Financial Innovation, Risk Management, and Bank Performance

Abstract

Several researches conducted from the angle of corporate governance reveals that the majority of the work that examines the direct association between financial innovation and bank performance has displayed mixed results and has ignored the indirect relationship between these two variables through the risk management of incurred by the bank. In this context, the purpose of this study is to investigate whether or not there is a mediating effect of risk management on the relationship between financial innovation and bank performance. Data collected from annual activity reports of banks listed on the Tunis Stock Exchange is analyzed, and used to validate the theoretical and empirical contributions of our article. The empirical study uses the Panel data extracted from 10 banks, over the period ranging from 2009 to 2017, and the Baron and Kenny (1986) mediation approach has been estimated, using specifications of random effects. Our empirical analysis substantiates that financial innovation has a positive direct effect on stock market performance, and a non-significative impact on financial profitability. Additionally, our results show that improving the stock market performance of banks by financial innovation depends on the mediator role of the operational risk management. To remain improving performance, Tunisian banks must pay more attention on special training of bank managers whose function relate to the choice of financial innovations and manage the associated risks.

Operational Risk Management and Customer Complaints in Omani Banks

“…Risk analysis: It is also considered one of the independent factors associated with managing operational risks, and the results showed a positive significance with customer complaints (P<0.459, t = 0.741). Whereas there was a correlation of the previous study by Zouari, and Abdelmalek, (2020) a positive relationship between the independent and dependent variable in terms of managing operational risks and customer complaints, as well as the continuous improvement of banks based on the operational role in risk management and analysis. This means that when operational risks are analyzed and detected, customers' complaints will be reduced.…”

“…Even if the overall performance improves, the requirements for disclosure or reporting on the actual situation of stakeholders in the bank must be complied with. Zouari, and Abdelmalek, (2020) studied the operational situation for risk management between monetary innovation and the general performance of banks in Tunisia the results showed that the continuous improvement of the market for Bursa Banks through economic innovation depends on the operational position in managing risks. Rahim et al, (2019) verified the link between operational risk management and customer complaints in Malaysia.…”

“…Therefore, risk identification has little effect on banks' performance. Zouari et al (2020) were identified that the continuous improvement of the bank's stock market through financial innovation depends on the operational role in risk management. Saiful et al (2019) were also found that operational risk management has a positive impact on banks' performance.…”

Co-Evolutionary Dynamics of Financial Inclusion of Generation Z in a Sub-Saharan Digital Financial Ecosystem

“…The emergent behaviour of Zanaco in the wake of disruptive financial technologies represents financial innovation towards financial inclusion of the unbanked demographic segments of society. Financial innovation is a process, carried out by any institution, involving the creation, promotion and adoption of new including both incremental and radical products, platforms and processes (Zouari & Abdelmalek, 2020). Sadrul Huda, Kabir, Popy and Saha (2020) discuss financial innovation in the context of Bangladesh, and argue that financial innovation is critical to the development of the financial system in modern society.…”

Risk Profiling of Secondary Equity Investors From the Chennai City of India Based on the Big Five Personality Model

“…Performance depends not only on financial innovations but is mediated by the process of risk management (Zouari & Abdelmalek, 2020). Personality is instrumental in driving individuals towards risk taking (Kogan & Wallach, 1964).…”