Cost economies, efficiency and productivity growth in the Chinese banking industry:evidence from a quarterly panel dataset

This article examines cost economies, productivity growth and cost efficiency of the Chinese banks using a unique panel dataset that identifies banks' four outputs and four input prices over the period of 1995-2001. By assessing the appropriateness of model specification, and making use of alternative methodologies in evaluating the performance of banks, we find that the joint-stock commercial banks outperform state-owned commercial banks in productivity growth and cost efficiency. Under the variable cost assumption, Chinese banks display economies of scale, with state-owned commercial banks enjoying cost advantages over the joint-stock commercial banks. Consequently, our results highlight the ownership advantage of these two types of banks and generally support the ongoing banking reform and transformation that is currently taking place in China.

Does the Chinese banking system promote the growth of firms?

Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results.

Institutional work taken literally: How logics shift as banking lawyers 'get the deal done'

The role of interest and agency in the creation and transformation of institutions, in particular the “paradox of embedded agency” (Seo & Creed, 2002) have long puzzled institutional scholars. Most recently, Lawrence and Suddaby (2006) coined the term “institutional work” to describe various strategies for creating, maintaining and disrupting institutions. This label, while useful to integrate existing research, highlights institutionalists’ lack of attention to work as actors’ everyday occupational tasks and activities. Thus, the objective of this study is to take institutional work literally and ask: How does practical work come to constitute institutional work? Drawing on concepts of “situated change” (Orlikowski, 1996) I supplement existing macro-level perspectives of change with a microscopic, practice-based alternative. I examine the everyday work of English and German banking lawyers in a global law firm. Located at the intersection of local laws, international financial markets, commercial logics and professional norms, banking lawyers’ work regularly bridges different normative settings. Hence, they must constructively negotiate contradictory meanings, practices and logics to develop shared routines that resonate with different normative frameworks and facilitate task accomplishment. Based on observation and interview data, the paper distils a process model of banking transac-tions that highlights the critical interfaces forcing English and German banking lawyers into cross-border sensemaking. It distinguishes two accounts of cross-border sensemaking: the “old story” in which contradictory practices and norms collide and the “new story” of a synthetic set of practices for collaboratively “editing” (Sahlin-Andersson, 1996) legal documentation. Data show how new practices gain shape and legitimacy over a series of dialectic contests unfolding at work and how, in turn, these contests shift institutional logics as lawyers ‘get the deal done’. These micro-mechanisms suggest that as practical and institutional work blend, everyday work-ing practices come to constitute a form of institutional agency that is situated, emergent, dialectic and, therefore, embedded.

Does lending behaviour of banks in emerging economies vary by ownership? Evidence from the Indian banking sector

While much has been discussed about the relationship between ownership and financial performance of banks in emerging markets, literature about cross-ownership differences in credit market behaviour of banks in emerging economies is sparse. Using a portfolio choice model and bank-level data from India for 9 years (1995–96 to 2003–04), we examine banks’ behaviour in the context of credit markets of an emerging market economy. Our results indicate that, in India, the data for the domestic banks fit well the aforementioned portfolio-choice model, especially for private banks, but the model cannot explain the behaviour of foreign banks. In general, allocation of assets between risk-free government securities and risky credit is affected by past allocation patterns, stock exchange listing (for private banks), risk averseness of banks, regulations regarding treatment of NPA, and ability of banks to recover doubtful credit. It is also evident that banks deal with changing levels of systematic risk by altering the ratio of securitized to non-securitized credit.

How important is ownership in a market with a level playing field? The Indian banking sector revisited

Private ownership of firms is often argued to lead to better firm performance than public ownership. However, the theoretical literature and the empirical evidence indicate that agency problems may affect the performance of privately owned firms. At the same time, competition and hard budget constraints can induce state-owned firms to operate efficiently. In India, banking sector reforms and deregulation were initiated in 1992, encouraging entry and establishing a level playing field for all banks. Data for the financial years 1995–1996 through 2000–2001 suggest that, by 1999–2000, ownership was no longer a significant determinant of performance. Rather, competition induced public-sector banks to eliminate the performance gap that existed between them and both domestic and foreign private-sector banks.

Does ownership always matter? Evidence from the Indian banking industry

Existing empirical evidence on the ownership-performance issue is weighted towards the property rights hypothesis that private enterprises are superior to public enterprises. However, very few studies examine a developing country in which the strong link between the market for corporate control and the efficiency of private enterprises assumed by the property rights hypothesis may not be satisfied. Our study of the Indian banking industry confirms our expectation that, in the absence of well-functioning capital markets, there may not be significant differences in the performance of private and public enterprises. Our analysis highlights the importance of creating appropriate institutions prior to pursuing privatization in developing countries.

The relative influence of organisational commitment and job-satisfaction on service quality of customer-contact employees in banking call centres

An inter-disciplinary approach is adopted to provide a deeper understanding of the human resource-service quality relationship. The paper tests the relationships organisational commitment and job satisfaction have with service quality of customer-contact employees. Hypotheses are constructed by reviewing literature in the areas of human resource management and services marketing. A study comprising 342 employees was conducted in four telephone call centres of a major UK retail bank. Investigates how different forms of organisational commitment and job satisfaction influence the service quality delivered by contact employees. Findings indicate that job satisfaction and organisational commitment of employees have a significant impact on service quality delivered. The affective component of commitment was found to be more important than job satisfaction in determining service quality of customer-contact employees.

Comparing methods to separate treatment from self-selection effects in an online banking setting

The literature discusses several methods to control for self-selection effects but provides little guidance on which method to use in a setting with a limited number of variables. The authors theoretically compare and empirically assess the performance of different matching methods and instrumental variable and control function methods in this type of setting by investigating the effect of online banking on product usage. Hybrid matching in combination with the Gaussian kernel algorithm outperforms the other methods with respect to predictive validity. The empirical finding of large self-selection effects indicates the importance of controlling for these effects when assessing the effectiveness of marketing activities.

An investigation into the acceptance of online banking in Saudi Arabia

Although a regional leader, Internet banking in Saudi Arabia is yet to be fully utilised as a value-adding tool to improve customer relationships and achieve cost advantages. The aim of this study was to identify the factors that encourage customers to adopt online banking in Saudi Arabia. The research constructs were developed based on the technology acceptance model (TAM) and incorporated some extra important control variables. The model was empirically verified to examine the factors influencing the online banking adoption behaviour of 400 customers. The findings of the study suggests that the quality of the Internet connection, the awareness of online banking and its benefits, the social influence and computer self-efficacy have significant effects on the perceived usefulness (PU) and perceived ease of use (PEOU) of online banking acceptance. Education, trust and resistance to change also have significant impact on the attitude towards the likelihood of adopting online banking. The implications of the findings are discussed and suggestions for future research are presented.

Corporate governance and accounting conservatism:evidence from the banking industry

Research Question/Issue: In this paper, we empirically investigate whether US listed commercial banks with effective corporate governance structures engage in higher levels of conservative financial accounting and reporting. Research Findings/Insights: Using both market- and accrual-based measures of conservatism and both composite and disaggregated governance indices, we document convincing evidence that well-governed banks engage in significantly higher levels of conditional conservatism in their financial reporting practices. For example, we find that banks with effective governance structures, particularly those with effective board and audit governance structures, recognize loan loss provisions that are larger relative to changes in nonperforming loans compared to their counterparts with ineffective governance structures. Theoretical/Academic Implications: We contribute to the extant literature on the relationship between corporate governance and quality of accounting information by providing evidence that banks with effective governance structures practice higher levels of accounting conservatism. Practitioner/Policy Implications: The findings of this study would be useful to US bank regulators/supervisors in improving the existing regulatory framework by focusing on accounting conservatism as a complement to corporate governance in mitigating the opaqueness and intense information asymmetry that plague banks.

Do foreign direct investment (FDI) and trade openness explain the disparity in ICT diffusion between Asia-Pacific and the Islamic Middle Eastern countries?

This study investigates the impact of FDI and trade openness on ICT diffusion in the Asia-Pacific and Middle East regions from 1996-2005. The results indicate that while dissimilarities exist between the economies included in this study in terms of their level of socio-economic and political development, education and the growth of GDP have had a positive impact on ICT diffusion in both regions. However, while FDI has generally had a positive and significant impact on ICT diffusion in Asia-Pacific economies, its impact on Middle Eastern economies has been detrimental. The results of this study also show that trade-openness has had, in general, a positive and significant impact on ICT diffusion. Copyright © 2010, IGI Global.