Operating performance of European bank mergers

Ismail, Ahmad; Davidson, Ian; Frank, Regina

doi:10.1080/02642060701849899

Cited by 26 publications

(8 citation statements)

References 42 publications

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“…The coefficient is also expected to be negative because bad loans (non-performing loans) tend to reduce bank's efficiency level. A better quality asset is described as having lower non-performing loans or ratio of LLRGL (Ismail et al, 2009). In this direction, Miller and Noulas (1997) asserted that the greater financial institutions exposure to high-risk loans, the higher the accumulation of unpaid loans, and this lowers the profitability.…”

Section: Determinants Of Revenue Efficiencymentioning

confidence: 99%

Determinants of revenue efficiency of Islamic banks

Sufian

Kamarudin

2015

International Journal of Islamic and Middle Eastern Finance and Management

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Purpose – The purpose of this paper is to examine the revenue efficiency of Islamic banks in the Southeast Asian countries. Specifically, the empirical analysis comprises Islamic banks operating in Malaysia, Indonesia and Brunei. This paper also seeks to investigate the potential internal (bank-specific) and external (macroeconomic and industry-specific) factors which influence the revenue efficiency of Islamic banks operating in Southeast Asian countries. Design/methodology/approach – This paper used a whole gamut of domestic and foreign Islamic banks operating in Southeast Asian countries, namely, Malaysia, Indonesia and Brunei during the period of 2006-2011. The level of revenue efficiency is computed by using the data envelopment analysis (DEA) method. Following the procedure set in Banker and Natarajan (2008) and Gujarati (2002), this paper use a panel regression analysis framework based on the ordinary least square and generalized least square methods to examine the potential determinants of revenue efficiency of the Islamic banks in the sample. In addition, this paper also use a battery of parametric (t-test) and non-parametric (Mann–Whitney [Wilcoxon] and Kruskall–Wallis) tests to examine the difference in the revenue efficiency of the domestic and foreign Islamic banks. Findings – The results indicate that the level of revenue efficiency on the domestic Islamic banks is higher compared to that of their foreign Islamic bank counterparts. The empirical findings seem to suggest that revenue efficiency has greater influence on the profit efficiency levels. It was found that the bank size, asset quality, capitalization, liquidity and management quality significantly influence the revenue efficiency of domestic Islamic banks operating in Malaysia, Indonesia and Brunei during the period under study. Research limitations/implications – Due to its limitations, the present study may be extended in variety of ways. First, if information on input prices is available, further analysis could be performed to investigate the cost, technical and allocative efficiency. Second, interested researchers may apply the Malmquist Productivity Index method to examine the sources of total factor productivity changes of Islamic banks operating in the ASEAN countries. Third, to obtain more robust results, empirical findings from the present study could be compared to the results derived from improved statistical methods, i.e. Bootstrap DEA. Practical implications – The empirical findings of this paper clearly call for regulators and decision-makers to review the revenue efficiency of banks operating in Malaysia, Indonesia and Brunei Islamic banking sectors. The results could also provide better information and guidance to the managers of Islamic banks, as they need to have a clear understanding on the impact of revenue efficiency on the performance of their banks. The empirical findings of this paper may also have implications for investors whose main focus is to gain higher profit from their investments. Originality/value – The paper is the first to provide empirical evidence on the determinants of revenue, cost and profit efficiency of Islamic banks operating in Southeast Asian countries.

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Section: Determinants Of Revenue Efficiencymentioning

confidence: 99%

Determinants of revenue efficiency of Islamic banks

Sufian

Kamarudin

2015

International Journal of Islamic and Middle Eastern Finance and Management

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“…This ratio relies on the properties of accrual accounting to assess performance (Beccalli and Frantz, 2008). Altunbas and Ibanez (2004) and Campa and Hernando (2006) find that bank M&A results in improved performance with ROE, while Ismail et al (2009) and Beccalli and Frantz (2008) show that bank M&As harm performance. I also use operating income to assets as profitability and calculate other operating income divided by total assets.…”

Section: Methodsmentioning

confidence: 99%

Investigating the relationship between bank performance and accounting standards: evidence from M&As in European banking

Akgün

2021

JCMS

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PurposeThe study aims to identify whether international financial reporting standards (IFRS) or local generally accepted accounting principles (GAAP) reporting provides investors and senior management of acquirer banks with superior information on target banks under post-merger bank performance.Design/methodology/approachThe authors examine the claim that IFRS improves corporate transparency and increases financial reporting quality in European Bank merger and acquisitions (M&As). The authors compare the financial performance of merged banks where the target and acquirer banks employed the same reporting system (up to 305 merged banks) to the performance of a control group of banks not engaged in M&A activity (up to 1,690 European banks).FindingsLocal GAAP reporting allows a more transparent assessment of financial performance using traditional indicators, making it a superior tool for assessing potential acquisition targets.Practical implicationsOverall, the empirical findings are consistent with prior studies and indicate a significant relationship between local GAAP and post-merger performance, while IFRS does not contribute to post-merger bank performance.Originality/valueThe study is one of the very few studies to investigate the relationship between bank performance, M&A activity and accounting standards in EU-28 countries. The primary contribution the finding of poor performance of IFRS reporting merged banks compared to local GAAP banks in EU-28 countries in line with prior results of Huian (2012). In addition, several deal- and bank-specific characteristics that affect accounting standards influence M&A transactions in European banks.

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“…On the contrary [23] do not find a significant relationship between market consolidation and profitability. A second factor that contributes to performance and competitive advantage is the quality of assets ( [24]), liquidity ( [14], [25]) and their internal restructuring to improve cost efficiency ( [26], [27]). The acquisition of assets is one strategy that needs to be analyzed and to acknowledge if this strategy has been adopted by a significant portion of the banking sector in Europe.…”

Section: The Banking Sector In Europementioning

confidence: 99%