Activity Strategies, Agency Problems, and Bank Risk

Tran, Dung Viet; Hassan, M. Kabir; Girerd‐Potin, Isabelle; Louvet, Pascal

doi:10.1111/jfir.12216

Cited by 14 publications

(4 citation statements)

References 86 publications

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“…SIZE has a positive and significant effect on 5 percent of bank stability. This finding is in line with the research conducted by Abuzayed et al (2018); Ayadi, Ayadi, and Trabelsi (2019); Tran, Hassan, Girerd-Potin, and Louvet (2020), which argued that an increase in the size of the bank would increase the stability of the bank as an effect of increasing the banking system to be more effective and efficient.…”

Section: Discussionsupporting

confidence: 89%

“…However, in the banking sector, diversification effects can cause agency problems as a result of the emergence of diversification costs (Wu et al, 2020). In various previous studies, many researchers found that the implementation of the income diversification strategy in banking resulted in a decrease in the stability (Abuzayed et al, 2018;Lee et al, 2020;Tran et al, 2020) as a result of the bank's inability to mitigate risk. Cost inefficiency and disruption become the bank's main focus as a financial intermediary institution, so they affect the bank's overall performance.…”

Section: Conclusion Limitations and Suggestionsmentioning

confidence: 99%

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Income Diversification Strategy on Bank Stability:International Banks Evidence

Octavianus,

Fachrudin

2022

J. Keuang. dan Perbank.

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This study aims to analyze the implementation of the income diversification strategy on bank stability carried out by international banks. This study uses panel data from 32 international banking companies from 2010-2019 with a total of 320 firm years of observation. The generalized method of moments is used as a statistical analysis tool for panel data. The study results show that the implementation of the income diversification strategy carried out by international banks was convincingly able to increase bank stability. This indicates that international banks were able to perform cost diversification efficiency to achieve better stability. Furthermore, the use of high leverage could reduce bank stability. This study shows robust results in the measurement of income diversification using either the Herfindahl Hirschman Index (HHI) or the ratio of non-interest income to total income. This is a premier formal assessment of the nexus between income diversification strategies and risk management among the largest commercial banks in the world context. This research is expected to be useful for banking management, regulators, and investors in the banking sector.

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Section: Discussionsupporting

confidence: 89%

Section: Conclusion Limitations and Suggestionsmentioning

confidence: 99%

Income Diversification Strategy on Bank Stability:International Banks Evidence

Octavianus,

Fachrudin

2022

J. Keuang. dan Perbank.

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“…The bank's maximization problem is to optimize the choice variables L , r l , i and r d in Equation (3) in order to maximize Π in each time period, given an RRF‐computed ∑ ( D ). The profit function above is a simplification of the profit‐generating activities (beyond traditional intermediation) of banks, which in the recent years include many non‐interest activities (Tran et al, 2020). However, this simplification is necessary to allow the model to focus on how different lending practices affect bank stability.…”

Section: Methodsmentioning

confidence: 99%

The perfect bail‐in: Financing without banks using peer‐to‐peer lending

2023

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We explore the potential outcomes for financial stability when using peer‐to‐peer lenders to finance economic activity. Combining Random Regression Forests, a machine‐learning process, with an agent‐based model, we perform simulations on artificial economies with various degrees of adoption of peer‐to‐peer lending. We find that as peer‐to‐peer lenders proliferate, there is increased financial instability, lower GDP and higher unemployment. On the other hand, peer‐to‐peer lending increases the total volume of loans given out but demonstrates a preference towards consumer loans (over corporate loans), which has a negative effect in the long run. Finally, introducing peer‐to‐peer lenders increases the access of the unbanked to services which conventional banking is not able to offer within the extant regulatory framework. Our results can help policymakers as they address the issue of regulation in the peer‐to‐peer finance industry.

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“…In this paper, we used the Z-score as a proxy for bank stability; this measure has been widely used in various previous studies, for example, Abdelbadie and Salama (2019), Tran et al (2020); Marie et al (2021), etc. The Z-score was first proposed by Professor Edward I. Altman of the Leonard N. Stern School of Business of New York University to study various enterprises in the US.…”

Section: Variablesmentioning

confidence: 99%

Corporate Governance and Financial Stability: The Case of Commercial Banks in Vietnam

Nguyen

Nguyen²,

Le³

et al. 2022

JRFM

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Bank stability is a goal that bank managers aim for in addition to the goal of maximizing shareholder value. To achieve this goal, commercial banks have applied various solutions, including corporate governance because corporate governance plays an important role in the business activities of an enterprise in general as well as in that of a commercial bank in particular. The purpose of this paper is to investigate the impact of corporate governance on the stabilities of Vietnamese commercial banks in the period from 2009 to 2020. Using hand-collected data from 25 commercial banks in Vietnam, by system GMM estimation and the Bayesian Mixed-Effects approach, the paper identifies the characteristics of corporate governance affecting bank stability. Board size, women board members, and board members’ education have a positive impact, and dependent board and foreign board members have a negative impact on bank stability. Our findings show important evidence for an emerging country, such as Vietnam. From the empirical results, the authors suggest several recommendations to maintain and enhance bank stability in the future time.

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Activity Strategies, Agency Problems, and Bank Risk

Cited by 14 publications

References 86 publications

Income Diversification Strategy on Bank Stability:International Banks Evidence

Income Diversification Strategy on Bank Stability:International Banks Evidence

The perfect bail‐in: Financing without banks using peer‐to‐peer lending

Corporate Governance and Financial Stability: The Case of Commercial Banks in Vietnam

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