Richard Osadume and Anthony Ojovwo Okene
The objective of this study is to ascertain whether financial sector sustainability had any correlation with financial sector performance in Nigeria and recommend appropriate…
Abstract
Purpose
The objective of this study is to ascertain whether financial sector sustainability had any correlation with financial sector performance in Nigeria and recommend appropriate policy directions.
Design/methodology/approach
The study selected four major Nigerian banks namely Zenith Bank Guaranty Bank United Bank for Africa and First Bank of Nigeria as its sample and covered 2010 to 2019. Secondary panel data were obtained from the published financial Statements of the banks and subjected to analytical techniques of panel unit root tests descriptive statistics panel least square and Co-integration statistical techniques at the 5% level of significance.
Findings
The findings revealed that the exogenous variables (SUST) have significant Impact on the endogenous variable (ROA, ROE) in the short-run but insignificant in the long run.
Research limitations/implications
The period covered was limited to 10 years and has an African development focus with emphasis on West Africa, Nigeria. However, the implication could be general to most or all economic and financial landscape. It shows that there is a correlation between financial sector sustainability and return on assets and returns on equity.
Practical implications
Monetary authorities should develop applicable annual performance sustainability framework for all banks; and set performance targets, that will be measured and monitored by appropriate regulatory unit periodically.
Social implications
The financial sector survival is directly related to its contribution towards the survival and development of its host community and operating environment.
Originality/value
This approach is novel in the sense that its approach is practical and measurable, which most research work have not focused on.
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Eleftherios Giovanis and Oznur Ozdamar
Effective business and investment climate can lead to a higher rate of investment, profits and improved productivity, through the creation of an institutional environment, where…
Abstract
Purpose
Effective business and investment climate can lead to a higher rate of investment, profits and improved productivity, through the creation of an institutional environment, where the state provides high-quality public goods. This study aims to explore the impact of the business–investment climate on firm performance in a sample of six countries in the Middle East and North Africa (MENA) region and Turkey. Furthermore, we extend our analysis to explore the impact of business–investment climate on the resource misallocation in Egypt and Turkey.
Design/methodology/approach
The study used fixed effects models to investigate the relationship between the business and investment climate, expressed by the obstacles in state–business relations- and the firm performance, which is measured by the firm's value-added, the labour productivity and the total factor productivity To reduce the endogeneity coming from possible reverse causality and the perceptions about the business climate, an instrumental variables (IV) approach applying the two-stage least squares (2SLS) method was followed. The empirical analysis relies on data derived from the World Bank Enterprise Surveys.
Findings
Based on estimates, the obstacles in business climate may reduce the firm performance measures by 15–40%. These findings indicate the importance of quality in the business climate and how the improvement in its efficiency can have a very considerable positive impact on firms' performance and thus on the overall economic growth of a country.
Originality/value
This is the first study exploring the impact of business–investment climate on various measures of the firm performance and the resource misallocation in a large sample of countries in the MENA region.
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This paper investigates the factors responsible for the emergence of different arrangements of state–society relations. Being concerned with the relations related to the…
Abstract
Purpose
This paper investigates the factors responsible for the emergence of different arrangements of state–society relations. Being concerned with the relations related to the industrial sector, this study focuses more on state–business–labor relations (SBLRs), especially on power dynamics between the main actors in these relations, namely, the state, tycoons, entrepreneurs and labor.
Design/methodology/approach
Based on power dynamics, four SBLR modes are identified and differentiated according to state power vis-à-vis non-state actors and tycoon power vis-à-vis the other non-state actors. The balanced mode is characterized by balanced power relations among the four considered actors. In the capture mode, tycoons are more powerful than other actors, including the state, although other nonsocial actors have organizational rights. The crony mode has powerful state, subservient tycoons who enjoy high levels of favoritism and low organizational power for the other social actors. Finally, the state-dominance mode has powerful state, low levels of favoritism to tycoons and low organizational power for all social actors. The paper then explores the factors responsible for the emergence of each of these modes by investigating the factors’ effects on state power and favoritism to tycoons. The investigated factors include historical political–economic, geographical, legal and cultural factors. The hypothesized effects of these factors are then tested using a random-effects probit regression model, investigating how the different factors affect the probability of the existence of the studied SBLR modes.
Findings
The results support much of the hypothesized relations and place more emphasis on some of the investigated factors. Earlier development is clearly responsible for the emergence of either the balanced or the state-capture SBLR mode. Geographical conditions favorable for development, such as latitude and metal richness, also lead to the emergence of either mode. The communist heritage, and more accurately the post-communist economic and incomplete political liberalism of the transition stage, contributed to the emergence of the state-capture SBLR mode. The British legal system, with the power it provides to non-state actors through the independence of judges and other measures, contributes to the emergence of the balanced SBLR mode. Cultural factors are largely responsible for the emergence of the crony SBLR mode, especially hierarchical and collectivist cultures, as well as ethnic fractionalization. On the other hand, the culture of Confucians has the strongest influence on the emergence of state dominance, while other cultures play a marginal role in its rise, and ethnic fractionalization marginally defuses the ability of the state to dominate without resorting to favoritism. Finally, access to rich natural resources, by enriching the state independently from social actors’ financial resources (e.g. taxation), marginally increases the probability of the emergence of the state-dominance mode.
Research limitations/implications
There is room for path dependency to explain the emergence of different SBLR modes in many countries. Unfortunately, the introduced regression model and any quantitative empirical work would not be able to effectively investigate such a process. Instead, an approach depending on case studies and a deeper investigation of country-specific historical political development is needed to complement the research done here. Conducting such an additional quest would help in reaching a more comprehensive understanding of why different countries have different SBLR modes. This should ultimately help in answering an equally important question: How to reverse engineer the emergence of favorable SBLR modes?
Practical implications
Although this paper did not investigate the economic merits or mischiefs of each of the studied modes, it is plausible to think of the balanced SBLR as the best mode. This is supported not only by the fact that most of the countries of this mode are developed countries but also by the attractiveness of the power dynamics governing this mode—a more balanced power among different SBLR actors. While some factors are almost impossible to replicate, for example, geographical factors, reform could target the factors that could be changed or mitigated. This is true for legal reform, especially for fostering the independence of judges. Culture is often regarded as a sticky institution. However, this is not always true, even though the change happens in the long run. A sort of dynamism should always be considered when referring to culture through time and space. Institutional reform could be instrumental in the long run in this regard. Conducting such reform with the help of such “exogenous” institutions should always consider the match between these institutions and “endogenous” institutions, such as culture. That is to say, the connection between democratization, fostering accountability and curbing favoritism and cultural values leaning toward these principles should be firmly established. Finally, a point of optimism is that—based on the results of this paper—reaching a high state of development could increase the chances of realizing a more balanced SBLR mode in the long run.
Originality/value
This paper represents a novel contribution to a topic that has hardly been addressed in the literature. The methodology that is used identifies different state–society relation modes and focuses on power relations in SBLRs is another important contribution to the present literature in many fields, such as institutional economics, socioeconomics and political economy.
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Elvis Kwame Agyapong, Louis David Junior Annor and Ebenezer Bugri Anarfo
This paper evaluates how bank dynamics, governance structures and financial sector development drive rural banks’ information and communications technology (ICT) investment in the…
Abstract
Purpose
This paper evaluates how bank dynamics, governance structures and financial sector development drive rural banks’ information and communications technology (ICT) investment in the Ghanaian economy.
Design/methodology/approach
Data for the empirical inquiry were compiled from relevant sources including World Development Indicators (WDI), World Governance Indicators (WGI) and ARB Apex Bank from 2014 to 2020. Prais–Winsten panel corrected standard errors (PW-PCSE) was employed in estimating and verifying hypothesized relationships for the study.
Findings
The results suggest that return on assets (ROA) and bank size improve rural banks’ ICT investment. Moreover, telecommunication development and government effectiveness have significant positive impact on ICT investment among rural banks in the Ghanaian economy. The results further show that telecommunication development has a positive moderating effect on regulatory quality and ICT investment nexus among rural banks in Ghana. Financial development, inflation and liquidity risk were found to negatively affect ICT investment among rural banks in Ghana.
Originality/value
The study is premised on four main motivations; (1) the growing role that ICT plays in development outcomes and firm performance (FP), as well as its potential for comparatively increased penetration among African banks and banking institutions (2) the importance of governance for innovation and investment in ICT, (3) banking regulation and (4) gaps in the literature. Previous studies on ICT investment highlight its impact on profitability but little on determinants of banks’ ICT investment in the emerging market context, especially moderating role of governance and ICT diffusion.
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Bisan Khalil Almasri, David Sunoco and Mohammad Al-said
This research aims to investigate the relationship between banks’ financial leverage and economic financial stability, and as a result, the research will discuss the role of…
Abstract
Purpose
This research aims to investigate the relationship between banks’ financial leverage and economic financial stability, and as a result, the research will discuss the role of earnings management (EM) in this relationship, since managers normally manipulate their financial reports when they show higher financial leverage. It is important to control the financial leverage in Jordanian banks based on the research results. The main objective is to mitigate the bank’s financial leverage risk as much as its relationship with financial stability. Results may be important for investors, managers, regulatory bodies and auditors in Jordan since they help strengthen financial stability in Jordan. Finally, the main objective of this study is to find a solution to maintain stable and real financial economy by finding the effect of higher financial leverage in Jordanian banks of managers’ cosmetic practices. This will be discussed through testing the role of EM of the relationship between firm’s financial leverage and financial stability.
Design/methodology/approach
In order for the researchers to analyze data, quantitative methods are processed statistically. Also, the researcher tests research conceptual framework according to the mediation model that was developed by Preacher and Hayes (2004). In Figure (1) of which panel A: determines a direct effect, while panel B: illustrates a mediating design. To construct the sample, the researcher used information extracted from Jordanian annual financial reports that is extracted from Amman Stock Exchange. The population of the study includes all Jordanian banks which are 26 banks, additionally, the period from 2008 to 2018 was used to illustrate data. The reason behind using this period is that to examine the variables relationships for and after 2008 financial crisis and its consequences. The researcher chose 2018 as the end period, that is because it is the year before COVID-19 period which covers 2019–2022, and this period is considered not normal. In comparison with past studies, the researcher used modified Jones Model to measure EM (Valášková et al., 2021; Nopiana and Salvi, 2022; Riahi, 2020; Quddoos et al., 2020; Cho et al., 2012), while financial stability and financial leverage was calculated using total debt/total equity (Nopiana and Salvi, 2022). Finally, financial stability is measured using the financial stability model for banking sector, but not for all economy that is because the banking sector represents 96% of the economy, also this study applied for banking sector. Missing values were replaced using the mean on SPSS. Finally, regression model and F-score, correlation have been examined in the research analysis.
Findings
Increased risk on enterprises has an impact on economic financial stability. And the interest rate result shows that Jordan’s central bank boosts interest rates during inflationary periods, increasing the risk to the economy’s financial stability. Furthermore, size has a minimal impact when compared to other variables, and greater business sizes signal more sophisticated transactions and higher leverage, reducing the economy’s financial soundness. Finally, ROA indicates increased bank performance, which contributes to the economy’s financial stability. While EM has a direct negative impact on financial stability, this conclusion is consistent with the researcher’s expectations. Because EM refers to the manipulation of financial report information, including information about financial leverage, manipulation also lowers investor confidence in bank share prices, affecting the stability of the economy’s financial system. It has little influence on the relationship between leverage and economic financial stability.
Practical implications
The implications of this research have been discussed through the research, for example, to maintain economic financial stability, auditors must take care through their role specially when there is higher financial leverage of Jordanian banks. Further, managers must pay attention before manipulating financial information if there is high financial leverage, because this will affect the economic financial stability. Lastly, the most important implication is that the maintenance of economic financial stability, and EM if not discovered for a period of time may show false signaling of economic financial stablity, and suddenly face financial crises.
Originality/value
Understanding the role of EM in the relationship between banks’ financial leverage the economic financial stability, may control many issues like the role of external auditor of reporting about the reliability of financial information (when there is high bank financial leverage, the auditor must exercise professional care and increase his sample to ensure that there are no cosmetic accounting), and when EM is in control, the economy will work smoothly and react normally to the effect of financial leverage of Jordanian banks. And the situation of 2008 crisis will not be repeated (because of the cosmetic practices by American firms for many years since 2008 with hidden cosmetic practices, suddenly, the 2008 crises happened). In conclusion, this discussion is original, since no literature theoretically discussed this issue before which (EM when financial leverage is high) may be applied in practice.
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The aim of the paper is to examine the various aspects of the 1MDB scandal including the extent and types of corruption that occurred and the action taken to deal with them. In…
Abstract
Purpose
The aim of the paper is to examine the various aspects of the 1MDB scandal including the extent and types of corruption that occurred and the action taken to deal with them. In doing this, the paper seeks to identify the reasons for the scandal and the lessons that can be learnt to avoid such a scandal in Malaysia and elsewhere in the future.
Design/methodology/approach
The research for the paper is based on evidence from court hearings, reports of watchdog and regulatory agencies, media reports, and various articles and books written about 1MDB.
Findings
The paper shows that most of the scandal involved embezzlement, bribery, false declarations and bond mispricing relating to extensive borrowing by 1MDB, and entailed a global network of shell companies and individuals through which the illicit money was passed. It also shows weak governance in 1MDB, poor internal controls within banks, the failure of watchdog and enforcement bodies to take the necessary action partly due to political control over them, and overall the lack of political will to deal with the scandal.
Originality/value
The paper builds on the findings of other papers and books written on the 1MDB scandal. It does this by linking the corruption to the borrowings of 1MDB, the international network of money-laundering and bribery through which illicit money flowed, and the poor internal controls in the organisation. It also builds on previous research by highlighting the failure of banks to identify money-laundering and of watchdog and enforcement bodies to deal with the corruption. A further value of the paper is to identify the lessons that can be learnt about combatting corruption on such a scale.
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Mariem Ben Abdallah and Slah Bahloul
The objective of this research is to determine the influence of solvency and liquidity on the profitability [return on assets (ROA)] of Tunisian banks from Q2-2020 to Q3-2022 by…
Abstract
Purpose
The objective of this research is to determine the influence of solvency and liquidity on the profitability [return on assets (ROA)] of Tunisian banks from Q2-2020 to Q3-2022 by considering asset quality as a moderating variable.
Design/methodology/approach
This study uses data on liquidity, solvency, ROA and asset quality for 12 banks. It also considers bank size, gross domestic product (GDP) growth and inflation as control variables. The methodology is based on panel data with generalized least squares (GLS) estimation to assess the moderate influence of the asset quality on solvency, liquidity and ROA. Also, the generalized method of moments (GMM) estimation is used as a robustness test.
Findings
The results of the GLS model estimation indicated a negatively significant moderating correlation between the liquidity and the solvency. The data from the GMM model indicate that the liquidity variable predicted by the liquidity has a positively significant influence on a bank's ROA as well as for the solvency variable, which is predicted by the capital capacity. Therefore, we conclude that these two variables had a positively significant impact on the ROA.
Research limitations/implications
The studies have many implications for banks and their management in addition to the industry regulators. The results of this study will enable political decision-makers to determine the banks' profits based on their liquidity and solvency.
Originality/value
This analysis provides financial explanations and recommendations for stakeholders in Tunisian banks. Furthermore, these banks must also be able to maintain their liquidity and solvency to ensure their profits in times of COVID-19.
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David Hermsdorf, Meike Rombach and Vera Bitsch
The purpose of this paper is to investigate food retailers food waste reduction practices in Germany. The focus is on selling and redistributing agricultural produce with visual…
Abstract
Purpose
The purpose of this paper is to investigate food retailers food waste reduction practices in Germany. The focus is on selling and redistributing agricultural produce with visual impairments and other surplus food items. In addition, drivers and barriers regarding the implementation of both waste reduction practices are explored.
Design/methodology/approach
In total, 12 in-depth interviews with managerial actors in the food retail sector and a food bank spokesperson were recorded, transcribed and analyzed through a qualitative content analysis.
Findings
In contrast to organic retailers, conventional retailers were reluctant to include agricultural produce with visual impairments in their product assortments, due to fears of negative consumer reactions. Another obstacle was EU marketing standards for specific produce. All retailers interviewed engaged in redistribution of surplus food. Logistics and the regulatory framework were the main barriers to food redistribution.
Originality/value
The present study adds to the existing body of literature on food waste reduction practices as it explores selling produce with visual impairments and elaborates on the legal background of food redistribution in German retail. The results are the foundation for providing recommendations to policy makers and charitable food organizations.
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Nicola Del Sarto, Elisa Bocchialini, Lorenzo Gai and Federica Ielasi
This paper aims to explore the transformative influence of social media applications on the digital evolution of banks. Using a multiple case study approach, this study…
Abstract
Purpose
This paper aims to explore the transformative influence of social media applications on the digital evolution of banks. Using a multiple case study approach, this study investigates how Italian banks have adopted social media in their digital transformation. The study seeks to uncover strategies used by banks to maximise the benefits of social media platforms and assess the outcomes and challenges faced during this process. The results provide valuable insights for banks navigating digital transformation, emphasising the importance of organisational culture, client engagement, financial innovation and proactive response to fintech disruptions.
Design/methodology/approach
This study uses a multiple case study approach to investigate the influence of social media applications on the digital transformation of banks. Six Italian banks that integrated social media into their digital transformation efforts are analysed. The research examines the strategies used by these banks to effectively leverage social media platforms. The outcomes and implications of these initiatives are scrutinised to discern both positive impacts and challenges faced by banks and customers. The research methodology involves in-depth analysis of case studies, incorporating insights from managerial interviews to underscore key aspects essential for successful digital adaptation in the banking sector.
Findings
This study reveals profound impacts of digital transformation on the banking sector, emphasising key implementation areas. Insights gleaned from case studies of six Italian banks underscore the transformative influence of social media applications. Results highlight positive impacts, including enhanced customer service, engagement, financial literacy and community building. Managerial interviews underscore five critical aspects: the imperative for a new organisational culture, a focus on millennial clients, understanding and offering new financial instruments and proactive responses to challenges posed by emerging fintech companies. Successful adaptation necessitates attention to organisational culture, client engagement, financial innovation and proactive response to fintech disruptions. The findings contribute to the evolving understanding of the transformative role of social media in reshaping the banking industry.
Originality/value
This paper fills a critical research gap by delving into the challenges specific to banking institutions during the implementation of social media strategies amid digital transformation. While existing literature predominantly highlights positive impacts, this study pioneers a comprehensive exploration of unique hurdles faced by banks. The multiple case study approach, focusing on six Italian banks, contributes original insights into the strategies used to maximise social media benefits. The research provides a nuanced understanding of both positive impacts and challenges encountered, offering valuable guidance for refining social media approaches in the ever-evolving digital landscape. This contributes to the existing body of knowledge and aids banks in navigating their digital transformation journey effectively.
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Magnus Jansson, Magnus Roos and Tommy Gärling
This paper aims to investigate whether loan officers' risk taking in credit decisions are associated with their personal financial risk preference and personality traits or solely…
Abstract
Purpose
This paper aims to investigate whether loan officers' risk taking in credit decisions are associated with their personal financial risk preference and personality traits or solely with bank-contextual and loan-relevant factors.
Design/methodology/approach
An online survey administered in six large Swedish banks to 163 loan officers responsible for assessing credit risk and approval of loan applications. The loan officers rated their likelihood of approving fictitious loan applications from business companies.
Findings
The loan officers' credit risk taking is associated with bank-contextual factors, directly with perceived organizational credit risk norms and indirectly with self-confidence in assessing credit risks through attitude to credit risk taking. A direct association is also found with personal financial risk preference but not with personality traits.
Research limitations/implications
Increased awareness of that loan officers' personal financial risk preference is associated with their credit risk taking in loan decisions but that the banks' risk policy has a stronger association. Banks' managements and boards should therefore assure that their credit risk policy is implemented, followed and being aligned with their performance incentives.
Practical implications
Increased awareness of that loan officers' credit risk taking is associated with personal financial risk preference but more strongly with the banks' risk policy that motivate banks' managements and boards to assure that their credit risk policy is implemented, followed and being aligned with their performance incentives.
Originality/value
The first study which directly compare the associations of loan officers' risk taking in credit approvals with personal risk preference and personality traits versus bank-contextual factors and loan-relevant information.