Pub Date : 2023-10-19DOI: 10.1108/jfrc-03-2023-0038
Aamir Aijaz Syed
Purpose The purpose of this study is to explore how the unprecedented rise in the economic policy uncertainty influence Indian banking sector stability. The unprecedented rise in the economic policy uncertainty during the recent pandemic has garnered the attention of policymakers to investigate its consequences on different sectors of the economy. Design/methodology/approach In this quest, the present study uses system generalized method of moments and other econometric tools to examine the influence of economic policy uncertainty on the Indian banking sector, covering the time frame from 2000 to 2022. In addition, the current study also investigates the mediating role of regulation and supervision in the nexus of economic policy uncertainty and the Indian banking sector stability. Findings The empirical outcome reveals that economic policy uncertainty negatively influences banking stability. However, when economic policy uncertainty interacts with stringent banking regulations, private monitoring and supervisions, it assists in diversifying the negative impact of economic policy uncertainty on the Indian banking sector stability. Originality/value To the best of the author’s knowledge, the study is an original work and provides robust estimates that will assist policymakers in understanding the influence of policy uncertainty on the banking stability. Moreover, the study also helps in understanding the role of supervision and regulation in mitigating the negative consequences of policy uncertainty on the banking stability.
{"title":"Economic policy uncertainty and Indian banking stability: the mediating role of regulation and supervision","authors":"Aamir Aijaz Syed","doi":"10.1108/jfrc-03-2023-0038","DOIUrl":"https://doi.org/10.1108/jfrc-03-2023-0038","url":null,"abstract":"Purpose The purpose of this study is to explore how the unprecedented rise in the economic policy uncertainty influence Indian banking sector stability. The unprecedented rise in the economic policy uncertainty during the recent pandemic has garnered the attention of policymakers to investigate its consequences on different sectors of the economy. Design/methodology/approach In this quest, the present study uses system generalized method of moments and other econometric tools to examine the influence of economic policy uncertainty on the Indian banking sector, covering the time frame from 2000 to 2022. In addition, the current study also investigates the mediating role of regulation and supervision in the nexus of economic policy uncertainty and the Indian banking sector stability. Findings The empirical outcome reveals that economic policy uncertainty negatively influences banking stability. However, when economic policy uncertainty interacts with stringent banking regulations, private monitoring and supervisions, it assists in diversifying the negative impact of economic policy uncertainty on the Indian banking sector stability. Originality/value To the best of the author’s knowledge, the study is an original work and provides robust estimates that will assist policymakers in understanding the influence of policy uncertainty on the banking stability. Moreover, the study also helps in understanding the role of supervision and regulation in mitigating the negative consequences of policy uncertainty on the banking stability.","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2023-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135666845","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-09-05DOI: 10.1108/jfrc-04-2023-0061
Driss El Kadiri Boutchich
Purpose This study aims to carry out a critical analysis of the methods used to deal with the regulatory impact assessment while proposing an alternative method to overcome some of the drawbacks of the aforementioned methods. Design/methodology/approach To achieve the objective of this work, the methods currently used in regulatory impact analysis are presented by highlighting their scope and the problems they may pose during their applications. After that, the adjusted variant of radial measure is suggested as an alternative method to the aforementioned methods while showing its relevance with regard to other methods using pertinent criteria. Finally, for concretization, a case study related to the sanctions against Russia after its invasion of Ukraine is presented. Findings The findings show that regulations related to the sanctions against Russia are good enough, with a score of 0.846. However, this score is less good in several countries like Germany (0.671), Italy (0.677) and France (0.745) and in the poorest countries. Originality/value The originality of this work resides in using a novel method in the regulatory impact analysis field, which is adjusted variant of radial measure. This method increases the effectiveness of the regulatory impact assessment.
{"title":"Methods of regulatory impact assessment: critical analysis and alternative method","authors":"Driss El Kadiri Boutchich","doi":"10.1108/jfrc-04-2023-0061","DOIUrl":"https://doi.org/10.1108/jfrc-04-2023-0061","url":null,"abstract":"\u0000Purpose\u0000This study aims to carry out a critical analysis of the methods used to deal with the regulatory impact assessment while proposing an alternative method to overcome some of the drawbacks of the aforementioned methods.\u0000\u0000\u0000Design/methodology/approach\u0000To achieve the objective of this work, the methods currently used in regulatory impact analysis are presented by highlighting their scope and the problems they may pose during their applications. After that, the adjusted variant of radial measure is suggested as an alternative method to the aforementioned methods while showing its relevance with regard to other methods using pertinent criteria. Finally, for concretization, a case study related to the sanctions against Russia after its invasion of Ukraine is presented.\u0000\u0000\u0000Findings\u0000The findings show that regulations related to the sanctions against Russia are good enough, with a score of 0.846. However, this score is less good in several countries like Germany (0.671), Italy (0.677) and France (0.745) and in the poorest countries.\u0000\u0000\u0000Originality/value\u0000The originality of this work resides in using a novel method in the regulatory impact analysis field, which is adjusted variant of radial measure. This method increases the effectiveness of the regulatory impact assessment.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-09-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47339573","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-28DOI: 10.1108/jfrc-02-2023-0019
Soumik Bhusan, Ajit Dayanandan, N. Gopal
Purpose The academic literature has examined why bank runs happen based on the work of 2022 Nobel Prize-winning economists Diamond and Dybvig. They have found the source of banking/financial crisis in terms of mismatch between liabilities (deposits being short term and savers wanting to short-term access to their money) and assets (long term and illiquid). The Lakshmi Vilas Bank (LVB) crisis intensified when it came under Prompt Corrective Action (PCA) of the Reserve Bank of India (RBI). This situation provides the opportunity to study whether the elements embodied in the theoretical models like Diamond and Dybvig hold true for LVB crisis. This study aims to examine the reasons for the demise of LVB in India using DuPont financial model, peer group analysis and time series structural break in crucial financial parameters. Design/methodology/approach The study examines the reason for insolvency of LVB using financial ratios, financial models (DuPont), financial distress model (Z-score) and asset-liability management. The study also adopts univariate structural break models using quarterly financial data covering the key financial measures used in the RBI’s PCA framework. Findings LVB crisis is like Diamond–Dybvig model, in the sense, savers requiring short-term access to their money (liquidity for their deposits) on the information of high non-performing assets, which further deteriorates the illiquid nature of loan portfolio (assets) of banks. The study finds its profit margin (net interest margin and non-interest margin) and managerial efficiency had started deteriorating since 2018. The study finds that LVB’s main weakness lies in its limited credit appraisal ability, its monitoring and weak internal controls. Lending to sensitive sectors (like real estate, capital markets and commodities) and exposure to large business groups also contributed to its weakness. The study also finds huge, elevated asset-liability mismatch, especially in the short-term maturity buckets. Using univariate econometric time series model, the study also confirms financial weakness being evident much earlier than the time when resolution was undertaken by the RBI through PCA. Research limitations/implications The study has implications for analysing and monitoring financial distress of banks. The study also has implications for devising banking regulation and supervision. Originality/value The study brings in a perspective of the banking regulations using the application of PCA framework on a listed private sector bank. The authors combine an accounting ratio model and combine risk measures that could identify the incipient risks in a bank. The authors believe this will help in refinement of banking regulations and better monitoring mechanisms.
{"title":"Bank crisis resolution in India","authors":"Soumik Bhusan, Ajit Dayanandan, N. Gopal","doi":"10.1108/jfrc-02-2023-0019","DOIUrl":"https://doi.org/10.1108/jfrc-02-2023-0019","url":null,"abstract":"\u0000Purpose\u0000The academic literature has examined why bank runs happen based on the work of 2022 Nobel Prize-winning economists Diamond and Dybvig. They have found the source of banking/financial crisis in terms of mismatch between liabilities (deposits being short term and savers wanting to short-term access to their money) and assets (long term and illiquid). The Lakshmi Vilas Bank (LVB) crisis intensified when it came under Prompt Corrective Action (PCA) of the Reserve Bank of India (RBI). This situation provides the opportunity to study whether the elements embodied in the theoretical models like Diamond and Dybvig hold true for LVB crisis. This study aims to examine the reasons for the demise of LVB in India using DuPont financial model, peer group analysis and time series structural break in crucial financial parameters.\u0000\u0000\u0000Design/methodology/approach\u0000The study examines the reason for insolvency of LVB using financial ratios, financial models (DuPont), financial distress model (Z-score) and asset-liability management. The study also adopts univariate structural break models using quarterly financial data covering the key financial measures used in the RBI’s PCA framework.\u0000\u0000\u0000Findings\u0000LVB crisis is like Diamond–Dybvig model, in the sense, savers requiring short-term access to their money (liquidity for their deposits) on the information of high non-performing assets, which further deteriorates the illiquid nature of loan portfolio (assets) of banks. The study finds its profit margin (net interest margin and non-interest margin) and managerial efficiency had started deteriorating since 2018. The study finds that LVB’s main weakness lies in its limited credit appraisal ability, its monitoring and weak internal controls. Lending to sensitive sectors (like real estate, capital markets and commodities) and exposure to large business groups also contributed to its weakness. The study also finds huge, elevated asset-liability mismatch, especially in the short-term maturity buckets. Using univariate econometric time series model, the study also confirms financial weakness being evident much earlier than the time when resolution was undertaken by the RBI through PCA.\u0000\u0000\u0000Research limitations/implications\u0000The study has implications for analysing and monitoring financial distress of banks. The study also has implications for devising banking regulation and supervision.\u0000\u0000\u0000Originality/value\u0000The study brings in a perspective of the banking regulations using the application of PCA framework on a listed private sector bank. The authors combine an accounting ratio model and combine risk measures that could identify the incipient risks in a bank. The authors believe this will help in refinement of banking regulations and better monitoring mechanisms.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-08-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44021843","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-28DOI: 10.1108/jfrc-05-2023-0073
George Kladakis, Sotirios K. Bellos, Alexandros Skouralis
Purpose This paper aims to examine the relationship between societal trust and bank asset opacity using an international sample of banks. Design/methodology/approach The authors use an international data set of banks and panel regressions. For robustness purposes, the authors use multiple measures of both societal trust and bank opacity as well as two-stage least squares regressions to address endogeneity concerns. Findings The authors find that societal trust is negatively associated with the opacity of bank portfolios. Practical implications Results of this study inform regulators on the importance of trust for the banking sector and support policies towards enhancing trust in banks. Also, a sustained environment of high levels of trust in banks can prevent the introduction of extensive prudential regulations that policymakers often use to establish trust, as well as lower the additional resources required when trust levels are low. Originality/value To the best of the authors’ knowledge, this is the first study that examines this relationship. The literature provides only limited evidence and not for the banking sector, for which opacity is of outmost importance.
{"title":"Societal trust and bank opacity","authors":"George Kladakis, Sotirios K. Bellos, Alexandros Skouralis","doi":"10.1108/jfrc-05-2023-0073","DOIUrl":"https://doi.org/10.1108/jfrc-05-2023-0073","url":null,"abstract":"\u0000Purpose\u0000This paper aims to examine the relationship between societal trust and bank asset opacity using an international sample of banks.\u0000\u0000\u0000Design/methodology/approach\u0000The authors use an international data set of banks and panel regressions. For robustness purposes, the authors use multiple measures of both societal trust and bank opacity as well as two-stage least squares regressions to address endogeneity concerns.\u0000\u0000\u0000Findings\u0000The authors find that societal trust is negatively associated with the opacity of bank portfolios.\u0000\u0000\u0000Practical implications\u0000Results of this study inform regulators on the importance of trust for the banking sector and support policies towards enhancing trust in banks. Also, a sustained environment of high levels of trust in banks can prevent the introduction of extensive prudential regulations that policymakers often use to establish trust, as well as lower the additional resources required when trust levels are low.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this is the first study that examines this relationship. The literature provides only limited evidence and not for the banking sector, for which opacity is of outmost importance.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-08-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49120225","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-25DOI: 10.1108/jfrc-12-2022-0157
Abinash Mandal, A. S.
Purpose This study aims to investigate the perceived willingness to adopt and use Forensic Accounting and Investigation Standards (FAIS) in Forensic Accounting and Investigation (FAI) assignments. The study also analyses the usefulness of FAIS in achieving the principle of natural justice (PNJ) concerning fairness. Design/methodology/approach The respondents comprised 118 accounting professionals whose online survey responses were analyzed descriptively. This study also uses a 2 × 2 contingency analysis representing two levels of usefulness and fairness. Findings The results revealed that FAIS 410 received the highest mean rating while FAIS 240 received the lowest mean rating in willingness to adopt and use FAIS, and most of the standards were related to the PNJ concerning fairness. The study shows the accounting professionals’ readiness to adapt and flourish with the help of these Standards in FAI assignments. Practical implications The findings of this study will increase practitioners’ awareness of the usefulness and fairness of FAIS, which will enhance their understanding of the significance of implementing these newly developed standards to harmonize the investigative process in forensic audits. Additionally, the findings may encourage regulators, researchers, accounting bodies and their members to adopt and conduct further FAIS studies that can advance financial crime prevention, detection and investigation knowledge. Originality/value This paper substantially contributes to the literature as it is the first to examine the usefulness and fairness of “Forensic Accounting and Investigation Standards” in the context of forensic audits and investigations, which has not been previously explored.
{"title":"Evaluating the perceived usefulness and fairness of forensic accounting and investigation standards","authors":"Abinash Mandal, A. S.","doi":"10.1108/jfrc-12-2022-0157","DOIUrl":"https://doi.org/10.1108/jfrc-12-2022-0157","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the perceived willingness to adopt and use Forensic Accounting and Investigation Standards (FAIS) in Forensic Accounting and Investigation (FAI) assignments. The study also analyses the usefulness of FAIS in achieving the principle of natural justice (PNJ) concerning fairness.\u0000\u0000\u0000Design/methodology/approach\u0000The respondents comprised 118 accounting professionals whose online survey responses were analyzed descriptively. This study also uses a 2 × 2 contingency analysis representing two levels of usefulness and fairness.\u0000\u0000\u0000Findings\u0000The results revealed that FAIS 410 received the highest mean rating while FAIS 240 received the lowest mean rating in willingness to adopt and use FAIS, and most of the standards were related to the PNJ concerning fairness. The study shows the accounting professionals’ readiness to adapt and flourish with the help of these Standards in FAI assignments.\u0000\u0000\u0000Practical implications\u0000The findings of this study will increase practitioners’ awareness of the usefulness and fairness of FAIS, which will enhance their understanding of the significance of implementing these newly developed standards to harmonize the investigative process in forensic audits. Additionally, the findings may encourage regulators, researchers, accounting bodies and their members to adopt and conduct further FAIS studies that can advance financial crime prevention, detection and investigation knowledge.\u0000\u0000\u0000Originality/value\u0000This paper substantially contributes to the literature as it is the first to examine the usefulness and fairness of “Forensic Accounting and Investigation Standards” in the context of forensic audits and investigations, which has not been previously explored.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-08-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45926247","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-08-07DOI: 10.1108/jfrc-01-2023-0001
Sunil Sangwan, N. Nayak, Vikas Sangwan
Purpose Regulation is critical for sustainable microfinance sector growth. Under this premise, the study aims to examine the different regulatory noncompliance (RNC) practices prevalent in the operations of microfinance institutions (MFIs) at the ground level. Design/methodology/approach Both the quantitative and qualitative (observations, interviews and focus group discussions) techniques are used to extract the findings. Findings The study highlights the different RNC practices exercised by the loan officers at the field level in their microfinance loan disbursements. Originality/value This study is based on the primary data collected from microfinance clients. The arguments put forth for the RNC practices are extracted from direct personal interviews with the loan officers and the clients. The role of various dilemmas/circumstances of the loan officers and the beneficiaries that implicate the MFIs in RNC is highlighted.
{"title":"Regulatory non-compliances in microfinance operations: a survey of Indian microfinance institutions","authors":"Sunil Sangwan, N. Nayak, Vikas Sangwan","doi":"10.1108/jfrc-01-2023-0001","DOIUrl":"https://doi.org/10.1108/jfrc-01-2023-0001","url":null,"abstract":"\u0000Purpose\u0000Regulation is critical for sustainable microfinance sector growth. Under this premise, the study aims to examine the different regulatory noncompliance (RNC) practices prevalent in the operations of microfinance institutions (MFIs) at the ground level.\u0000\u0000\u0000Design/methodology/approach\u0000Both the quantitative and qualitative (observations, interviews and focus group discussions) techniques are used to extract the findings.\u0000\u0000\u0000Findings\u0000The study highlights the different RNC practices exercised by the loan officers at the field level in their microfinance loan disbursements.\u0000\u0000\u0000Originality/value\u0000This study is based on the primary data collected from microfinance clients. The arguments put forth for the RNC practices are extracted from direct personal interviews with the loan officers and the clients. The role of various dilemmas/circumstances of the loan officers and the beneficiaries that implicate the MFIs in RNC is highlighted.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-08-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47671001","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-20DOI: 10.1108/jfrc-01-2023-0007
H. Luu, P. Vu, Dung Thuy Thi Nguyen, T. Hoang
Purpose The paper aims to examine the impact of tighter banking regulation on banks’ loan loss provisioning in an emerging market context. Design/methodology/approach The authors exploit the adoption of the Basel II Accord in Vietnam as a quasi-natural experiment and use Difference-to-Difference (DiD) method to examine the impact of tighter banking regulation on Vietnamese banks’ provisioning during the period of 2010–2019. Findings The paper finds that affected banks (i.e. those taking part in the pilot adoption programme) manage to reduce their provisions significantly compared to their control peers in the post-adoption period. More importantly, this paper further finds that the affected banks manage their provisions primarily for incomes smoothing and signalling. This paper also finds that those banks expand their lending significantly and experience an increase in financial performance in the post-adoption period. Overall, the results provide supports for the “borrowing from the future” proposition that banks may perceive that a tighter banking regulation provides them with growth opportunities, so they have the tendency to manipulate their provisions to facilitate their current income. Originality/value This paper contributes to the established literature on the manipulation of bank provisioning as well as the impact of banking regulation, and especially Basel II on bank economic decisions. As compared to prior literature, the adoption of Basel II in Vietnam provided an ideal shock for us to conduct a DiD design to estimate the causal impact of tighter banking regulation on banks’ provisioning practices.
{"title":"The impact of tighter banking regulation on bank loan loss provisioning: empirical evidence from a quasi-natural experiment","authors":"H. Luu, P. Vu, Dung Thuy Thi Nguyen, T. Hoang","doi":"10.1108/jfrc-01-2023-0007","DOIUrl":"https://doi.org/10.1108/jfrc-01-2023-0007","url":null,"abstract":"\u0000Purpose\u0000The paper aims to examine the impact of tighter banking regulation on banks’ loan loss provisioning in an emerging market context.\u0000\u0000\u0000Design/methodology/approach\u0000The authors exploit the adoption of the Basel II Accord in Vietnam as a quasi-natural experiment and use Difference-to-Difference (DiD) method to examine the impact of tighter banking regulation on Vietnamese banks’ provisioning during the period of 2010–2019.\u0000\u0000\u0000Findings\u0000The paper finds that affected banks (i.e. those taking part in the pilot adoption programme) manage to reduce their provisions significantly compared to their control peers in the post-adoption period. More importantly, this paper further finds that the affected banks manage their provisions primarily for incomes smoothing and signalling. This paper also finds that those banks expand their lending significantly and experience an increase in financial performance in the post-adoption period. Overall, the results provide supports for the “borrowing from the future” proposition that banks may perceive that a tighter banking regulation provides them with growth opportunities, so they have the tendency to manipulate their provisions to facilitate their current income.\u0000\u0000\u0000Originality/value\u0000This paper contributes to the established literature on the manipulation of bank provisioning as well as the impact of banking regulation, and especially Basel II on bank economic decisions. As compared to prior literature, the adoption of Basel II in Vietnam provided an ideal shock for us to conduct a DiD design to estimate the causal impact of tighter banking regulation on banks’ provisioning practices.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45967976","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-20DOI: 10.1108/jfrc-01-2023-0012
H. Bui, Zoltán Krajcsák
Purpose This study aims to investigate the relationship between corporate governance (CG) and financial performance in the case of publicly listed companies in Vietnam for the period from 2019 to 2021. The topic is crucial in understanding how effective governance practices can influence the financial outcomes of companies. The study sheds light on the link between CG practice and firm financial performance. It also provides insights for policymakers and practitioners to improve CG practices. Design/methodology/approach Due to the potential dynamic endogeneity in CG research, this study uses the generalized system methods of moments to effectively address the endogeneity problem. Financial performance is measured by Tobin’s Q, return on equity (ROE) and return on assets (ROA). Based on organization for economic cooperation and development (OECD) standards, these indices were calculated to assess the influence of CG practices on corporate financial performance, namely, for accounting information (ROA and ROE) and market performance (Tobin’s Q and service à resglement différé (SRD) – stock price volatility) for the period 2019–2021. In addition, the study examines the relationship between changes in the CG index and changes in financial performance. Findings The study’s main objective is to determine the relationship between CG performance scores and financial performance. The study found a positive relationship between transparency disclosure and financial performance and a positive correlation between CG and company size. The COVID-19 pandemic caused a decrease in transparency and information index scores in 2021 compared to 2019 and 2020 due to delayed General Meetings of Shareholders. The study failed to find a relationship between shareholder rights index (“cg_rosh”) and board responsibility (“cg_reob”) and financial performance, concerning which the findings of this study differ from those of previous studies. Reasons are put forward for these anomalies. Originality/value Policymakers need to develop a set of criteria for assessing CG practices. They also need to promulgate specific regulations for mandatory and voluntary information disclosure and designate a competent authority to certify the transparency of company information. The study also suggests that companies should develop CG regulations and focus on regulations relating to the business culture or ethics, as well as implementing a system to ensure equal treatment among shareholders. The study found that good CG practices can positively contribute to a company’s financial performance, which is crucial for investors to evaluate the quality of CG practices for each listed company so that investment risks can be limited.
{"title":"The impacts of corporate governance on firms’ performance: from theories and approaches to empirical findings","authors":"H. Bui, Zoltán Krajcsák","doi":"10.1108/jfrc-01-2023-0012","DOIUrl":"https://doi.org/10.1108/jfrc-01-2023-0012","url":null,"abstract":"\u0000Purpose\u0000This study aims to investigate the relationship between corporate governance (CG) and financial performance in the case of publicly listed companies in Vietnam for the period from 2019 to 2021. The topic is crucial in understanding how effective governance practices can influence the financial outcomes of companies. The study sheds light on the link between CG practice and firm financial performance. It also provides insights for policymakers and practitioners to improve CG practices.\u0000\u0000\u0000Design/methodology/approach\u0000Due to the potential dynamic endogeneity in CG research, this study uses the generalized system methods of moments to effectively address the endogeneity problem. Financial performance is measured by Tobin’s Q, return on equity (ROE) and return on assets (ROA). Based on organization for economic cooperation and development (OECD) standards, these indices were calculated to assess the influence of CG practices on corporate financial performance, namely, for accounting information (ROA and ROE) and market performance (Tobin’s Q and service à resglement différé (SRD) – stock price volatility) for the period 2019–2021. In addition, the study examines the relationship between changes in the CG index and changes in financial performance.\u0000\u0000\u0000Findings\u0000The study’s main objective is to determine the relationship between CG performance scores and financial performance. The study found a positive relationship between transparency disclosure and financial performance and a positive correlation between CG and company size. The COVID-19 pandemic caused a decrease in transparency and information index scores in 2021 compared to 2019 and 2020 due to delayed General Meetings of Shareholders. The study failed to find a relationship between shareholder rights index (“cg_rosh”) and board responsibility (“cg_reob”) and financial performance, concerning which the findings of this study differ from those of previous studies. Reasons are put forward for these anomalies.\u0000\u0000\u0000Originality/value\u0000Policymakers need to develop a set of criteria for assessing CG practices. They also need to promulgate specific regulations for mandatory and voluntary information disclosure and designate a competent authority to certify the transparency of company information. The study also suggests that companies should develop CG regulations and focus on regulations relating to the business culture or ethics, as well as implementing a system to ensure equal treatment among shareholders. The study found that good CG practices can positively contribute to a company’s financial performance, which is crucial for investors to evaluate the quality of CG practices for each listed company so that investment risks can be limited.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42245001","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-07-07DOI: 10.1108/jfrc-03-2023-0033
Riffat Hasan, O. Kruse
Purpose The purpose of this paper is to analyse and investigate how intensified regulatory requirements related to outsourcing have influenced and changed the outsourcing activities of German financial institutions. Design/methodology/approach The study involved interviewing 11 outsourcing experts in the German financial sector, including four of the five largest banks in Germany. In coding and analysing the collected data, this study adopted the approach of a qualitative content analysis framework. Findings The study found that the revised legal requirements have had a significant and potentially negative impact on the efficiency of outsourcing, leading to a necessity for German financial institutions to internally realign their outsourcing managements. The study further revealed practical realigned methods German financial institutions executed to meet the legal requirements. Originality/value The impact, meaning and relevance of legal requirements in the outsourcing environment of German financial institutions has been relatively under-researched from a qualitative perspective and focused on other primary fields of investigation like outsourcing decisions and outcomes. This study has, by adopting a qualitative approach, addressed the identified gap by providing first-hand insights and new knowledge.
{"title":"The impact of regulatory requirements on German financial institutions’ outsourcing arrangements","authors":"Riffat Hasan, O. Kruse","doi":"10.1108/jfrc-03-2023-0033","DOIUrl":"https://doi.org/10.1108/jfrc-03-2023-0033","url":null,"abstract":"\u0000Purpose\u0000The purpose of this paper is to analyse and investigate how intensified regulatory requirements related to outsourcing have influenced and changed the outsourcing activities of German financial institutions.\u0000\u0000\u0000Design/methodology/approach\u0000The study involved interviewing 11 outsourcing experts in the German financial sector, including four of the five largest banks in Germany. In coding and analysing the collected data, this study adopted the approach of a qualitative content analysis framework.\u0000\u0000\u0000Findings\u0000The study found that the revised legal requirements have had a significant and potentially negative impact on the efficiency of outsourcing, leading to a necessity for German financial institutions to internally realign their outsourcing managements. The study further revealed practical realigned methods German financial institutions executed to meet the legal requirements.\u0000\u0000\u0000Originality/value\u0000The impact, meaning and relevance of legal requirements in the outsourcing environment of German financial institutions has been relatively under-researched from a qualitative perspective and focused on other primary fields of investigation like outsourcing decisions and outcomes. This study has, by adopting a qualitative approach, addressed the identified gap by providing first-hand insights and new knowledge.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-07-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44830723","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-28DOI: 10.1108/jfrc-08-2022-0099
Daniel Ofori‐Sasu, B. Mekpor, Eunice Adu-Darko, E. Sarpong-Kumankoma
Purpose This paper aims to examine the interaction effect of regulations (monetary and macro-prudential) in explaining the possible non-linear effect of bank risk exposures (credit risk and insolvency risk) on banking stability in Africa. Design/methodology/approach The study uses a two-step system generalized method of moments (GMM) estimator for a data set of banks across 54 African countries over the period 2006–2020. Findings The authors find that the relationships between bank credit risk–bank stability and bank insolvency risk–bank stability are non-linear and characterized by the presence of optimal thresholds, which are 5.3456 for credit risk and 2.3643 for insolvency. Contrary to their positive effects below these optimal thresholds, credit risk and insolvency risk become negatively linked to bank stability in Africa. The authors find that macro-prudential action and monetary policy both have a positive and significant relationship with bank stability. The authors provide evidence to support that the marginal effect of excessive credit risk and insolvency risk on bank stability is reduced when interacted with monetary and macro-prudential regulations, and the impact is significant in strong institutional environment. Research limitations/implications Future research should extend data to include developing and emerging economies in the world. Also, policymakers, researchers and practitioners should consider different regulatory and institutional frameworks in explaining the relationship between the thresholds of bank risk exposures and bank stability in the world. Practical implications Regulatory authorities should have to deeply reform their financial systems, develop risk-based regulatory framework and effective supervision mechanism relating to appropriate techniques that maintain an optimal and desired level of bank risks and risk-taking behaviours required to ensure a stable banking system. Originality/value To the best of the authors’ knowledge, this is the first study to examine how different regulatory frameworks shape the non-linear impact of bank risk exposures on bank stability in Africa.
{"title":"Bank risk exposures and bank stability in Africa: the role of regulations in a non-linear model","authors":"Daniel Ofori‐Sasu, B. Mekpor, Eunice Adu-Darko, E. Sarpong-Kumankoma","doi":"10.1108/jfrc-08-2022-0099","DOIUrl":"https://doi.org/10.1108/jfrc-08-2022-0099","url":null,"abstract":"\u0000Purpose\u0000This paper aims to examine the interaction effect of regulations (monetary and macro-prudential) in explaining the possible non-linear effect of bank risk exposures (credit risk and insolvency risk) on banking stability in Africa.\u0000\u0000\u0000Design/methodology/approach\u0000The study uses a two-step system generalized method of moments (GMM) estimator for a data set of banks across 54 African countries over the period 2006–2020.\u0000\u0000\u0000Findings\u0000The authors find that the relationships between bank credit risk–bank stability and bank insolvency risk–bank stability are non-linear and characterized by the presence of optimal thresholds, which are 5.3456 for credit risk and 2.3643 for insolvency. Contrary to their positive effects below these optimal thresholds, credit risk and insolvency risk become negatively linked to bank stability in Africa. The authors find that macro-prudential action and monetary policy both have a positive and significant relationship with bank stability. The authors provide evidence to support that the marginal effect of excessive credit risk and insolvency risk on bank stability is reduced when interacted with monetary and macro-prudential regulations, and the impact is significant in strong institutional environment.\u0000\u0000\u0000Research limitations/implications\u0000Future research should extend data to include developing and emerging economies in the world. Also, policymakers, researchers and practitioners should consider different regulatory and institutional frameworks in explaining the relationship between the thresholds of bank risk exposures and bank stability in the world.\u0000\u0000\u0000Practical implications\u0000Regulatory authorities should have to deeply reform their financial systems, develop risk-based regulatory framework and effective supervision mechanism relating to appropriate techniques that maintain an optimal and desired level of bank risks and risk-taking behaviours required to ensure a stable banking system.\u0000\u0000\u0000Originality/value\u0000To the best of the authors’ knowledge, this is the first study to examine how different regulatory frameworks shape the non-linear impact of bank risk exposures on bank stability in Africa.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-06-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49239893","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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