FDI and heterogeneity in bank efficiency: Evidence from emerging markets

Konara, Palitha; Tan, Yong; Johnes, Jill

doi:10.1016/j.ribaf.2019.02.008

Cited by 26 publications

(11 citation statements)

References 72 publications

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“…Further, a vast majority of the studies reviewed used the equity to assets ratio as a measure of capitalization and ignored the relationship between the profitability of banks and their regulatory capital ratios, i.e., their capital to risk-weighted assets ratio and minimum capital requirements. Some studies, however, did use the capital to risk-weighted assets ratio as a measure of capitalization but in a different context (see for example Belaid et al 2017;Konara et al 2019;Jouida 2018). This study is the first to employ the equity to assets ratio, capital to risk-weighted assets ratio, and minimum capital requirements as measures of capitalization to provide better insight and offer more profound implications.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…This study employs three measure of capitalization: the Capital Ratio (CR), as a measure of total equity to total assets (Haris et al 2019c;Athanasoglou et al 2008;Saona 2016;Tan 2016;; the Capital Adequacy Ratio (CAR), as a measure of regulatory capital to total risk-weighted assets (Belaid et al 2017;Jouida 2018;Konara et al 2019;; and the Minimum Capital Requirement (MCR). The CR has been extensively studied in the vast body of literature, while the CAR and MCR are regulatory concerns 3 based on the BASEL guidelines developed to measure and strengthen the capital position of banks and other financial institutions.…”

Section: Independent Variablesmentioning

confidence: 99%

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A Study on the Impact of Capitalization on the Profitability of Banks in Emerging Markets: A Case of Pakistan

Haris

Tan

Malik³

et al. 2020

JRFM

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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.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Section: Independent Variablesmentioning

confidence: 99%

A Study on the Impact of Capitalization on the Profitability of Banks in Emerging Markets: A Case of Pakistan

Haris

Tan

Malik³

et al. 2020

JRFM

Self Cite

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“…It can be argued that banks with higher levels of profitability will have a higher ability to absorb negative shocks. An example is when banks accumulate a large number of nonperforming loans, the ones with higher levels of profitability would be able to absorb the negative shocks and unexpected losses, and therefore further reduce the level of risk compared to the banks with lower levels of profitability (Konara et al, 2019).…”

Section: Model Specificationmentioning

confidence: 99%

Risk, competition, efficiency and its interrelationships: evidence from the Chinese banking industry

Tan

Charles

Belimam³

et al. 2021

ARA

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PurposeThis study investigates the interrelationships between efficiency, competition and risk in the Chinese banking industry.Design/methodology/approachParametric stochastic frontier analysis is used to estimate bank efficiency; the Lerner index is used as the competition indicator; accounting ratios and a translog function are used to measure different types of risk and finally, the three-stage least square estimator is used to investigate the interrelationships.FindingsThe results of this study show that the impact of competition on different types of risk is significant and positive, while there is a significant and positive impact of credit risk, liquidity risk and capital risk on bank competition. In addition, the findings demonstrate that the interrelationships between efficiency and competition are significant and negative. The authors do not find any robust interrelationships between different types of risk and different types of efficiency; the authors find that diversification and higher levels of profitability reduce bank credit risk. The results suggest that a higher developed banking sector reduces the level of bank competition in China.Originality/valueThis is the first piece of research that comprehensively investigates the interrelationships between different types of risk, competition and different efficiencies in China.

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“…According to Gamariel (2015), foreign bank presence stimulates competition and compels domestic banks to pursue efficiency goals to stay profitable. However, Konara et al (2019) contend that the degree and type of efficiency gains banks enjoy from FDI inflows vary between foreign and domestic banks. Nevertheless, Luo et al (2017) find a positive nexus between foreign bank branch network and bank efficiency, profitability and overall performance among 107 Chinese commercial banks.…”

Section: Literature Reviewmentioning

confidence: 99%

“…3. See Konara et al (2019) for the types of efficiency gains that FDI inflows provide domestic verses foreign banks.…”

Section: Notesmentioning

confidence: 99%

Financial integration and bank profitability in five regional economic communities in Africa

Banyen

Biekpe

2020

IJOEM

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PurposeThis paper examines the effect of both de jure and de facto measures of financial integration on bank profitability in five regional economic communities of Africa.Design/methodology/approachUsing panel data from 405 banks operating in 47 African countries across five regional economic communities over 2007–2014, the study constructs a composite measure of bank profitability. The study then employs the dynamic two-step system GMM estimation technique to test the effect of both de jure and de facto measures of financial integration on bank profitability in Africa and across five sub-regional markets.FindingsOverall, the results support a positive relationship between financial integration and overall bank profitability in Africa, except for the Arab Maghreb Union and Southern Africa Development Community.Practical implicationsThe findings of this study suggest that increased financial integration in Africa directly improves bank’s overall profitability and the variations among the sub-regional markets inform tailored policy initiatives.Originality/valueTo the best of the authors' knowledge, this is the first study on Africa to employ a composite measure of bank profitability to assess its determinants. It is also the first to include both de facto and de jure financial integration measures in a single study. This is also the first largest comparative study on bank profitability in Africa.

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FDI and heterogeneity in bank efficiency: Evidence from emerging markets

Cited by 26 publications

References 72 publications

A Study on the Impact of Capitalization on the Profitability of Banks in Emerging Markets: A Case of Pakistan

A Study on the Impact of Capitalization on the Profitability of Banks in Emerging Markets: A Case of Pakistan

Risk, competition, efficiency and its interrelationships: evidence from the Chinese banking industry

Financial integration and bank profitability in five regional economic communities in Africa

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