BBS Papers Coming Soon

This section contains information about articles which are already reviewed, accepted and waiting for publication in next issues of the journal.

Financial institutions performance evaluation in a unique developing market using TOPSIS approach

Sami Al Kharusi, Ph.D., Assistant Professor, Economics and Finance Department, Sultan Qaboos University, Oman
Eşref Savaş BAŞCI, Ph.D., Faculty of Economics and Administrative Sciences, Banking and Finance Department, Hitit University, Çorum, Turkey

Abstract. Using Technique for Order Performance by Similarity to Ideal Solutions (TOPSIS) approach for the data from 2011 to 2015, the authors investigate the financial performance of 16 different financial institutions in Oman that include nine commercial banks, three specialized banks, two investment companies, and two finance companies. They find that the one investment company, Dhofar International Development and Investment Holding Co., was more efficient in 2015 and 2011. Moreover, Oman Housing Bank was more efficient in 2013 and 2014, while Ahli Bank was more efficient in the year 2012. In contrast, Bank Muscat that has the largest total assets was ranked number 16 for the years 2013, 2014 and 2015. As a result of Spearman's Rho (Rank-Order) Correlation, all ranked results are related to other years. If a bank is at placement in level, it can be affected by year before or year after. But Oman banks' correlations shows that there are 2 different periods as effecting one year to the other.

To liberate or to regulate: balanced approach to bank-oriented financial system transformation in developing countries

Emira Kozarević, Associate Professor, Tuzla University, Department of Finance and Financial Policy, Bosnia & Herzegovina
Nedžad Polić, Associate Professor, Zenica University, Department of Finance & Hifa oil d.o.o., Executive Director, Bosnia & Herzegovina
Amela Perić, Lecturer, University of Technology, Sydney, Master of Project Management, Australia

Abstract. A stable, transparent financial system inspires confidence among investors and supports the overall economic growth. Inflexible regulation tends to slow down economic progress, making countries less attractive to investors.
Economies with bank-oriented financial systems tend to be less attractive to investors, so their long-term goal is to demonstrate flexibility through liberalization, attracting new investors and ensuring survival in highly competitive and unforgiving global conditions. Liberalization success is even more essential for developing counties and their efforts to open the borders for capital flows and attract new investments. While financial liberalization affects all sectors of the economy and directly influences growth, it does not guaranty it. The removal of financial restrictions could affect capital distribution, increase volatility, create challenges for banks, etc. To support the liberalization efforts, it is very important to understand the nature of banking business, criticality of transparent and effective regulatory framework, as well as the expectations of potential investors.
The main goal of this paper is to discuss the process of financial liberalization in developing countries and motivate the policy makers to consider available lessons when creating their balanced approach to financial (de)regulation processes towards financial development and integration in the global financial landscape.

The impact of macroeconomic and bank-spesific factors toward non-performing loan : evidence from Indonesian public banks

Hanifan Fajar, Department of Administrative Science, Faculty of Social and Political Science, Universitas of Indonesia, Depok, Indonesia
Umanto, Department of Administrative science, Faculty of Social and Political Science, Universitas of Indonesia, Depok, Indonesia

Abstract. The Present Study want to focusing on the need for banking sector to be more reactive when facing globalization that could bring impact on banking industries complexity. Based on empirical studies, there is a need to analyse Non Performing Loan Determinants comprehensively using macroeconomic and bank-spesific factors to make a good condition on bank, because Combining macroeconomic and bank-spesific variable as NPL determinants has made a big improvement to analyse NPL. The object of present study is 20 Banks that listed in Indonesia Stock Exchange (IDX) between q12005-q42014. Using dynamic panel data GMM-system method shows that the previous period of NPL (Non Performing Loan), change of PDB (Gross Domestic Product), Inflation Rate, and Solvency Ratio have a significantly negative impact to NPL. However, BOPO (Operations Expenses to Operations Income) and ROE (Return on Equity) has a significantly positve relationship to NPL. On the other hand this research does not find any significance on BI Rate (Interest Rate), Solvency, and Size to NPL. From the result it can be concluded that combining macroeconomic and bank-spesific variable could be a method to analyze NPL determinants on Bank.

Virtual banking and online business

Nadia Sha, Dr., Assistant Professor, Department of Accounting and Finance, College of Commerce and Business Administration, Dhofar University, Sultanate of Oman
Shariq Mohammad, Dr., Assistant Professor, Department of Accounting and Finance, College of Commerce and Business Administration, Dhofar University, Sultanate of Oman

Abstract. Banks play a crucial role in promoting online businesses. Even though e-shoppers have the option of cash-on-delivery, which seems to be secure and trustworthy, still there is an urge for the e-payment schemes which can only be provided through banks. Banks acts as a strong and trust worthy intermediary in the online transactions and it provides a bold opening in the online business. At present banks have e-payment systems like Internet Banking, Electronic Fund Transfers (NEFT/RTGS), Plastic Money (Credit Card & Debit Card) and Mobile Banking. These systems provide payment to online transactions like online purchases of products, mobile recharges, hotel booking, ticket booking etc by considering all types of security measures. For the real working of these e-services, the need of apt infrastructures is an inevitable feature.
This paper examines the efficient utilization of Mobile Banking by the bank customers who have all the infrastructures for availing the same. The results showed that the majority of the sample customers selected for the study, owned mobile but only few of them use mobile as their mode of access to banks. It also revealed that the people were comparatively well aware of Mobile Banking but its usage level was very low. The mostly used e-settlement with Mobile Banking was for mobile top-up by urban area customers and rural area customers and there was no significant difference between the urban area and rural area customers regarding the utilization of Mobile Banking.

Exchange rate movements in the presence of the Zero Lower Bound

Jens Klose, Dr., Prof., THM Business School, University of Applied Sciences, Germany

Abstract. Exchange rates are expected to adjust according to the stance of monetary policies which are in normal times differences in interest rates set by the central banks. This interest rate parity does however no longer hold if central banks approach the zero lower bound on interest rates and switch to measures of quantitative easing. Therefore, we estimate exchange rate changes based on the different stance of the monetary base which is an indicator of differing monetary policies in the countries. The results reveal that indeed exchange rates movements in the Dollar-Euro-rate can be explained by differences in the monetary base since the zero lower bound has become binding. However, the influence depends crucially on whether the monetary base is increased or decreased and whether the other central bank is also expanding or reducing its balance sheet at the same time.

The banking and other economic factors of selected U.S. historical events: from the establishment of the Federal Reserve Banking System to the Great Recession

Paul Gentle, Ph.D., Former Assistant Professor of Economics, University of Colorado-Denver, Beijing, China

Abstract. Knowledge in the economic and banking history of the United States, of the last one hundred years or thereabouts, is necessary in any discussions of even current economic and political policies. This article looks at major economic events in the last century, with some attention also given to surrounding political forces of these events. In 1933, President Franklin Roosevelt, with strong bipartisan support in Congress, was able to pass the Glass-Stegall Act, after taking office in the Great Depression. Politicians in the United States during the approximately twenty-five years prior to the bursting of the housing bubble in 2007 have both used legislation to remove regulations and also made sure that inadequate government personnel were available to audit financial institutions. An important part of confidence is a faith in government regulatory agencies that monitor financial institutions. In addition, new financial instruments, such as credit default swaps, have caused further financial instability and the need for auditing, which has not been forthcoming. Lax monetary and regulatory policies can create a real estate bubble. This happened in the most recent economic disaster, the Great Recession. Sometimes the Federal Reserve has pursued reasonable monetary policy and other times inappropriate decreases or increases in the money supply have created havoc in the national economy.

Corporate governance practices in the banking sector of Bangladesh: do they really matter?

Samiul Parvez Ahmed, Ph.D, Assistant Professor, School of Business, Independent University, Bangladesh
Rahatul Zannat, Student, School of Business, Independent University, Bangladesh
Sarwar Uddin Ahmed, Ph.D, Dean and Professor, School of Business, Independent University, Bangladesh

Abstract. A well governed institution is expected to use its resources optimally and, thus, perform more efficiently and contribute positively to economic development of a nation. However, often, it can be seen that poor management of the stakeholders leads to less than optimal strategic directions for an institution. Due to recent global financial crisis and rising issues of the Bangladeshi banking sector, corporate governance is one of the factors that have gained considerable attention. Recent drive of the governance issues of the banking sector of Bangladesh is expected to bring positive change in the financial sector and, hence, it is crucial to assess whether complying with governance codes leads to desired outcome or not. Specifically, the main purpose of this study is to examine the relationship between performances of commercial banks with corporate governance factor along with some internal and macroeconomic variables. Thus, the listed commercial banks in the Dhaka Stock Exchange (DSE) of Bangladesh were considered for the study. Subsequently, considering data availability of the time period (2011-2014), 29 listed commercial banks in the DSE have been considered and, hence, Ordinary Least Squared (OLS) regression models were used through Eviews 8.0 for analyzing the data. Though the study shows a positive relation between corporate governance and performances of banks, the statistical insignificance of the relation raises concern regarding various issues of corporate governance in the financial sector of Bangladesh.

Dodd-Frank and Risk-taking: reputation impact in banks

Ezelda Swanepoel, Lecturer, School of Economic Sciences, North-West University, South Africa
Ja'nel Esterhuysen, Research Fellow, School of Economic Sciences, North-West University, South Africa
Gary van Vuuren, Visiting Professor, School of Economic Sciences, North-West University, South Africa
Ronnie Lotriet, Associate Professor, NWU School of Business and Governance, North-West University, South Africa

Abstract. The banking industry plays a significant role in both the financial system and economy as a whole. By 2012 the US banking system owned US $14.45 trillion in assets. However, the importance of the banking system stretches beyond its mere size. Numerous studies have indicated that the health of this sector has significant effects on overall economic activity, as well as the size and persistence of economic cycles. For the purposes of this paper the researcher measured the correlation between current legislation, risk-taking, market value, and reputation. This was performed by calculating z-scores to determine bank risk-taking. The z-scores were correlated to market value to determine its impact. Reputable firm behavior was used to determine the correlation between market value and reputation. The statistical package for social sciences was used to perform ANOVA analysis of share value and z-scores. A literature review was conducted to determine the reputational impact. It was determined that current legislation might have a desired result on risk-taking, that risk-taking might not have an impact on market value, and that reputation might have an impact on market value.

Young clients' attitudes to service quality at retail banks in a developing country

Nkululeko Praise God ZUNGU, M Tech: Marketing, Department of Marketing & Retail, Durban University of Technology, South Africa
RogerB MASON, Ph.D., Honorary Research Professor, Department of Marketing & Retail, Durban University of Technology, South Africa

Abstract. The aim of this paper is to investigate service quality as perceived by younger customers of retail banks in a developing country. The objectives include identifying customers' levels of satisfaction and loyalty to their banks and to identify the levels of service quality associated with such satisfaction and loyalty.
The instrument used to collect data via a survey of retail bank customers was an adaptation of the SERVQUAL questionnaire. A total of 448 students were surveyed, using a mix of systematic and quota sampling, with data being collected on university campuses. Data were analysed using descriptive statistical techniques.
The main conclusions were that most young customers are reasonably satisfied with, and loyal to, their banks. There was little difference, on all the service quality constructs, between the different banks, and between expectations and perceptions of service quality. However, there was no evidence of any bank providing a service that delighted their customers or exceeded their expectations and so all banks are at risk from a competitor who adopts strategies to meet these goals.
The study has contributed to knowledge by focusing on attitudes to service quality of young bank customers in a developing country, an aspect that has been under-researched.

Testing the long memory features in return and volatility of Dhaka stock exchange: an econometric analysis

Aviral Kumar Tiwari, Assistant Professor, Faculty of Management, IBS/IFHE Hyderabad, India
Muhammad Mahboob Ali, Professor, Dhaka School of Economics, Bangladesh
Naveed Raza, Universiti Malaysia Terengganu, Malaysia

Abstract. The present study developed to test the long-memory features in returns and volatility of Dhaka stock Exchange index. Expectant character is that strong banking systems and financial markets can simultaneously play in healthful way towards the existing financial advancement of the country for which bank can play complementary role en route for stock market. However, in order to assess the long-memory features and to empirically demonstrate the usefulness of our models for better implications we fit the ARFIMA-FIGARCH and FIPARCH framework for the daily data ranging from January-4, 2004 to August 20, 2014. The empirical evidence gleaned from long-memory tests supports the presence of long-memory in Bangladesh stock returns. Moreover, the supporting evidence for presence of long memory in both return and volatility contradicts the efficient market hypothesis of Fama (1970) that the future return and volatility values are unpredictable. More emphasis should be given for the improvement of the Dhaka stock exchange market so that both individual and institutional investors can get proper treatment. Authors' suggested that central bank of Bangladesh should play sensible role so that Dhaka stock exchange become strong efficient market which needs appropriate regulation, preparation and also execution.