Market structure, institutional quality and bank capital ratios: evidence from developing countries

Etudaiye-Muhtar, Oyebola Fatima; Abdul-Baki, Zayyad

doi:10.1108/ejmbe-09-2019-0158

Cited by 13 publications

(12 citation statements)

References 56 publications

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“…Although numerous investigations were conducted to determine the effect of institutional quality on the economic and financial development of a country, the impact of institutional quality on banking stability is under-researched (Canh et al , 2021; Uddin et al , 2020). Furthermore, Chan et al (2015) and Etudaiye-Muhtar and Abdul-Baki (2020) suggest that market structure and institutional quality may jointly affect the banking system in developing countries. Therefore, this study examines the market structure and institutional quality's joint effect on bank stability.…”

Section: Introductionmentioning

confidence: 99%

Market structure, institutional quality and bank stability: evidence from emerging and developing countries

Son

Nguyen

2022

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Purpose The purpose of this study is to carry out an empirical investigation about how the level of market concentration or competitiveness of the banking system and institutional quality are associated with bank’s financial stability. Design/methodology/approach This study uses dynamic panel data techniques on the sample of 133 developing and emerging countries over the years 2002–2020. Findings The authors document several significant findings. First, there is evidence that bank stability is positively associated with the level of market concentration. The result is in line with the concentration–stability view that banks operating in a more concentrated market tend to be more stable than those in a less concentrated market. Second, the results confirm that the quality of the institutional environment plays a critical role in improving the stability of banks in developing and emerging countries. Third, the authors find that institutional development can moderate the effect of market concentration (or competitiveness of the banking system) on bank stability. Specifically, the results show that better institutional quality enhances the positive influence of bank concentration on the bank’s financial stability in developing and emerging countries. These results are robust to different specifications with the alternative measures of bank stability and market concentration. Originality/value This study provides further understanding regarding the effects of the level of market concentration or competitiveness of the banking system and institutional quality on bank stability in 133 developing and emerging countries over the years 2002–2020.

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Section: Introductionmentioning

confidence: 99%

Market structure, institutional quality and bank stability: evidence from emerging and developing countries

Son

Nguyen

2022

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“…In most studies on capital structure in the banking sector, researchers find that the level of profitability has a negative effect on the capital structure (Al-Hunnayan, 2020;Ghosh & Chatterjee, 2018;Guizani & Ajmi, 2021;Kahya et al, 2020;Khan et al, 2020). However, several studies have found that the profitability of banking companies has a positive and significant effect on their debt structure (Etudaiye-Muhtar& Abdul-Baki, 2020). The results of this study indicate that international banks are more careful in maintaining their debt ratios, as debt to banks is a 'commodity' that is used to earn profits.…”

Section: Hypothesis Testing and Discussionmentioning

confidence: 66%

“…For example, from the trade-off theory point of view, the company's profitability has a positive effect on the company's debt structure due to increased tax benefits. In other words, the more increasing the company's profitability, the more likely the company is in debt (El-Sayed Ebaid, 2009;Etudaiye-Muhtar & Abdul-Baki, 2020;Kraus & Litzenberger, 1973;Rani, Yadav, & Tripathy, 2019).…”

Section: Determinants Of Capital Structurementioning

confidence: 99%

“…Therefore, the Hausman specification test (HST) resulted that the fixed effect model is more suitable for use than the random effect model in predicting the results of hypothesis testing. However, some researchers conducted tests using the generalized method of moments (GMM) (Bolarinwa & Adegboye, 2020;Etudaiye-Muhtar & Abdul-Baki, 2020;Haron, 2016;Iqbal, Xu, Fareed, Wan, & Ma, 2020;Rani et al, 2019). This is due to the frequent cases of endogeneity in financial studies.…”

Section: Endogeneitymentioning

confidence: 99%

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Income Diversification and Capital Structure: International Banks Evidence

Octavianus¹,

Fachrudin²,

Sadalia³

et al. 2021

theijbm

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This study aims to contribute to the literature on a corporate capital structure by analyzing the effect of income diversification on the capital structure of international banking companies. This study uses panel data from 32 global banking companies in 2010-2019 with 320 firm-year observation obtained from stock exchanges in each country. The generalized method of moments is used as a statistical analysis tool for panel data. The results show that the income diversification carried out by international banking companies has a positive effect with high significance on the company's short-term debt structure. Therefore, income diversification can be a factor affecting the capital structure of international banking companies. Previous studies examined determinants of capital structure such as profitability, tangibility, firm size, firm growth, firm age, and non-debt tax shield. The findings of this study add the income diversification variable to the determinants of capital structure. This study is expected to bring benefits to banking management, investors, and regulators in the banking sector, as well as to make new contributions to the literature on corporate capital structure.

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“…The wave of failures among Russian banks can have dramatic social consequences and be detrimental for the stability of the financial system as a whole (Fung a cov a and Weill, 2013). However, at the same time, the banking concentration can strengthen the financial system because bigger banks have better chances to diversify their risk, and it is easier to monitor a reduced number of banks (Etudaiye-Muhtar and Abdul-Baki, 2021). Although there are a number of papers about bankruptcy prediction in Russian banks, most of them are based on outdated data, so that there is room for new evidence.…”

Section: Introductionmentioning

confidence: 99%

Survival of Russian banks: how efficient are the control measures?

Barajas

Krakovich²,

López‐Iturriaga³

2022

EJMBE

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PurposeIn this paper, the authors study the failure of Russian banks between 2012 and 2019.Design/methodology/approachThe authors analyze the entire population of Russian banks and combine a logit model with the survival analysis.FindingsIn addition to the usual determinants, the authors find that not-failed banks have higher levels of fulfillment of the Central Bank requirements of solvency, liquidity, provide fewer loans to their shareholders and own more shares of other banks. The results of this study suggest an asymmetric effect of the strategic orientation of banks: whereas the proportion of deposits from firms is negatively related to the probability of failure, the loans to firms are positively related to bankruptcies. According to this research, the fact of being controlled by a foreign bank has a significant negative relationship with the likelihood of failure and moderates the effect of bank size, performance and growth on the bankruptcy likelihood.Practical implicationsOn the whole, the results of this study support the new Central Bank rules, but show that the thresholds imposed by the Russian regulator actually do not make a difference between failed and not failed banks in the short and medium term.Originality/valueThe authors specially focus on the effectiveness of new rules issued by the Central Bank of Russia in 2013.

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Market structure, institutional quality and bank capital ratios: evidence from developing countries

Cited by 13 publications

References 56 publications

Market structure, institutional quality and bank stability: evidence from emerging and developing countries

Market structure, institutional quality and bank stability: evidence from emerging and developing countries

Income Diversification and Capital Structure: International Banks Evidence

Survival of Russian banks: how efficient are the control measures?

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