Financial Reforms and Financial Fragility:  A Panel Data Analysis

Iftikhar, Syed Faizan

doi:10.3390/ijfs3020084

Cited by 17 publications

(17 citation statements)

References 34 publications

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“…The average of the log of total assets is 5.78 million USD which is lower than the international average of about 6.14 million USD, the variable ranging from -3.72 to 12.21 million USD. The growth of gross loans is 34.97% which is much higher than the global average 18.72% calculated by Iftikhar (2015). This indicates the higher pace of accumulation of doubtful loans in Africa increasing the likelihood of bank fragility happening.…”

Section: Descriptive Statisticsmentioning

confidence: 79%

“…reported in Iftikhar (2015). This points to the need to pay careful attention to the accumulation of bad debts in African banks.…”

Section: Descriptive Statisticsmentioning

confidence: 99%

“…Using a global database of banks, Iftikhar (2015) has made an important study of bank fragility by examining a range of determining factors such as bank level characteristics, macroeconomic environment, financial reform and bank regulatory or supervision indicators. The study found the significant role that bank specific, macro and financial reform variables play in NPLs.…”

Section: Related Literaturementioning

confidence: 99%

See 2 more Smart Citations

Bank fragility in Africa: GMM dynamic panel data evidence

Kedir

Iftikhar

Murinde

et al. 2018

Transnational Corporations Review

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This study investigates the impact of bank-level and macroeconomic variables on bank fragility using a dynamic two-step GMM panel estimator on 433 banks in 46 African countries over the period 1997-2012. The study finds that both bank characteristics and macroeconomic variables are key drivers of bank fragility. The past experience of higher levels of non-performing loans (NPLs) significantly and positively determines current levels of NPLs. The growth of gross loan is negative and significant but economic growth leads to higher NPLs. The equity to assets ratio and the log of assets of banks are negatively associated with NPLs suggesting their potential to provide buffers to banks. Equally, total assets reduce bank fragility. These findings have important policy implications. The study shows that credit risk management initiatives, bank operation oversight and regulations should not be restricted in the times of financial crises, even during positive economic growth episodes in the business cycle.

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Section: Descriptive Statisticsmentioning

confidence: 79%

“…reported in Iftikhar (2015). This points to the need to pay careful attention to the accumulation of bad debts in African banks.…”

Section: Descriptive Statisticsmentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

See 1 more Smart Citation

Bank fragility in Africa: GMM dynamic panel data evidence

Kedir

Iftikhar

Murinde

et al. 2018

Transnational Corporations Review

View full text Add to dashboard Cite

show abstract

“…Ayrıca çalışmada finansal kırılganlığın yüksek düzeyde olduğu bankacılık sistemlerinde bu dalgalanmaların ve kırılganlığın olası krizlerin yaşanma ihtimalini artırdığı ortaya çıkarılmıştır. Iftikhar (2015), finansal reformlar, finansal liberalizasyon ve bankacılık düzenlemesinin kalitesi ile mali kırılganlık denetimi arasındaki ilişki araştırmıştır. Çalışmada, bankacılık sektörünün finansal açıdan kırılganlığı, yalnızca bankaya özgü ve makro-spesifik değişkenler tarafından değil, aynı zamanda finansal liberalizasyon ve bankacılık düzenlemeleri ve denetim politikaları ile de ilgili olduğu ortaya çıkarılmıştır.…”

Section: Finansal Kırılganlığa İlişkin Literatürunclassified

Bankalarda Finansal Kırılganlığı Etkileyen Faktörlerin Panel Veri Analizi ile Belirlenmesi

Topaloğlu

2018

Eskişehir Osmangazi Üniversitesi İktisadi Ve İdari Bilimler Dergisi

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In the study, it is aimed to determine the micro factors that affect the financial fragility of the commercial banks which are continuously operating in the Turkish banking sector during 2002-2015 period. Financial fragility is represented by the non performing loan ratio and capital adequacy ratio while the micro factors are represented by return on assets, return on equity, liquid ratio, bank size, financial leverage and net interest margin. Two different models were composed to determine the factors affecting financial fragility. These models were analyzed by panel data method. At the end of the analysis, In model 1, A statistically significant and negative relationship was observed between bank size and non performing loan ratio while a statistically significant and positive relationship was observed between liquid ratio and non performing loan ratio. In model 2, A statistically significant and positive relationship was observed between capital adequacy ratio and net interest margin and return on assets while a statistically significant and negative relationship was observed between capital adequacy ratio and financial leverage and return on equity.

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“…Berger and Bouwman (2013) demonstrate that public outcries for more bank capital tend to be greater after financial crises, and post-crisis reform proposals tend to focus on how capital regulation should adapt to prevent future crises. 3 Iftikhar (2015) finds empirical evidence that financial reforms and financial liberalization significantly enhance the likelihood of financial fragility, while strong banking regulations and supervision have an inverse relationship with financial fragility. Plantin (2015) further studies the optimal capital regulation of banks in the presence of a shadow banking sector.…”

Section: Introductionmentioning

confidence: 99%

Bank Interest Margin, Multiple Shadow Banking Activities, and Capital Regulation

Lin

Chen

Huang

2018

IJFS

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Abstract:In this paper, we develop a contingent claim model to evaluate a bank's equity and liabilities that integrates the premature default risk conditions with loan rate-setting behavioral mode and multiple shadow banking activities under capital regulation. The barrier options theory of corporate security valuation is applied to the contingent claims of a bank. The barrier reports that default can occur at any time before the maturity date. We focus on a type of earning-asset portfolio, consisting of balance-sheet banking activities of loans and liquid assets and shadow banking activities of wealth management products (WMPs) and entrusted loans (ELs). The optimal bank interest margin, i.e., the spread between the loan rate and the deposit rate, is derived and analyzed. The results provide an alternative explanation for the decline in bank interest margins, which better fits the narrative evidence on bank spread behavior under capital regulation in particular during a financial crisis. Raising either WMPs or ELs leads to a transfer of wealth from equity holders to the debt holders, and hence increases the deposit insurance liabilities. We also show that the multiple shadow banking activities of WMPs and ELs captured by scope equities may produce superior return performance for the bank. Tightened capital requirements may reinforce the superior return performance by a surge in shadow banking activities that makes the bank less prudent and more prone to risk-taking at a reduced margin, thereby adversely affecting banking stability. We demonstrate that financial disturbance may be created because of the potential for shadow banking activities to spill over to regular banking activities and damage the real economy.

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Financial Reforms and Financial Fragility: A Panel Data Analysis

Cited by 17 publications

References 34 publications

Bank fragility in Africa: GMM dynamic panel data evidence

Bank fragility in Africa: GMM dynamic panel data evidence

Bankalarda Finansal Kırılganlığı Etkileyen Faktörlerin Panel Veri Analizi ile Belirlenmesi

Bank Interest Margin, Multiple Shadow Banking Activities, and Capital Regulation

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