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.

Efficiency and total factor productivity changes of Malaysian commercial banks

This paper analyses the efficiency of Malaysian commercial banks between 1996 and 2002 and finds that while the East Asian financial crisis caused a short-term increase in efficiency in 1998 primarily due to cost-cutting, increases in non-performing loans after the crisis caused a more sustained decline in bank efficiency. It is also found that mergers, fully Islamic banks, and conventional banks operating Islamic banking windows are all associated with lower efficiency. The paper estimates suggest mild decreasing returns to scale, and an average productivity change of 2.37% that is primarily attributable to technical change, which has nonetheless declined over time. Finally, while Islamic banks have been moderately successful in developing new products and technologies, the results suggest that the potential for Islamic banks to overcome their relative inefficiency is limited.

The efficiency and productivity of Malaysian banks:an output distance function approach

This study employs stochastic frontier analysis to analyze Malaysian commercial banks during 1996-2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in outputs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalised Malmquist productivity index. On average, Malaysian banks experience mild decreasing return to scale and annual productivity change of 2.37 percent, with the latter driven primarily by technical change, which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. In addition, our productivity estimates indicate that the potential for full-fledged Islamic banks and conventional banks with Islamic banking operations to overcome the output disadvantages associated with Islamic banking are relatively limited. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had an interim output-increasing effect in 1998, the crisis prompted a continuing negative impact on the output performance by increasing the volume of non-performing loans.

A note on the modelling the efficiency of top Arab banks

The major aim of this research is benchmarking top Arab banks using Data Envelopment Analysis (DEA) technique and to compare the results with that of published recently in Mostafa (2007a,b) [Mostafa, M. M. (2007a). Modeling the efficiency of top Arab banks: A DEA–neural network approach. Expert Systems with Applications, doi:10.1016/j.eswa.2007.09.001; Mostafa M. M. (2007b), Benchmarking top Arab banks’ efficiency through efficient frontier analysis, Industrial Management & Data Systems, 107(6) 802–823]. Data for 85 Arab banks used to conduct the analysis of relative efficiency. Our findings indicate that (1) the efficiency of Arab banks reported in Mostafa (2007a,b) is incorrect, hence, readers should take extra caution of using such results, (2) the corrected efficiency scores suggest that there is potential for significant improvements in Arab banks. In summary, this study overcomes with some data and methodology issues in measuring efficiency of Arab banks and highlights the importance of encouraging increased efficiency throughout the banking industry in the Arab world using the new results.

West German bank advertising and the East German public:a study in intercultural advertising communication

In the wake of German unification, initial advertising by many West German companies in the new federal states (the former German Democratic Republic - GDR) proved largely ineffective and many advertisers were forced to change their approach to this new market. The advertising task proved even more complicated for banks, because banking existed only at the most basic level in the former GDR. Furthermore, under the old regime, "capitalist" banks represented the very antithesis of the GDR's founding ideology. This analysis of advertising by West German banks - in particular Dresdner Bank - in the new federal states brings together elements of discourse and communication theory, particularly Relevance Theory [Sperber and Wilson 1986], with the overall objective of designing a model of intercultural advertising communication. A series of simple association tasks based on texts from pre-Wende advertisements was completed by a sample of advertisees (as they are called in the study) in Leipzig. The research shows the lack of relevance between the advertiser's understanding of concepts such as "credit", "bank" etc. and the associations which these concepts have for the sample of advertisees. Further analysis reveals that this lack of relevance occurs because advertisers and advertisees assign differing contexts to these concepts when they communicate through advertising. The study concludes that these different contexts, governed by the contrasting ideological, economic and linguistic environments of the advertisers and advertisees, interfere with the effective communication of the advertising message.

Evaluating productive efficiency:comparative study of commercial banks in Gulf countries

Financial institutes are an integral part of any modern economy. In the 1970s and 1980s, Gulf Cooperation Council (GCC) countries made significant progress in financial deepening and in building a modern financial infrastructure. This study aims to evaluate the performance (efficiency) of financial institutes (banking sector) in GCC countries. Since, the selected variables include negative data for some banks and positive for others, and the available evaluation methods are not helpful in this case, so we developed a Semi Oriented Radial Model to perform this evaluation. Furthermore, since the SORM evaluation result provides a limited information for any decision maker (bankers, investors, etc...), we proposed a second stage analysis using classification and regression (C&R) method to get further results combining SORM results with other environmental data (Financial, economical and political) to set rules for the efficient banks, hence, the results will be useful for bankers in order to improve their bank performance and to the investors, maximize their returns. Mainly there are two approaches to evaluate the performance of Decision Making Units (DMUs), under each of them there are different methods with different assumptions. Parametric approach is based on the econometric regression theory and nonparametric approach is based on a mathematical linear programming theory. Under the nonparametric approaches, there are two methods: Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH). While there are three methods under the parametric approach: Stochastic Frontier Analysis (SFA); Thick Frontier Analysis (TFA) and Distribution-Free Analysis (DFA). The result shows that DEA and SFA are the most applicable methods in banking sector, but DEA is seem to be most popular between researchers. However DEA as SFA still facing many challenges, one of these challenges is how to deal with negative data, since it requires the assumption that all the input and output values are non-negative, while in many applications negative outputs could appear e.g. losses in contrast with profit. Although there are few developed Models under DEA to deal with negative data but we believe that each of them has it is own limitations, therefore we developed a Semi-Oriented-Radial-Model (SORM) that could handle the negativity issue in DEA. The application result using SORM shows that the overall performance of GCC banking is relatively high (85.6%). Although, the efficiency score is fluctuated over the study period (1998-2007) due to the second Gulf War and to the international financial crisis, but still higher than the efficiency score of their counterpart in other countries. Banks operating in Saudi Arabia seem to be the highest efficient banks followed by UAE, Omani and Bahraini banks, while banks operating in Qatar and Kuwait seem to be the lowest efficient banks; this is because these two countries are the most affected country in the second Gulf War. Also, the result shows that there is no statistical relationship between the operating style (Islamic or Conventional) and bank efficiency. Even though there is no statistical differences due to the operational style, but Islamic bank seem to be more efficient than the Conventional bank, since on average their efficiency score is 86.33% compare to 85.38% for Conventional banks. Furthermore, the Islamic banks seem to be more affected by the political crisis (second Gulf War), whereas Conventional banks seem to be more affected by the financial crisis.

Efficiency analysis of Islamic banks:a case of Gulf Cooperation Council (GCC)

Although considerable effort has been invested in the measurement of banking efficiency using Data Envelopment Analysis, hardly any empirical research has focused on comparison of banks in Gulf States Countries This paper employs data on Gulf States banking sector for the period 2000-2002 to develop efficiency scores and rankings for both Islamic and conventional banks. We then investigate the productivity change using Malmquist Index and decompose the productivity into technical change and efficiency change. Further, hypothesis testing and statistical precision in the context of nonparametric efficiency and productivity measurement have been used. Specially, cross-country analysis of efficiency and comparisons of efficiencies between Islamic banks and conventional banks have been investigated using Mann-Whitney test.

The influence of culture and market orientation on services brands:insights from Irish banking and retail firms

Purpose: This paper aims to examine the influence of the culture of the service firm on its interpretation of the role of the brand and on the development and implementation of its brand values. Design/methodology/approach: A grounded theory approach was used. Interviews were conducted with 20 managers within two leading banking firms in Ireland and two leading grocery retailers in Ireland. Findings: The development of the brand, and its role within the firm, is closely related to the firm's culture. The research shows obstacles and opportunities created by the cultural context of firms wishing to disseminate and embed a set of brand values. The paper presents an "involvement model" of brand values implementation and outlines changes required to implement brand values. Research limitations/implications: The study was bound by access to firms, and managers' availability. The authors sought an insight into the relationship between each firm's culture and its brands. They advocate quantitative research to further investigate the findings within these service sectors and to test proposed antecedents (transformational leadership, employee involvement) and outcomes (employee-based brand equity and consumer-based brand equity) of values adoption. Practical implications: The paper identifies aspects of retail and banking cultures which support or detract from brand development. In particular, it presents the learnings from successful brand values implementation in a clan culture, aspects of which are applicable across other cultures. Originality/value: The paper provides valuable insights into the role of the brand within the service firm and the positive and negative influence of context on brand values and their development and implementation. © Emerald Group Publishing Limited.

The real effects of banking supervision:evidence from enforcement actions

We present a novel way to examine macro-financial linkages by focusing on the real effects of bank supervisors’ enforcement actions. Exploiting plausibly exogenous variation in supervisory monitoring intensity, we show that enforcement actions in single-market banks trigger temporarily large adverse effects for the macroeconomy by reducing personal income growth, the number of establishments, and increasing unemployment. These effects are related to contractions in bank lending and liquidity creation, and are more pronounced when we consider enforcement actions on both single-market and multi-market banks, and in counties with fewer banks and greater external financial dependence.

Integration and devolvement of human resource practices in Nepal

Purpose: The purpose of this study is to explore the nature of human resource management in publicly listed finance sector companies in Nepal. In particular, it explores the extent to which HR practice is integrated into organisational strategy and devolved to line management. Design/methodology/ approach: A structured interview was conducted with the senior executive responsible for human resource management in 26 commercial banks and insurance companies in Nepal. Findings: The degree of integration of HR practice appears to be increasing within this sector, but this is dependent on the maturity of the organisations. The devolvement of responsibility to line managers is at best partial, and in the case of the insurance companies, it is more out of necessity due to the absence of a strong central HR function. Research limitations/implications: The survey is inevitably based on a small sample; however this represents 90 per cent of the relevant population. The data suggest that Western HR is making inroads into more developed aspects of Nepalese business. Compared with Nepalese business as a whole, the financial sector appears relatively Westernised, although Nepal still lags India in its uptake of HR practices. Practical implications: It appears unlikely from a cultural perspective that the devolvement of responsibility will be achieved as a result of HR strategy. National cultural, political and social factors continue to be highly influential in shaping the Nepalese business environment. Originality/value: Few papers have explored HR practice in Nepal. This paper contributes to the overall assessment of HR uptake globally and highlights emic features impacting on that uptake. © Emerald Group Publishing Limited.

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.

International retail restructuring and divestment: the experience of Tesco

A key purpose of this study is to explore the lessons learned from international retail divestment and market withdrawal experiences. Drawing on 33 in-depth interviews with leading investment banks and key retail executives at Tesco, the study investigates the company's international restructuring and divestment activities in Ireland and France during the mid -1980s and 1990s. It has been demonstrated that, despite the progressive merger and acquisition wave sweeping through the corporate retail landscape recently, international retail divestment is quite widespread. The main conclusion from this study is that Tesco originally did not envisage divestment or de-internationalisation as part of the original internationalisation strategy process in either the acquisition of Three Guys in Ireland or Catteau in France. There was no appreciation from Tesco during their early period of expansion of the fact that exit pressures might arise during the course of market entry. In this regard, the case study provides insights into the relationship between investment and divestment within the context of international retail restructuring. The case evidence also demonstrates the positive impact of the Three Guys and Catteau divestments which helped management to refocus and rejuvenate the company's internationalisation process.

Credit and collateral

Collateral - generally defined as an asset used to provide security for a lender's loan - is an important feature of credit contracts and all the available evidence suggests that its use is getting more pervasive. This informative book builds upon recent research into this topic. Sena analyses three case-studies that revolve around the impact that financial constraints have on economic outcomes. In the first case-study, the relationship between firms' technical efficiency and increasing financial pressure is explored. The author then goes on to show, in the second case study, that under specific circumstances, increasing financial pressure and increasing product market competition can jointly have a positive impact on firms' technical efficiency, while not being true for all types of firms. In the third case, she analyses the impact that finance constraints have on women's start-ups. Unique and revealing, this is the first book to deal so extensively with the topic of collateral, and as such, is a valuable reference to postgraduates and professionals in the fields of macroeconomics, monetary and business economics. © 2008 Vania Sena. All rights reserved.

The link between HR practices, psychological contract fulfillment, and organizational performance:the case of the Greek services sector

The purpose of this study is to investigate the impact of human resource (HR) practices on organizational performance through the mediating role of psychological contract (expressed by the influence of employer on employee promises fulfillment through employee attitudes). The study is based on a national sample of 78 organizations from the public and private services sector in Greece, including education, health, and banking, and on data obtained from 348 employees. The statistical method employed is structural equation modeling, via LISREL and bootstrapping estimation. The findings of the study suggest that employee incentives, performance appraisal, and employee promotion are three major HR practices that must be extensively employed. Furthermore, the study suggests that the organization must primarily keep its promises about a pleasant and safe working environment, respectful treatment, and feedback for performance, in order for employees to largely keep their own promises about showing loyalty to the organization, maintaining high levels of attendance, and upholding company reputation. Additionally, the study argues that the employee attitudes of motivation, satisfaction, and commitment constitute the nested epicenter mediating construct in both the HR practices–performance and employer–employee promise fulfillment relationships, resulting in superior organizational performance. © 2012 Wiley Periodicals, Inc.