Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 4

Bank Performance Related Abstracts

4 Corporate Governance and Performance of Islamic Banks in GCC Countries

Authors: Samir Srairi

Abstract:

This paper investigates the impact of the internal corporate governance on bank performance by constructing a corporate governance index (CGI) for 27 Islamic banks operating in five Arab Gulf countries. Using content analysis on the banks’ annual reports for 3 years (2011-2013), the index construction uses information on six important corporate governance mechanisms, namely board structure, risk management, transparency and disclosure, audit committee, Sharia supervisory board and investment account holders. The results demonstrate that Islamic banks adhere to 54% of the attributes addressed in the CGI. The most frequently reported and disclosed elements are Sharia supervisory board followed by board structure and risk management. The findings related to countries revealed that only two countries, the United Arab Emirates and Bahrain, possess a higher level of CGI. Our regression results provide evidence that Islamic banks with higher levels of corporate governance report high operating performance measured by return on assets and net interest margin. Finally, as of the effect of internal and external factors, we identified four variables that were associated with bank performance, namely size, equity, risk and concentration.

Keywords: Governance Mechanisms, Bank Performance, Islamic banks, GCC countries, corporate governance index

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3 Portfolio Restructuring of Banks: The Impact on Performance and Risk

Authors: Hannes Koester

Abstract:

Driven by difficult market conditions and increasing regulations, many banks are making the strategic decision to restructure their portfolio by divesting several business segments. Using a unique dataset of 727 portfolio restructuring announcements by 161 international listed banks over the period 1999 to 2015, we investigate the impact of restructuring measurements on the stock performance as well as on the banks’ profitability and risk. Employing the event study methodology, we detect positive stock market reactions on the announcement of restructuring measurements. These positive stock market reactions indicate that shareholders reward banks’ specialization activities. However, the results of the system GMM regressions show a negative relation between restructuring measurements and banks’ return on assets and a positive relation towards the individual and systemic risk of banks. These empirical results indicate that there is no guarantee that portfolio restructurings will result in a more profitable and less risky institution.

Keywords: Systemic Risk, Bank Performance, restructuring, bank risk, divestiture

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2 Factors Affecting the Profitability of Commercial Banks: An Empirical Study of Indian Banking Sector

Authors: Neeraj Gupta, Jitendra Mahakud

Abstract:

The banking system plays a major role in the Indian economy. Banking system is the payment gateway of most of the financial transactions. Banking has gone a major transition that is still in progress. Recent banking reforms after liberalization in 1991 have led to the establishment of the foreign banks in the country. The foreign banks are not listed in the Indian stock markets and have increased the competition leading to the capture of the significant share in the revenue from the public sector banks which are still the major players in the Indian banking sector. The performance of the banking sector depends on the internal (bank specific) as well as the external (market specific and macroeconomic) factors. Profitability in banking sector is affected by numerous factors which can be internal or external. The present study examines these internal and external factors which are likely to effect the profitablilty of the Indian banks. The sample consists of a panel dataset of 64 commercial banks in India, consisting of 1088 observations over the years from 1998 to 2016. The GMM dynamic panel estimation given by Arellano and Bond has been used. The study revealed that the variables capital adequacy ratio, deposit, age, labour productivity, non-performing asset, inflation and concentration have significant effect on performance measured.

Keywords: Bank Performance, banks in India, bank productivity, banking management

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1 Contextual Factors of Innovation for Improving Commercial Banks' Performance in Nigeria

Authors: Tomola Obamuyi

Abstract:

The banking system in Nigeria adopted innovative banking, with the aim of enhancing financial inclusion, and making financial services readily and cheaply available to majority of the people, and to contribute to the efficiency of the financial system. Some of the innovative services include: Automatic Teller Machines (ATMs), National Electronic Fund Transfer (NEFT), Point of Sale (PoS), internet (Web) banking, Mobile Money payment (MMO), Real-Time Gross Settlement (RTGS), agent banking, among others. The introduction of these payment systems is expected to increase bank efficiency and customers' satisfaction, culminating in better performance for the commercial banks. However, opinions differ on the possible effects of the various innovative payment systems on the performance of commercial banks in the country. Thus, this study empirically determines how commercial banks use innovation to gain competitive advantage in the specific context of Nigeria's finance and business. The study also analyses the effects of financial innovation on the performance of commercial banks, when different periods of analysis are considered. The study employed secondary data from 2009 to 2018, the period that witnessed aggressive innovation in the financial sector of the country. The Vector Autoregression (VAR) estimation technique forecasts the relative variance of each random innovation to the variables in the VAR, examine the effect of standard deviation shock to one of the innovations on current and future values of the impulse response and determine the causal relationship between the variables (VAR granger causality test). The study also employed the Multi-Criteria Decision Making (MCDM) to rank the innovations and the performance criteria of Return on Assets (ROA) and Return on Equity (ROE). The entropy method of MCDM was used to determine which of the performance criteria better reflect the contributions of the various innovations in the banking sector. On the other hand, the Range of Values (ROV) method was used to rank the contributions of the seven innovations to performance. The analysis was done based on medium term (five years) and long run (ten years) of innovations in the sector. The impulse response function derived from the VAR system indicated that the response of ROA to the values of cheques transaction, values of NEFT transactions, values of POS transactions was positive and significant in the periods of analysis. The paper also confirmed with entropy and range of value that, in the long run, both the CHEQUE and MMO performed best while NEFT was next in performance. The paper concluded that commercial banks would enhance their performance by continuously improving on the services provided through Cheques, National Electronic Fund Transfer and Point of Sale since these instruments have long run effects on their performance. This will increase the confidence of the populace and encourage more usage/patronage of these services. The banking sector will in turn experience better performance which will improve the economy of the country. Keywords: Bank performance, financial innovation, multi-criteria decision making, vector autoregression,

Keywords: Financial Innovation, multi-criteria decision making, Bank Performance, vector autoregression

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