Constantino Stavros, Kate Westberg, Roslyn Russell and Marcus Banks
Service captivity is described as the experience of constrained choice whereby a consumer has no power and feels unable to exit a service relationship. This study aims to explore…
Abstract
Purpose
Service captivity is described as the experience of constrained choice whereby a consumer has no power and feels unable to exit a service relationship. This study aims to explore how positive service experiences can contribute to service captivity in the alternative financial services (AFS) sector for consumers experiencing financial vulnerability.
Design/methodology/approach
A total of 31 interviews were undertaken with Australian consumers of payday loans and/or consumer leases.
Findings
The authors reveal a typology of consumers based on their financial vulnerability and their experience with AFS providers. Then they present three themes relating to how the marketing practices of these providers create a positive service experience, and, in doing so, can contribute to service captivity for consumers experiencing financial vulnerability.
Research limitations/implications
The benefits derived from positive service experiences, including accessible solutions, self-esteem, and a sense of control over their financial situation, contribute to the service captivity of some consumers, rendering alternative avenues less attractive.
Practical implications
AFS providers must ensure a socially responsible approach to their marketing practices to minimize potentially harmful outcomes for consumers. However, a systems-level approach is needed to tackle the wider issue of financial precarity. Policymakers need to address the marketplace gaps, regulatory frameworks and social welfare policies that contribute to both vulnerability and captivity.
Originality/value
This research extends the understanding of service captivity by demonstrating how positive service experiences can perpetuate this situation. Further, specific solutions are proposed at each level of the service system to address service captivity in the AFS sector.
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This paper aims to identify the paths of digital transformation followed by companies facing disruption and offer recommendations for executives for choosing the appropriate path.
Abstract
Purpose
This paper aims to identify the paths of digital transformation followed by companies facing disruption and offer recommendations for executives for choosing the appropriate path.
Design/methodology/approach
This is a conceptual paper.
Findings
This paper identifies two paths of digital transformation. The offensive path is aggressive and involves the rapid acquisition of digital resources through portfolio investment and merger and acquisition tactics. The defensive path is relatively slow and relies on the organic growth of the digital capabilities of the incumbent companies over time.
Research limitations/implications
This paper identifies a number of potential factors affecting the choice of the transformation path taken by companies. Further studies can be conducted to investigate these contingent factors.
Practical implications
This study describes the strategic paths available in a digital transformation and identifies the conditions that might justify a particular approach.
Originality/value
This paper identifies two types of paths that are generally followed by companies aiming digital transformation – offensive and defensive. This aspect has not been studied in any other research work.
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The recent political crisis in the Middle East, coupled with several banking failures, have raised concerns about the safety of this region's banks among potential customers and…
Abstract
The recent political crisis in the Middle East, coupled with several banking failures, have raised concerns about the safety of this region's banks among potential customers and investors in the international market. This paper presents an analysis of the safety of Middle Eastern banks, using capital strength as a measure of safety. A comparison of the capital strength of Middle Eastern banks with a sample of the world's largest banks and the largest U.S. banks (based on capital) is conducted for the period 1988 to 1992. The results of this study indicate that Middle Eastern banks possess significantly higher capital to assets ratios than both world and U.S. banks, and very few Middle Eastern banks failed to meet the Basel minimum capital ratio during this period.
Nadia Basty and Ines Ghazouani
This study investigates how bank competition affects financial stability and whether government intervention contributes to shaping this relationship in North African countries.
Abstract
Purpose
This study investigates how bank competition affects financial stability and whether government intervention contributes to shaping this relationship in North African countries.
Design/methodology/approach
A review of the literature on the subject was conducted, combined with an empirical analysis that used a two-step system generalized method of moments (GMM) and a sample of 45 banks operating in North African countries over the period 2005–2019.
Findings
The findings reveal a quadratic relationship between competition and banking stability in North African countries. Competition–stability view and competition–fragility view could be applied at the same time for North African banks. Additionally, in this context, results highlight a negative impact of government intervention on financial stability in a competitive financial sector. North African banks operating in a high government intervention quality environment tend to engage in high-risk investments. Robustness checks with alternative measures of competition and banking stability also show consistent results.
Originality/value
To the authors’ knowledge, this is the first time that the North African context has been explored to determine the role of the quality of government intervention in the relationship between competition and banking system fragility. This paper seeks to cover the shadow field in existing literature through further new information. Thus, it contributes to the emerging market banking literature by showing that both high and low levels of competition can improve financial stability in North African countries. Moreover, it expands its contribution by displaying the moderator effect of intervention quality on the bank competition–stability relationship.
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Abdul Rafay, Tahseen Mohsan and Ramla Sadiq
Inquiring into the role of Islamic and conventional banks regarding the core responsibility of lending is an established phenomenon. This chapter is based on key findings…
Abstract
Purpose
Inquiring into the role of Islamic and conventional banks regarding the core responsibility of lending is an established phenomenon. This chapter is based on key findings regarding dynamic changes in the structural mix of credit portfolios in Islamic banks and conventional banks of Pakistan.
Methodology/approach
The nature of the study is exploratory; the sample consists of 5 Islamic banks and 20 conventional banks of Pakistan comparatively evaluated for the time frame of 2008–2014.
Findings
Our findings show that for Islamic banks, there is an increasing trend in the credit portfolios as a proportion to assets as well as to equity, whereas in case of conventional banks the findings are opposite. The results further prove a positive and negative growth of credit portfolios as proportional to assets and equity in case of Islamic and conventional banks respectively. It is also observed that credit portfolios of Islamic banks are growing with higher degree as a proportion to equity as compared to proportion to assets. On the other hand, conventional banks show higher degree of decline of credit portfolios as a proportion to equity as compared to assets.
Originality/value
These findings also show that primary stakeholders in Islamic banks are more risk seekers thus more inclined towards risky investments than ordinary credits.
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Dat T Nguyen and Tu Le
This study aims to investigate the interrelationships between charter value and market discipline in five Southeast Asian countries (ASEAN-5).
Abstract
Purpose
This study aims to investigate the interrelationships between charter value and market discipline in five Southeast Asian countries (ASEAN-5).
Design/methodology/approach
This research uses a simultaneous equations model with a three-stage least squares estimator for a sample of 79 listed banks from 2006 to 2019.
Findings
The findings show a negative two-way relationship between charter value and market discipline. More specifically, charter value can reduce market discipline. Meanwhile, a negative relationship between market discipline and charter value reemphasizes the significance of market discipline in the banking system to enhance bank charter value. Similar results still hold when using several robustness checks (e.g. subsamples, considering the global financial crisis, governance indicators and market structure).
Originality/value
To the best of the authors’ knowledge, this study is the first attempt to investigate the bidirectional relationship between bank risk and charter value in ASEAN-5. Therefore, this study would provide significant recommendations for policymakers and practitioners.
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The purpose of this paper is to show the importance of policy discussions on the role of governance in limiting excessive risk-taking at times of turmoil.
Abstract
Purpose
The purpose of this paper is to show the importance of policy discussions on the role of governance in limiting excessive risk-taking at times of turmoil.
Design/methodology/approach
Corporate governance measures are regressed on measures of risk taking using a sample of US bank holding companies (BHCs) during 2002-2014.
Findings
Results show that BHCs with more concentrated shareholders, more managerial ownership, smaller boards, and less outside directors undertake less risky investments with respect to total assets, loans, and off-balance-sheet items. Capital adequacy effect is overpowering pushing for more risky positions. Finally, banks with good governance push for less risky positions, even with larger capital ratios, during the financial crisis period relative to the precrisis boom.
Practical implications
This paper extends research on the association between bank ownership structure and risk taking. It adds to prior research by examining a key feature of banks, namely, their bank-specific capital adequacy. The relevance of this study stems from recent initiatives undertaken by the Basel Committee, the Group of Thirty (G30), and bank regulators to address deficient corporate governance structures that led to bank breakdowns.
Originality/value
One of the innovations of this paper is the use of risk-weighted measures to proxy for risk taking in banks, using risk weights used by bank regulators to adjust for operational risk, credit risk, and market risk.
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Vinay Kandpal, Peterson K. Ozili, P. Mary Jeyanthi, Deepak Ranjan and Deep Chandra
This chapter looks at a number of diverse elements that led to the rise of the digital banking industry. In this age of rapid digitisation, today's bank transactions and…
Abstract
This chapter looks at a number of diverse elements that led to the rise of the digital banking industry. In this age of rapid digitisation, today's bank transactions and activities are mostly done on mobile phones or other smart devices instead of going back and forth between a traditional branch lobby. With more and more customers seeking banking services accessible around the clock from the palm of their hand, based on the numerous experiential data digital platforms have accumulated for many years in the field and other places, traditional financial institutions will have no way but to break open their thinking about how to deliver those services to think. Governments and their regulators are beginning to see the potential risks posed by the new digital banking technology and want consumer protection, competition put under even stricter conditions for players as well and system stability all guaranteed. Above all, it is evidence of something people cannot ignore: the sharp upward trend of cybersecurity risk in recent years. The advent of digitalisation eliminated any excuse for storing sensitive financial data without the most modern cyber defences. Then, at a further level, financial tech start-ups come up like crocuses in spring while Bigtech companies all over the globe are jumping into banking. Both cooperation opportunities and competitive challenges await traditional banks. However, bank customers' changing demographics (millennials and GenZ) are the most vivid examples as they age, together with global universal financial inclusion trends, bringing about social and economic challenges.
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This study aims to analyze the moderating role of capital on the relationship between loan growth and credit risk for Islamic banks in the post-crisis era.
Abstract
Purpose
This study aims to analyze the moderating role of capital on the relationship between loan growth and credit risk for Islamic banks in the post-crisis era.
Design/methodology/approach
The study used annual data of 217 Islamic banks from 38 countries and ranges from 2010–2019. The study applies a two-step system GMM method for hypotheses testing about the moderating role of bank capital on the relationship between loan growth and credit risk in Islamic banks.
Findings
The findings showed that an increase in loan growth increases the credit risk of Islamic banks, as evidenced by loan loss provisions, loan loss reserves and nonperforming loans. The results indicate that capital positively moderates the relationship between loan growth and credit risk in Islamic banking. The positive relationship between bank capital and risk-taking is in line with the “regulatory hypothesis” in banking. The findings predict lower impacts of capital on the relationship between loan growth and credit risk in the South Asian region than MENA, Africa, South, East and Central Asia regions. However, the impact of capital is higher for larger Islamic banks than medium and smaller ones.
Practical implications
The findings of the study add value to the current debate on the role of bank capital to reduce risk-taking in Islamic banks. The study's findings have implications for policymakers, managers, especially in Islamic banking, for improving the Islamic financial system by managing the role of capital, loan growth and credit risk.
Originality/value
This is the first study to explore the moderating role of bank capital on the relationship between loan growth and credit risk in the post-crisis era, especially in Islamic banking. This is the first study in the Islamic banking context, which is providing empirical evidence for the impact of loan growth on the back looking and forward-looking proxies of credit risk under the moderating role of bank capitalization in the post-crisis era. This is the first study, which providing findings based on regions and size to compare the differences in Islamic banks for the impact of loan growth on credit risk under the moderating role of capitalization.
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Sine Nørholm Just and Nico Mouton
The meaning of scandals like “Liborgate” is not given beforehand; it is constructed in the course of framing contests. The purpose of this paper is to provide a nuanced framework…
Abstract
Purpose
The meaning of scandals like “Liborgate” is not given beforehand; it is constructed in the course of framing contests. The purpose of this paper is to provide a nuanced framework for understanding such framing contests by re-conceptualizing them as rhetorical struggles.
Design/methodology/approach
A conceptual framework that combines modern framing theory, and classical stasis theory is applied to the rhetorical struggles over the meaning of “Liborgate.”
Findings
While rhetorical struggles over “Liborgate” overtly center on the issue of who is to blame, an analysis of the argumentative relations between competing frames leads to the conclusion that this political “blame game” is related to struggles over how to define the scandal, how to conceptualize its causes, and policy recommendations. Banks may have lost the battle of “Liborgate,” but the war over the meaning of financial culture is far from over.
Originality/value
The paper is theoretically and methodologically original in its combination of the theories of framing and stasis, and it provides analytical insights into how sense is made of financial culture in the wake of the financial crisis.