Financial crises, bank efficiency and survival: Theory, literature and emerging market evidence

Isik, Ihsan; Uygur, Ozge

doi:10.1016/j.iref.2021.07.016

Cited by 19 publications

(8 citation statements)

References 65 publications

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“…Analysis of bank efficiency has often been carried out. This study has similarities with studies analyzed by Wahab et al (2014); Le et al (2019); Isik & Uygur (2021);and Hadad et al (2012) because they analyzed bank efficiency. However, this study differs from previous studies because it will analyze bank efficiency by adding one input variable related to Sustainable Development Goals (SDGs).…”

Section: Introductionmentioning

confidence: 56%

“…Research conducted in emerging markets analyzes bank efficiency, including when a crisis occurs (Isik & Uygur, 2021). Before a crisis occurs, bank efficiency tends to decrease, then reaches its lowest point during a crisis and gradually increases after the crisis (Isik & Uygur, 2021). Hadad et al (2012) analyzed bank efficiency using DEA with an intermediation approach.…”

Section: Introductionmentioning

confidence: 99%

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Efficiency Analysis of Five Conventional Commercial Banks in Indonesia by Examining the Principles of Sustainable Finance

Permadani¹,

Rahayu²,

Putro³

2022

IJEBMR

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This research analyzes the efficiency of conventional commercial banks in Indonesia by examining the principles of sustainable finance. This research only examines 5 banks in Indonesia during 2019-2021 due to the availability of data obtained from the sustainability report. The efficiency scores in 2019-2021 will be calculated using the DEA method with an output-oriented Bankers-Charnes-Cooper (BCC) assumption or Variable Return to Scale (VRS) assumption and an intermediation approach. Third-party funds, other operating expenses, and energy efficiency are input variables used in this research. Credit and securities are the output variables. In general, the results of this research conclude that several banks in Indonesia have a DEA efficiency score equal to 1 or have worked efficiently and the bank that always works efficiently during 2019-2021 is BCA. The practical implications to improve bank efficiency for banks that are not yet efficient are to maximize the distribution of funds through credit and securities, then these banks also need to take advantage of technological advances.

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Section: Introductionmentioning

confidence: 56%

Section: Introductionmentioning

confidence: 99%

Efficiency Analysis of Five Conventional Commercial Banks in Indonesia by Examining the Principles of Sustainable Finance

Permadani¹,

Rahayu²,

Putro³

2022

IJEBMR

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“…In bank efficiency analyses, it has also been popular to use financial ratios, examples being Isik and Uygur ( 2021 ) and Mohtashami and Ghiasvand ( 2020 ). Premachandra et al ( 2009 ) gave a tip as to how best to choose financial ratios as inputs or outputs of DEA, so that the larger ratio value which could lead to bankruptcy be used as an input, or vice versa (if the model is in the Best Practice format).…”

Section: Data and Variable Selectionmentioning

confidence: 99%

Bank efficiency and failure prediction: a nonparametric and dynamic model based on data envelopment analysis

Chen

Tang

2022

Ann Oper Res

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For decades, the prediction of bank failure has been a popular topic in credit risk and banking studies. Statistical and machine learning methods have been working well in predicting the probability of bankruptcy for different time horizons prior to the failure. In recent years, bank efficiency has attracted much interest from academic circles, where low productivity or efficiency in banks has been regarded as a potential reason for failure. It is generally believed that low efficiency implies low-quality management of the organisation, which may lead to bad performance in the competitive financial markets. Previous papers linking efficiency measures calculated by Data Envelopment Analysis (DEA) to bank failure prediction have been limited to cross sectional analyses. A dynamic analysis with the updated samples is therefore recommended for bankruptcy prediction. This paper proposes a nonparametric method, Malmquist DEA with Worst Practice Frontier, to dynamically assess the bankruptcy risk of banks over multiple periods. A total sample of 4426 US banks over a period of 15 years (2002–2016), covering the subprime financial crisis, is used to empirically test the model. A static model is used as the benchmark, and we introduce more extensions for comparisons of predictive performance. Results of the comparisons and robustness tests show that Malmquist DEA is a useful tool not only for estimating productivity growth but also to give early warnings of the potential collapse of banks. The extended DEA models with various reference sets and orientations also show strong predictive power.

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“…In general, Covid-19 has altered banking behavior preferences in minimizing the demand for bank loans, since banks will be more cautious of defaults or poor loans, which can exacerbate situations in difficult times. Many researchers compare Islamic and conventional banks using a range of bank performance criteria, drawn by their fast growth even during the recent global financial crisis (Farandy et al, 2017;Isik & Uygur, 2021;Loong et al, 2017). Although the comparison is between Islamic banks, conventional banks are also measured against one another.…”

Section: Literature Reviewmentioning

confidence: 99%

The impact of Covid-19 on the banking industry efficiency: Comparison between Indonesia and Malaysian banks

Riani¹,

Ikhwan

2022

Asian. J. Islam. Manag.

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Purpose − This study aims to measure and compare the efficiency of Islamic and conventional banks in Indonesia and Malaysia, from 2015 to 2020.Methodology − Data Envelopment Analysis (DEA) was employed as a research method for measuring efficiency. The DEA results are also used to identify input or output variables that must be improved if the Decision-Making Unit (DMU) needs to improve efficiency in form of potential improvement.Findings − This study shows that Covid-19 had an impact on decreasing the efficiency level of Indonesian and Malaysian Banks. This study also shows that Indonesian Banks are relatively efficient compared to Malaysian Banks. Nevertheless, Islamic bank is more affected by Covid-19 compared to conventional. In addition, the most important variable performance to be improved by banks during the Covid-19 pandemic is total financing.Implication − It can be used as a guideline for both nations to improve their shortcomings in each type of bank and to strengthen the banking system during economic downturns in order to speed up the recovery process.Originality − This is the initial study to examine the banking efficiency of Indonesia and Malaysia during the covid pandemic-induced economic crisis. As a result, it is expected to capture the impact of the covid-19 epidemic on banking efficiency.

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Financial crises, bank efficiency and survival: Theory, literature and emerging market evidence

Cited by 19 publications

References 65 publications

Efficiency Analysis of Five Conventional Commercial Banks in Indonesia by Examining the Principles of Sustainable Finance

Efficiency Analysis of Five Conventional Commercial Banks in Indonesia by Examining the Principles of Sustainable Finance

Bank efficiency and failure prediction: a nonparametric and dynamic model based on data envelopment analysis

The impact of Covid-19 on the banking industry efficiency: Comparison between Indonesia and Malaysian banks

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