Sok-Gee Chan, Eric H.Y. Koh and Mohd Zaini Abd Karim
The purpose of this paper is to examine the impact of the directors’ socioeconomic backgrounds on the risk-taking behavior of the listed commercial banks in China.
Abstract
Purpose
The purpose of this paper is to examine the impact of the directors’ socioeconomic backgrounds on the risk-taking behavior of the listed commercial banks in China.
Design/methodology/approach
The generalized least square method and Arellano and Bover’s (1995) generalized method of moment were used to study the relationship between the directors’ socioeconomic backgrounds and bank risk-taking behavior. The sample studied consists of 16 listed commercial banks in China from 2003 to 2011.
Findings
It was found that smaller board sizes and higher percentage of independent directors contribute to lower risk-taking. The results also indicate that banks are better off with boards that have gender diversity, government affiliation and higher average age because they enhance problem-solving and market insights facilitate adherence to government or regulatory policies and help reduce the banks’ risks.
Research limitations/implications
Future studies may consider including non-public-listed banks, pre-2003 data and analyses of the agencies to which the government-affiliated directors are or were attached.
Practical implications
The paper suggests that corporate governance reform initiatives with closely monitored implementation and phased liberalization contributed toward the banking industry’s resilience. Implications for management include that boards of directors with better quality, sufficient independence, gender diversity, government affiliation and maturity will help reduce risks.
Social implications
This study may facilitate the decision-making for the bank management and policymakers on the selection of best directors in the Chinese banking sector. The Chinese banking system serves as a plausible role model for consideration, given that four of its banks have now leapfrogged to be among the top ten largest banking institutions after the global financial crisis.
Originality/value
The study covers a wide range of socioeconomic backgrounds of the board of directors which are crucial in influencing the behavior of the board in banking operations.
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Abu Hanifa Md. Noman, Che Ruhana Isa, Md Aslam Mia and Chan Sok-Gee
This study aims to examine the impact of activity restrictions in shaping the risk-taking behaviour of banks through the channel of competition in different economic conditions.
Abstract
Purpose
This study aims to examine the impact of activity restrictions in shaping the risk-taking behaviour of banks through the channel of competition in different economic conditions.
Design/methodology/approach
The authors use a dynamic panel regression method, particularly a two-step system generalised method of moments to address the risk-taking persistence of banks and endogeneity of activity restrictions and competition with banks’ risk-taking using financial freedom and property rights as instrumental variables. Activity restrictions are computed by constructing an index based on the survey results of Barth et al. (2001, 2006, 2008 and 2013a). Competition is measured by the Panzar–Rosse H-statistic and risk-taking behaviour are measured by non-performing loan ratio and lnZ-score. In the investigation process, the authors control bank characteristics – size, efficiency, ownership and loan composition and macroeconomic factors – gross domestic product growth and inflation, and use 2,527 bank-year observations from 180 commercial banks of Association of the Southeast Asian Nations-five countries over the 1990–2014 period.
Findings
This study finds that activity restrictions exacerbate the risk-taking behaviour of the banks leading to changes in the channel of competition because of the “risk-shifting effect” of competition. The finding is robust by considering the financial crisis and alternative specifications.
Research limitations/implications
This study contributes to bank literature and policy formulation regarding the effect of activity restrictions on the risk-taking behaviour of banks, which is an issue of concern amongst bank regulators, policymakers and academics, especially in the aftermath of the 2008–2009 global financial crisis.
Practical implications
Understanding how the competition plays a role in the relationship between activity restrictions and the risk-taking of banks in different economic situations.
Originality/value
This study provides new insight into the bank literature by investigating the moderating role of competition on activity restrictions and the risk-taking behaviour of banks in a different economic environment.
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Tze Kiat Lui and Mohd Haniff Zainuldin
Strengthening ESG strategies in Malaysian banks is necessary as they continue to face difficulties integrating ESG into their strategies and disclosure despite existing government…
Abstract
Purpose
Strengthening ESG strategies in Malaysian banks is necessary as they continue to face difficulties integrating ESG into their strategies and disclosure despite existing government frameworks. This study aims to use stakeholder-resource-based view (RBV) concept to explore how board characteristics and ownership concentration influence ESG disclosure practices in Malaysian banks.
Design/methodology/approach
The study analysed annual, environmental, social and governance (ESG) and integrated reports of Malaysian banks from 2010 to 2022 to examine the effects of board characteristics on ESG disclosures. Using content analysis and 481 balanced data sets, ordinary least squares (OLS) and robust regressions were applied, with interaction terms testing the moderating effects of ownership concentration.
Findings
Board independence negatively impacts ESG disclosure in Malaysian banks, suggesting that independent directors may not prioritise sustainability. Board size, diversity and sustainability committees positively influence ESG practices. Ownership concentration interactions reinforce these findings, but board independence remains negatively significant.
Research limitations/implications
Future research should expand the sample to other emerging markets, explore a wider range of bank board attributes and use advanced econometric methods to increase the generalisability of the results.
Practical implications
The study impacts theory, financial institutions and policy, redefining ESG practices in Malaysian banking. It highlights the role of board characteristics and the importance of ownership concentration. Several practical recommendations are provided.
Social implications
The study impacts theory, financial institutions and policy by redefining ESG practices within Malaysian banking. It highlights the significance of board characteristics and ownership concentration, offering several practical recommendations.
Originality/value
The study fills gaps in the literature by examining the impact of board characteristics on ESG disclosures through content and statistical analyses. It integrates stakeholder theory with RBV to provide novel insights into ESG reporting in Malaysian banks, highlighting the role of high ownership concentration in emerging markets.
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Arbind Samal, Sabyasachi Patra and Devjani Chatterjee
The purpose of this paper is to examine the influence of culture on organizational readiness to change (ORC) within the context of merger and acquisition (M&A) in the banking…
Abstract
Purpose
The purpose of this paper is to examine the influence of culture on organizational readiness to change (ORC) within the context of merger and acquisition (M&A) in the banking sector in India.
Design/methodology/approach
A multisource approach is used to collect data from a public-sector bank in India for testing our hypothesis. A hierarchical approach based on higher-order modelling has been deployed for confirming the path model. The foundation of the study is based on power distance (PD) and uncertainty avoidance (UA) cultural dimensions of Hofstede (1984).
Findings
Employees in organizations with large PD and high UA index exhibit low readiness to change. Findings support a negative relationship of culture (large PD and high UA) with organizational readiness to change at the individual level.
Research limitations/implications
The study has three major implications. First, measures and importance of change readiness at the individual level during corporate events such as M&A is elucidated in the study. Second, a paradigm for assessing higher-order models grounded in theoretical and methodological rigour for testing our hypothesis is presented in the paper. Last, the role of culture in M&A processes is highlighted vis-à-vis factors related to PD and UA on ORC.
Practical implications
The findings of the research answer to the call for a study on factors that help in creating a synergy for successful M&A across all sectors especially in the banking sector. People representing high UA and large PD often look forward to direction and guidelines for guiding employee actions. Leaders therefore need to set clear agenda and effectively communicate the appropriateness of change to their employees for developing positive behaviour towards desirable organizational outcomes. This study touches upon this important perspective for its practical utilization.
Originality/value
The study adds to the limited literature on change which addresses the need for studying socio-cultural factors in the M&A process, especially in an emerging economies context.
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Tra Thanh Ngo, Minh Quang Le and Thanh Phu Ngo
The purpose of this paper is to incorporate risk in technical efficiency of ASEAN banks in a panel data framework for the period 2000 to 2015.
Abstract
Purpose
The purpose of this paper is to incorporate risk in technical efficiency of ASEAN banks in a panel data framework for the period 2000 to 2015.
Design/methodology/approach
The directional distance function and semi-parametric framework are employed to estimate efficiency scores for two scenarios, one with only good outputs and the other with a combination of good and bad outputs.
Findings
The findings show there is no evidence of technological progress for banks in ASEAN and concerns about the outperformance of Vietnam’s banks. In addition, performance of Vietnam’s banks tends to be distorted by low level of loan loss reserves.
Practical implications
To reflect the true performance and shorten the period of removing bad assets, the State Bank of Vietnam can request banks in Vietnam to book more loan loss reserves.
Originality/value
By examining such a new approach, this study makes an early attempt to incorporate credit risk into the banking efficiency in ASEAN region.