have been aware of the importance of bank stability. If we say that performance is related to the good function of commercial banks, stability is more related to the banks functioning well long term. Therefore, the current Special Issue would particularly welcome contributions in the area of investigations into stability in the banking sector. In other words, we shall try to answer the following research questions through potential contributions: 1) What is the situation of stability in a specific banking sector? 2) How can we further improve banking sector stability (what are the factors influencing stability in the banking sector)?

It is well known that the banking sector is a very profitable industry compared to other economic sectors and, as argued previously, the government or the regulatory authorities have been aware of the importance of sustainable development in the banking sector. The stability discussed above is one component of sustainability, while other aspects of sustainability focus more on the banks’ return to the society or the economy. In other words, banks should undertake responsible behavior when engaging in different types of businesses. This Special Issue would like to see empirical studies addressing the issues of corporate social responsibility in the banking sector and what the benefits/costs of undertaking this are.

Finally, due to the importance and the special funds channeling character of the banking sector, empirical research should look into not only the microlevel issues within banks or the banking industry, but more attempts should be made to examine the interactions between the banking industry and other sectors of the economy and the interrelationships between the banking industry and the economy. Therefore, this Special Issue would welcome contributions from empirical studies concerning the issues regarding the relationship between banking with small businesses, the relationship between banking and the real estate sector, and the relationships with other industries. Further, at a macroeconomic level, the Special Issue would like to see investigations in terms of the relationships between banking sector and economic growth, the relationship between banking sector and innovation, and the relationship between banking sector with corruption, among others.

In summary, the Special Issue will be focusing on, but not limited to the following topics:

  1. Investigation of bank performance;
  2. Examination of bank stability;
  3. Evaluation of corporate social responsibility/sustainability in banking;
  4. Assessment of the relationship between the banking industry and other sectors of the economy;
  5. Investigation regarding the relationship between the banking industry and the economy.

The Special Issue welcomes empirical banking studies addressing the above issues, and we will also be very interested in looking at studies using advanced operational research methods to investigate the issues above, in particular in the area of bank efficiency and productivity.

If you have any questions, please do contact me at: [email protected].

Dr. Yong (Aaron) Tan
Guest Editor

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Related Special Issue

Published Papers (13 papers)

2021

Jump to: 2020

Article
The Impact of Brand Equity on Conversion Behavior in the Use of Personal Banking Services: Case Study of Commercial Banks in Vietnam
J. Risk Financial Manag. 2021, 14(8), 346; https://doi.org/10.3390/jrfm14080346 - 28 Jul 2021
Viewed by 142
Abstract
The brand equity of banks plays a crucial role in determining customer behavior of using their services. The study aims to examine the impact of brand equity on conversion behavior in the use of personal banking services at commercial banks in Vietnam. The [...] Read more.
The brand equity of banks plays a crucial role in determining customer behavior of using their services. The study aims to examine the impact of brand equity on conversion behavior in the use of personal banking services at commercial banks in Vietnam. The paper uses quantitative research methods, through linear SEM (Structural Equation Modelling) analysis, with survey data including 554 samples of individual customers of commercial banks. The study’s findings show that the bank’s brand equity has a negative impact on the behavior of individual customers. In the relationship between these two factors, competitive advertising effectiveness and loyalty of customers act as intermediary factors. On that basis, the study makes a number of recommendations to preclude customers leaving and minimize business losses caused by the conversion of customers’ banks. The findings of this study have shown the importance and impact of brand equity on conversion behavior in the use of personal customer services. These are meaningful contributions both theoretically and practically to help banks get a deeper insight into brand equity and the need to pay attention to building and developing sustainable brand equity for the bank, as well as an important basis for further research. Full article
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2020

Jump to: 2021

Article
Bank Characteristics Effect on Capital Structure: Evidence from PMG and CS-ARDL
J. Risk Financial Manag. 2020, 13(12), 310; https://doi.org/10.3390/jrfm13120310 - 04 Dec 2020
Viewed by 689
Abstract
The main aim of this paper was to investigate the impact of bank characteristics on capital structure empirically. The study employed a panel data analysis, Pooled Mean Group (PMG) and Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) estimators were utilized, for the period spans [...] Read more.
The main aim of this paper was to investigate the impact of bank characteristics on capital structure empirically. The study employed a panel data analysis, Pooled Mean Group (PMG) and Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) estimators were utilized, for the period spans between the years 2008 and 2018. Both the borrowing (leverage) ratio and equity ratio used in the analysis cover short-term deposits and long-term deposits as a fundamental determinant variable on the capital structure. The main findings confirm that the deposit ratio has a positive relationship with the size of the bank. In other words, big banks use more foreign sources than small banks to use the tax shield advantage. At the same time, a percentage increase in bank size and liquidity ratio enhance the bank deposit rate by 0.0068% and 0.479%, respectively, in the long-run, while a percentage change in interest income coverage will reduce the bank deposit rate by 0.004% in the long-run. Meanwhile, the significant causal relationship of growth rate with the bank deposit rate could not be established. In addition, the short-run coefficients of the variables reveal that size, interest coverage, and liquidity have a positive and significant causal relationship with bank deposit rate in the short-run. The findings of the study are in line with the results of capital structure theories, especially the hierarchy theory and balancing theory. Full article
Article
Empirical Evidence of a Changing Operating Cost Structure and Its Impact on Banks’ Operating Profit: The Case of Germany
J. Risk Financial Manag. 2020, 13(10), 247; https://doi.org/10.3390/jrfm13100247 - 19 Oct 2020
Cited by 1 | Viewed by 610
Abstract
The financial sector is undergoing extensive changes and challenges that affect the entire market and infrastructure of financial service providers. Technological development leads to increased digitalisation and allows new business models to emerge. With regard to the banking sector, it is evident that [...] Read more.
The financial sector is undergoing extensive changes and challenges that affect the entire market and infrastructure of financial service providers. Technological development leads to increased digitalisation and allows new business models to emerge. With regard to the banking sector, it is evident that this sector is characterized by employees and associated services. However, due to changing conditions, a decline in personnel has been recorded for many years. This raises the question as to what extent—based on contrary assumptions of the principle agency theory and the expense preference hypothesis—personnel changes influence the operational success of banks. On this basis, six hypotheses were formulated and tested. The principal component analysis method was applied to prepare the data. Afterwards, the actual analysis was carried out using a mixed method approach. The results on the basis of the years 2013–2017 showed a negative personnel development, which contributed to the improvement of the operating results of banks. Hereby it becomes evident that the business model design of savings and cooperative banks is of secondary importance. Full article
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Article
Banking Development and Economy in Greece: Evidence from Regional Data
J. Risk Financial Manag. 2020, 13(10), 243; https://doi.org/10.3390/jrfm13100243 - 15 Oct 2020
Cited by 2 | Viewed by 685
Abstract
This article examines the development of Greek systemic banks for the period 2003–2018, using data such as the ATM network and branches at a regional level. We test the impact of the ATM network and branches on the deposits of Greek commercial banks [...] Read more.
This article examines the development of Greek systemic banks for the period 2003–2018, using data such as the ATM network and branches at a regional level. We test the impact of the ATM network and branches on the deposits of Greek commercial banks as well as the impact of local GDP on the regional banking efficiency. The analysis is carried out in two steps, (1) we use the Data Envelopment Analysis (DEA) for efficiency analysis, and (2) we use panel regression models for regression analysis. The results show that branches that operate at small regions are less efficient than those of the larger regions. Furthermore, both the ATMs and the number of branches have a positive relationship with deposits. This means that banks must continue to operate branches and ATMs in Greece. Finally, we show that local GDP helps significantly in increasing regional banking efficiency. The above findings are important given the need to support the local economy with modern banking services in Greece. Full article
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Article
Bottlenecks to Financial Development, Financial Inclusion, and Microfinance: A Case Study of Mauritania
J. Risk Financial Manag. 2020, 13(10), 239; https://doi.org/10.3390/jrfm13100239 - 13 Oct 2020
Cited by 2 | Viewed by 758
Abstract
The objective of the study was to enhance our knowledge on institutional bottlenecks for financial development, financial inclusion, and microfinance, using Mauritania as a case study. We used a mixed-methods’ methodology that combines analysis of secondary data and an expert interview. First, a [...] Read more.
The objective of the study was to enhance our knowledge on institutional bottlenecks for financial development, financial inclusion, and microfinance, using Mauritania as a case study. We used a mixed-methods’ methodology that combines analysis of secondary data and an expert interview. First, a logit model with dummy independent variables was used to investigate the factors that impact the households’ access to credit, the main advantage of this model being to avoid confounding effects by analyzing the association of all variables together. Our study found that access to financial services is equal in Mauritania between men and women, but that access to credit is higher for public sector employees, educated people, and households with smaller families. Second, using principal components’ analysis, we found that the different regions of Mauritania can be divided based on unemployment, income, literacy, financial inclusion, and population density into two main dimensions, yielding four quadrants: Attractive, industrious, moderate, and resource cursed. We expected that sparsely populated countries would have less access to credit. Counterintuitively, we found that within a low-density country, people in the lowest-density regions have higher odds of getting credit. Third, based on an interview with an expert, we noted the key challenges that microfinance is facing in Mauritania and provided recommendations to overcome these. As in most case studies, external validity was limited. Full article
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Article
The Impact of BASEL Accords on the Management of Vietnamese Commercial Banks
J. Risk Financial Manag. 2020, 13(10), 228; https://doi.org/10.3390/jrfm13100228 - 27 Sep 2020
Cited by 1 | Viewed by 747
Abstract
This paper is an attempt to empirically examine the impact of Basel Accord regulatory guidelines on the risk-based capital adequacy regulation and bank risk management of Vietnamese commercial banks. Our research aims to assess how Vietnamese commercial banks manage their capital ratio and [...] Read more.
This paper is an attempt to empirically examine the impact of Basel Accord regulatory guidelines on the risk-based capital adequacy regulation and bank risk management of Vietnamese commercial banks. Our research aims to assess how Vietnamese commercial banks manage their capital ratio and bank risk under the latest Basel Accord capital adequacy ratio requirements. Building on previous studies, this research uses a simultaneous equation modeling (SiEM) with three-stage least squares regression (3SLS) to analyze the endogenous relationship between risk-based capital adequacy standards and bank risk management. A year dummy variable (dy2013) is included in the model to take account of changes in the regulation of the Vietnamese banking system. Furthermore, we add a value-at-risk variable developed by as an independent variable into equations of the empirical models. The results reveal a significant impact of Basel capital adequacy regulatory pressure on the risk-based capital adequacy standards and bank risk management of Vietnamese commercial banks. Moreover, banks under the latest Basel capital adequacy regulations are induced to reduce risks and increase banks’ financial performance. Full article
Article
A Study on the Impact of Capitalization on the Profitability of Banks in Emerging Markets: A Case of Pakistan
J. Risk Financial Manag. 2020, 13(9), 217; https://doi.org/10.3390/jrfm13090217 - 18 Sep 2020
Cited by 1 | Viewed by 886
Abstract
A strong capitalized position of financial institutions is essential to ensure their solvency. Because of their unique nature, banks must always keep an optimum level of capital to ensure smooth banking earnings. Consequently, it is mandatory for all types of banks operating in [...] Read more.
A strong capitalized position of financial institutions is essential to ensure their solvency. Because of their unique nature, banks must always keep an optimum level of capital to ensure smooth banking earnings. Consequently, it is mandatory for all types of banks operating in Pakistan to keep a minimum amount of required capital along with capital adequacy to remain solvent and profitable. Therefore, using three measures of capitalization, i.e., the Capital Ratio (CR), Capital Adequacy Ratio (CAR), and Minimum Capital Requirement (MCR), and four measures of profitability, i.e., Return on Avg. Assets (ROAA), Return on Avg. Equity (ROAE), Net Interest Margin (NIMAR), and Profit Margin (NMAR), this study contributes to the existing literature on the relationship between the capitalization and profitability of 29 Pakistani banks over the period of 2007–2018. The results, based on the Generalized Method of Moments (GMM) system estimator technique, reported an inverted U-shaped relationship between the two capitalization measures, i.e., CR and CAR, and the four profitability measures, i.e., ROAA, ROAE, NIMAR, and NMAR. This indicates that profitability increases with an increase in capitalization up to a certain level, while beyond that level, a further increase in capitalization decreases profitability. The results also indicate that banks who maintain their MCR have higher profitability than those who do not. Full article
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Article
Do Profitable Banks Make a Positive Contribution to the Economy?
J. Risk Financial Manag. 2020, 13(8), 159; https://doi.org/10.3390/jrfm13080159 - 24 Jul 2020
Cited by 3 | Viewed by 863
Abstract
A number of studies have investigated the relationship between financial sector development and economic growth; however, the impact of bank profitability on economic growth is still unclear. We investigate the link between bank profitability and economic growth in the Asia-Pacific region over the [...] Read more.
A number of studies have investigated the relationship between financial sector development and economic growth; however, the impact of bank profitability on economic growth is still unclear. We investigate the link between bank profitability and economic growth in the Asia-Pacific region over the period 2004–2014. Using the system GMM estimator, our findings suggest that a profitable banking sector is a prerequisite for economic growth in the Asia-Pacific region and that the impact of bank profitability on economic growth is more prominent in small banking sectors. Perhaps surprisingly, we found that the bank size has a negative impact on GDP growth, with the influence of bank profitability on economic growth reducing as the size of the banking sector increases. Our results also show that the impact of profitability on economic growth is much larger in developed economies compared to small emerging and large emerging economies. Full article
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Article
The Role of Redenomination Risk in the Price Evolution of Italian Banks’ CDS Spreads
J. Risk Financial Manag. 2020, 13(7), 150; https://doi.org/10.3390/jrfm13070150 - 10 Jul 2020
Viewed by 1079
Abstract
The recent financial crisis offered an interesting opportunity to analyze the markets’ behavior in a high-volatility framework. In this paper, we analyzed the price discovery process of the Italian banks’ Credit Default Swap (CDS) spreads through the Merton model, extended with the inclusion [...] Read more.
The recent financial crisis offered an interesting opportunity to analyze the markets’ behavior in a high-volatility framework. In this paper, we analyzed the price discovery process of the Italian banks’ Credit Default Swap (CDS) spreads through the Merton model, extended with the inclusion of a redenomination risk proxy, as to say, the risk that Italy could leave the eurozone. This paper contributes to the literature by integrating the classic Merton model with a political-sensitive market variable able to explain the greatest variance in the Italian banks’ CDS spreads during the most relevant and commonly recognized periods of socio-political and financial distress. Results show that the redenomination risk is progressively becoming the main driver of the process during crises, in particular for the sovereign debt crisis and in 2018. Full article
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Article
Life after Debt: The Effects of Overleveraging on Conventional and Islamic Banks
J. Risk Financial Manag. 2020, 13(6), 137; https://doi.org/10.3390/jrfm13060137 - 24 Jun 2020
Viewed by 626
Abstract
It is generally argued that Islamic banks are safer than conventional banks. The prime reason is that their product structure is essentially asset-backed financing, while conventional banks rely heavily on leveraging, which was considered one of the main causes of the 2008 global [...] Read more.
It is generally argued that Islamic banks are safer than conventional banks. The prime reason is that their product structure is essentially asset-backed financing, while conventional banks rely heavily on leveraging, which was considered one of the main causes of the 2008 global financial crisis. This paper examines the riskiness of Islamic and conventional banks during the 2008 global crisis by measuring overleveraging, defined as the difference between actual and optimal debt. This research conducted empirical analysis on the overleveraging of 20 banks (10 conventional and 10 Islamic banks) from five different countries, namely, Bahrain, Kuwait, Malaysia, the United States, and the United Kingdom. The analysis is double-folded: on the one hand, the results in this paper suggest that excess debt, rather than the mere holding of debt, was the reason behind the severe financial meltdown in 2007–2009; on the other hand, this paper shows that Islamic banks, in most of the countries in context, performed better during the recent crisis, but were subject to the second-round effect of the global crisis around the years of 2011–2013. Full article
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Review
Regulatory Restrictions on US Bank Funding Sources: A Review of the Treatment of Brokered Deposits
J. Risk Financial Manag. 2020, 13(6), 130; https://doi.org/10.3390/jrfm13060130 - 18 Jun 2020
Cited by 1 | Viewed by 655
Abstract
This paper is the first paper to provide a comprehensive review of the US regulatory treatment of a relatively recent and controversial source of funds, namely brokered deposits. To do this, we consider the extent to which banks rely on brokered deposits, as [...] Read more.
This paper is the first paper to provide a comprehensive review of the US regulatory treatment of a relatively recent and controversial source of funds, namely brokered deposits. To do this, we consider the extent to which banks rely on brokered deposits, as well as the impact of these funds on bank performance, bank failures, and bank failure costs. We also consider the changes taking place in technologies and how they continue to affect the way banks obtain funds and provide services to their customers. Our conclusion is that, without sufficient evidence to the contrary, such deposits should be treated no differently from all other deposits and other purchased funds. Full article
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Article
Microfinance Participation in Thailand
J. Risk Financial Manag. 2020, 13(6), 122; https://doi.org/10.3390/jrfm13060122 - 11 Jun 2020
Viewed by 765
Abstract
Income inequality is a major problem in Thailand. A key determinant of income inequality in Thailand is the lack of financial access to financial institutions for low-income families. Microfinance institutions (MFIs) play an important role in enabling poor households to access financial resources [...] Read more.
Income inequality is a major problem in Thailand. A key determinant of income inequality in Thailand is the lack of financial access to financial institutions for low-income families. Microfinance institutions (MFIs) play an important role in enabling poor households to access financial resources at a reasonable cost. The purpose of this paper is to investigate factors that affect Thai households participating in microfinance programs in Thailand. A multinomial logit model is used to investigate the factors that impact the Thai households’ access to microfinance. The study employs secondary data from the Thai Socioeconomic Survey (cross-sectional data in 2017) to identify factors affecting Thai household participation in microfinance programs. The results show that the Village Fund (VF) targets low-income rural households and encourages those with older household heads who have lower levels of education, and female household heads, to participate in their program. Larger households are more likely to access the VF. Households with higher dependency ratios are less likely to borrow from the VF. Households with well-educated, young household heads in regional areas are more likely to borrow money from Saving Groups for Production (SGPs). SGP borrower households have higher household incomes than VF borrower households. Our findings indicate that VFs and SGPs are credit sources in the rural credit market; these sources enable rural households to access credit to meet their needs. In addition, rural Thai households borrow from many sources so that they can rotate their loan repayments. Low-income households refinance their loans by borrowing from different sources. Full article
Article
Relative Efficiency of Canadian Banks: A Three-Stage Network Bootstrap DEA
J. Risk Financial Manag. 2020, 13(4), 68; https://doi.org/10.3390/jrfm13040068 - 10 Apr 2020
Cited by 1 | Viewed by 845
Abstract
In this study, we focus on how banks can enhance their efficiency in the utilization of resources to ensure their economic sustainability. We propose a novel three-stage (production, investment, and revenue generation) network Data Envelopment Analysis (DEA) with bootstrapping to evaluate the performance [...] Read more.
In this study, we focus on how banks can enhance their efficiency in the utilization of resources to ensure their economic sustainability. We propose a novel three-stage (production, investment, and revenue generation) network Data Envelopment Analysis (DEA) with bootstrapping to evaluate the performance of the six big Canadian banks for the period 2000–2017, amid the 2007 financial crisis and the increasing competition level due to new technologies. We identify the best practices in each stage that can be used as benchmarks by other banks to improve their economic sustainability. Our results indicate that the 2007 financial crisis resulted in lower efficiencies in the performance of Canadian banks. This decline was not substantial for the production and investment stages when the revenue generation stage received the greatest hit. In addition, we observed that the individual banks did not have consistent performance in the different stages. Finally, we compared our model with the black box DEA model and concluded that the network DEA provides more insightful and accurate results in terms of banks’ efficiencies. Full article
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