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Commercial Banking
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Commercial Banking

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Banking and Finance".

Deadline for manuscript submissions: closed (28 February 2021) | Viewed by 40721

Printed Edition Available!
A printed edition of this Special Issue is available here.

Special Issue Editor

Prof. Dr. Christopher Gan

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Guest Editor
Department of Financial and Business Systems, Faculty of Agribusiness & Commerce, Lincoln University, Christchurch 7467, New Zealand
Interests: commercial banking; micro-finance; rural finance; development economics; financial economics; Asian economy; banking; digital finance; cyber risk and cyber fraud
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

As we are all aware, the credit market is characterized by information asymmetries between lenders and borrowers. This information imbalance has significant consequences for the decision-making processes used by parties such as individuals in households, businesses and governments who want to optimise their use of credit. Borrowers typically know the limits of their resources and understand risk better than lenders, whilst entrepreneurs in particular possess inside information about their own projects for which they seek financing. A better understanding of borrower characteristics could benefit the lender but the moral hazard problem prevents the direct transfer of information between the two participants.

The existence of financial intermediaries is arguably an artifact of information asymmetry. Beyond simple financial transactions, financial intermediation provides a mechanism for information transmission, which can reduce the degree of information asymmetry and consequently increase market efficiency. During the process of information transmission, the bank is able to provide unique services in the production and exchange of information. Therefore, banks have comparative advantages in information production, transmission, and utilisation.

In credit provision, it is possible for lenders to make Type I and Type II errors. These types of errors are associated with whether banks decide to lend money to borrowers with low repayment capacity or risk missing out on potentially profitable lending. However, the recent US subprime loan crisis and previous financial crises (such as the Mexican, Argentinian, Chilean and Asian financial crises) show it is possible that banks can make both good and bad lending decisions. Does this mean that banks have lost their comparative advantages in leveraging information asymmetry?

The special issue welcomes contribution in empirical methods in banking such as bank loans announcement, credit constraints, capital regulation and bank behaviour, bank regulation on bank performance, corporate governance in banking, maturity transformation risk in banking and bank’s merger and acquisition.

Prof. Dr. Christopher Gan
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • capital regulation
  • systemic risk
  • risk management
  • information asymmetries
  • moral hazard
  • adverse selection
  • liquidity
  • Basel accord
  • merger and acquisition
  • credit risk

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Related Special Issue

Published Papers (7 papers)

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Editorial

Jump to: Research

3 pages, 162 KiB  
Editorial
Editorial for the Special Issue on Commercial Banking
by Christopher Gan
J. Risk Financial Manag. 2020, 13(6), 111; https://doi.org/10.3390/jrfm13060111 - 1 Jun 2020
Viewed by 2069
Abstract
The existence of financial intermediaries is arguably an artifact of information asymmetry. Beyond simple financial transactions, financial intermediation provides a mechanism for information transmission, which can reduce the degree of information asymmetry and consequently increase market efficiency. During the process of information transmission, [...] Read more.
The existence of financial intermediaries is arguably an artifact of information asymmetry. Beyond simple financial transactions, financial intermediation provides a mechanism for information transmission, which can reduce the degree of information asymmetry and consequently increase market efficiency. During the process of information transmission, the bank is able to provide unique services in the production and exchange of information. Therefore, banks have comparative advantages in information production, transmission, and utilisation. In credit provision, it is possible for lenders to make Type I and Type II errors. These types of errors are associated with whether banks decide to lend money to borrowers with low repayment capacity or risk missing out on potentially profitable lending. However, the recent US subprime loan crisis and previous financial crises (such as the Mexican, Argentinian, Chilean and Asian financial crises) show it is possible that banks can make both good and bad lending decisions. Does this mean that banks have lost their comparative advantages in leveraging information asymmetry? This Special Issue includes contribution in empirical methods in banking such risk and bank performance, capital regulation, bank competition and foreign bank entry, bank regulation on bank performance, and capital adequacy and deposit insurance. Full article
(This article belongs to the Special Issue Commercial Banking)

Research

Jump to: Editorial

21 pages, 355 KiB  
Article
Revenue Diversification, Risk and Bank Performance of Vietnamese Commercial Banks
by Khanh Ngoc Nguyen
J. Risk Financial Manag. 2019, 12(3), 138; https://doi.org/10.3390/jrfm12030138 - 28 Aug 2019
Cited by 20 | Viewed by 9293
Abstract
In the future, when the process of economic integration in the banking sector is more powerful, and competitive, diversifying revenue is an inevitable and objective trend to help the banks increase profits, minimize risks and improve their competitive position in the system. The [...] Read more.
In the future, when the process of economic integration in the banking sector is more powerful, and competitive, diversifying revenue is an inevitable and objective trend to help the banks increase profits, minimize risks and improve their competitive position in the system. The research is on the relationship between revenue diversification, risk and bank performance using data from audited financial statements and annual reports of 26 commercial banks listed and unlisted in Vietnam during the period 2010–2018. The research method uses Generalized Method of Moment (GMM) modeling techniques to solve endogenous problems, variance and autocorrelation in the research model. Research results show that diversification negatively impacts profitability and the higher the diversification, the higher the risk of commercial banks. However, the more diversified listed banks, the more increased the bank’s stability. The banks show the weakness and lack of experience of the banking system in developing a reasonable profit transformation model. The revenue diversification of banks is currently passive and moves slowly. Interest income is still the motivation of bank development, boosting profit growth. Growth, as well as the contribution from service activities, is not commensurate with potentials; although there are many positive points, they are not enough to cover risks from net interest income activities. Full article
(This article belongs to the Special Issue Commercial Banking)
16 pages, 253 KiB  
Article
Competition in the Indian Banking Sector: A Panel Data Approach
by Zhiheng Li, Shuangzhe Liu, Fanda Meng and Milind Sathye
J. Risk Financial Manag. 2019, 12(3), 136; https://doi.org/10.3390/jrfm12030136 - 22 Aug 2019
Cited by 9 | Viewed by 4190
Abstract
The paper aims to assess the level of competition in the Indian banking sector overall as well as within the three groups of banks: foreign owned, state owned (public sector), and privately owned. We use panel data for the period from 2005–2018. We [...] Read more.
The paper aims to assess the level of competition in the Indian banking sector overall as well as within the three groups of banks: foreign owned, state owned (public sector), and privately owned. We use panel data for the period from 2005–2018. We found that the overall competition in the Indian banking sector is strong, although there are differences by type of bank ownership. The Indian banking market continues to be characterized by monopolistic competition. The various policy measures taken by the Indian government in recent years appear to have helped boost competition. A policy suggestion would be to further liberalize the banking sector for foreign investment. Full article
(This article belongs to the Special Issue Commercial Banking)
21 pages, 1220 KiB  
Article
Can Higher Capital Discipline Bank Risk: Evidence from a Meta-Analysis
by Quang T. T. Nguyen, Son T. B. Nguyen and Quang V. Nguyen
J. Risk Financial Manag. 2019, 12(3), 134; https://doi.org/10.3390/jrfm12030134 - 20 Aug 2019
Cited by 6 | Viewed by 3630
Abstract
Capital regulation has been among the most important tools for regulators to maintain the credibility and stability of the financial systems. However, the question whether higher capital induce banks to take lower risk remains unanswered. This paper examines the effect of capital on [...] Read more.
Capital regulation has been among the most important tools for regulators to maintain the credibility and stability of the financial systems. However, the question whether higher capital induce banks to take lower risk remains unanswered. This paper examines the effect of capital on bank risk employing a meta-analysis approach, which considers a wide range of empirical papers from 1990 to 2018. We found that the negative effect of bank capital on bank risk, which implies the discipline role of bank capital, is more likely to be reported. However, the reported results are suffered from the publication bias due to the preference for significant estimates and favored results. Our study also shows that the differences in the previous studies’ conclusions are primarily caused by the differences in the study design, particularly the risk and capital measurements; the model specification such as the concern for the dynamic of bank risk behaviors, the endogeneity of the capital and unobserved time fixed effects; along with and the sample characteristics such as the sample size, and whether banks are bank holding companies or located in high-income countries. Full article
(This article belongs to the Special Issue Commercial Banking)
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25 pages, 381 KiB  
Article
Role of Bank Regulation on Bank Performance: Evidence from Asia-Pacific Commercial Banks
by Zhenni Yang, Christopher Gan and Zhaohua Li
J. Risk Financial Manag. 2019, 12(3), 131; https://doi.org/10.3390/jrfm12030131 - 7 Aug 2019
Cited by 18 | Viewed by 7240
Abstract
The banking industry is an essential financial intermediary, thus the efficient operation of banks is vital for economic development and social welfare. However, the 2008 global financial crisis triggered a reconsideration of the banking systems, as well as the role of government intervention. [...] Read more.
The banking industry is an essential financial intermediary, thus the efficient operation of banks is vital for economic development and social welfare. However, the 2008 global financial crisis triggered a reconsideration of the banking systems, as well as the role of government intervention. The literature has paid little attention to the banking industry in the Asia-Pacific region in the context of bank efficiency. This study employs double bootstrap data envelopment analysis to measure bank efficiency and examine the relationship between regulation, supervision, and state ownership in commercial banks in the Asia-Pacific region for the period 2005 to 2014. Our results indicate that excluding off-balance sheet activities in efficiency estimations lead to underestimating of the pure technical efficiency, while overestimating the scale efficiency of banks in the Asia-Pacific region. Cross-country comparisons reveal that Australian banks exhibit the highest levels of technical efficiency, while Indonesian banks exhibit the lowest average. Our bootstrap regression results suggest that bank regulation and supervision are positively related to bank technical efficiency, while state ownership is not significantly related to bank efficiency. Furthermore, our findings show that tighter regulation and supervision are significantly related to higher efficiency for small and large-sized banks. Full article
(This article belongs to the Special Issue Commercial Banking)
26 pages, 710 KiB  
Article
Bank Competition, Foreign Bank Entry, and Risk-Taking Behavior: Cross Country Evidence
by Sichong Chen, Muhammad Imran Nazir, Shujahat Haider Hashmi and Ruqia Shaikh
J. Risk Financial Manag. 2019, 12(3), 106; https://doi.org/10.3390/jrfm12030106 - 26 Jun 2019
Cited by 16 | Viewed by 7800
Abstract
This unique study examines the interactive role of bank competition and foreign bank entry in explaining the risk-taking of banks over the globe. We used cross-country data for the banking sector from 2000 to 2016. Using the pooled regression model and Two-stage Least [...] Read more.
This unique study examines the interactive role of bank competition and foreign bank entry in explaining the risk-taking of banks over the globe. We used cross-country data for the banking sector from 2000 to 2016. Using the pooled regression model and Two-stage Least Squares model (2SLS with Generalized Method of Moments GMM), we document that foreign bank entry decreases the risk-taking behavior of the banks to a certain level and exhibits an inverted U-shaped relation with financial stability. Furthermore, the joint effect of bank competition and foreign bank entry brings financial fragility because host banks tend to make risky investments due to undue competition induced by foreign bank entry. We support the competition–fragility hypothesis when foreign bank entry goes beyond a certain threshold. Our results also suggest that restrictions on bank activities and capital regulation stringency reduce the level of the risk factor. We also applied various robustness tests, which further confirm our mainstream results. Our findings have policy implications for foreign investors and regulatory authorities. Full article
(This article belongs to the Special Issue Commercial Banking)
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18 pages, 303 KiB  
Article
Capital Adequacy, Deposit Insurance, and the Effect of Their Interaction on Bank Risk
by Seksak Jumreornvong, Chanakarn Chakreyavanich, Sirimon Treepongkaruna and Pornsit Jiraporn
J. Risk Financial Manag. 2018, 11(4), 79; https://doi.org/10.3390/jrfm11040079 - 19 Nov 2018
Cited by 7 | Viewed by 4790
Abstract
This paper investigates how deposit insurance and capital adequacy affect bank risk for five developed and nine emerging markets over the period of 1992–2015. Although full coverage of deposit insurance induces moral hazard by banks, deposit insurance is still an effective tool, especially [...] Read more.
This paper investigates how deposit insurance and capital adequacy affect bank risk for five developed and nine emerging markets over the period of 1992–2015. Although full coverage of deposit insurance induces moral hazard by banks, deposit insurance is still an effective tool, especially during the time of crisis. On the contrary, capital adequacy by itself does not effectively perform the monitoring role and leads to the asset substitution problem. Implementing the safety nets of both deposit insurance and capital adequacy together could be a sustainable financial architecture. Immediate-effect analysis reveals that the interplay between deposit insurance and capital adequacy is indispensable for banking system stability. Full article
(This article belongs to the Special Issue Commercial Banking)
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