Issue #2 (Volume 18 2023)

The process of converting a conventional bank into a fully-fledged Islamic bank is becoming a popular alternative solution, alongside spin-off, for smaller banks. Two Indonesian banks, Bank of Aceh Sharia and Bank of NTB Sharia, completed this conversion in 2016 and 2018, respectively. This study uses a mixed-methods approach to examine the impact of this conversion on market share, using both quantitative regression with a dummy variable and qualitative analysis through focus group discussions with executive management and in-depth interviews with the Sharia supervisory boards of the two converted banks. The study found that the conversion positively impacted market share, with the default rate and level of capital also playing a role. Prior to conversion, the Indonesian sharia banking industry had less than a 5% market share, but after the conversion, it reached 6.7%. The two converted banks were able to increase their market share to 7% and 2%, respectively. These results suggest that converting into a full-fledged Islamic bank is a viable alternative solution for smaller conventional banks, rather than opting for spin-offs or mergers.

This study examines profitability as a mediating variable to explore variables that affect the capital buffer in commercial banks. The research population is conventional commercial banks operating in Indonesia, with an observation period of 2017–2020. A purposive sampling method was used, during which 90 observations were found. Data analysis used multiple regression and the Sobel test to test for the mediating role of profitability. The results show that profitability acts as a mediating variable for non-performing loans and the ratio of loans to deposits in the capital buffer. Therefore, it is suggested that banks must maintain their ability to generate profitability in order to avoid liquidity risk. Another finding that is also important for bank managers is that non-performing loans have a significant effect on reducing profitability, while loans to total assets have a positive impact. Loan-to-deposit ratio and income diversification are not significant to profitability. Profitability, debt-to-total assets ratio, and income diversification have a negative impact on the capital buffer. Non-performing loans are not significant, while the loan-to-deposit ratio has a significant positive impact on the capital buffer.

The study investigates the relationship between customers’ loyalty, trust and satisfaction concerning an organization’s reputation in the South African banking sector. High service levels exist in this highly competitive and price-sensitive market. Access to banking has also digitized significantly, and banks adapted their service strategies to comply with COVID-19 restrictions such as hard lockdowns and limited movements. Customers were not able to attend banks. Hence the whole personal (contact) service and loyalty scenario required aggressive reengineering. A bank’s competitiveness can be impacted significantly by service quality, price competitiveness, and product diversity. As a result, the study with the primary objective is to determine the new relationships between customer loyalty and antecedents such as service quality, customer satisfaction, customer trust, brand image, reputation, customer loyalty, and word of mouth. Data were gathered from South African customers using a 5-point Likert scale distributed via an electronic platform (Google Forms). More than 1,000 questionnaires were distributed, and 150 were completed and returned (representing a 15% response rate). The reliability is satisfactory (Cronbach alpha coefficient on all antecedents exceeded 0.775). The literature model was confirmed using confirmatory factor analysis. The analysis showed that the model possesses convergent- (r2 < Sqrt AVE) and discriminant (AVE > 0.5) validity and possesses satisfactory fit indices (CFI = .951, TL = .941, NFI = .922, RMSEA = .089, CMIN/df = 129.072/592.188 = 2.188). This indicates that the model can be operationalized in South Africa to measure post-COVID-19 bank loyalty.

The paper examined the influence of the banking sector on economic growth in the BRICS countries using panel data analysis methods (1987–2020). The effect of the complementarity variable on economic growth in BRICS was also explored using the same data set. The lack of agreement in the empirical literature on the relationship between banking sector development and growth motivated this study. The study was also motivated by the desire to deal away with the omitted variable bias which is to a very large extent plagued the available literature on the influence of the banking sector on economic growth. Panel data analysis included fixed effects (FE), fully modified ordinary least squares (FMOLS), and pooled ordinary least squares (OLS). It was observed that the banking sector had a significant positive effect on economic growth under the pooled OLS (all three models) and fixed effects (model 1). Model 2 under the fixed effects indicate a negative significant relationship moving from the banking sector towards economic growth. FMOLS (models 1 and 2), pooled OLS (models 1, 2 and 3), and fixed effects (model 1) show that the complementarity variable enhanced economic growth significantly. Policies aimed at enhancing banking sector development and domestic investment should be implemented without delay by the BRICS countries if they intend to bolster economic growth.

The purpose of this study was to determine if senior management support (SMSI) in Yemeni commercial banks mediates the association between internal audit function (IAF) quality characteristics and improved corporate governance effectiveness (CGE). Internal auditors, heads of internal audit, chairmen and participants in audit committees, CEOs, and financial management of Yemeni commercial banks were given a list of questions to answer. 158 full lists were obtained to evaluate after distributing the survey. For data analysis and hypothesis testing in this work, Smart PLS 3 was used. The study findings demonstrate a substantial relationship between CGE and IAF competence and due professional care (CPCI), IAF independence and objectivity (INOI), and IAF professional ethics (PEI). The outcomes of the study also demonstrate that there is no relationship between CGE and chief audit executive (CAE) Leadership Style (CLS). In terms of the moderate variable’s influence, the findings revealed that SMSI positively changes the link between CLS, CPCI, and corporate governance effectiveness. SMSI, on the other hand, has no influence on the link between INOI, PEI, and the efficacy of corporate governance. The findings add to the knowledge on IAF factors affecting the efficacy of CG and the role of SMSI in changing this relationship in developing countries such as Yemen.

Acknowledgment
The authors extend their appreciation to the deanship of scientific research at King Khalid University for funding this work through large groups project under grant number (RGP.2/189/44).

The modern concept of social responsibility states that in the due course of business, enterprises should pay due attention to social interests of stakeholders as a whole as most of the decisions taken by a company affect all the stakeholders. Through these means, companies are now focusing on informing their stakeholders about their contribution to social responsibility through disclosures made in annual reports. In this direction, this study is being conducted with the aim of examining the social responsibility accounting disclosures (SRA) of the banks listed on the Amman stock market. The study analyzed data from 14 Amman Stock Exchange banks for ten years from 2012 to 2021. Data for the study were gathered from Amman Stock’s official website. The results of the study confirm that the extent of disclosures on SRA has been decreasing over the study period, and such a trend has been seen in all the four sub-dimensions (community, environment, employees, and stakeholders) of SRA. The results of the study confirm that social responsibility accounting disclosures differ significantly across the set of business characteristics like firm size, firm age, and equity ratio. The results also confirm a significant negative relationship between bank size and equity ratio with SRA and a significant positive relationship between age and profitability with SRA. The study results suggest that SRA disclosures should be increased both in terms of volume and pattern.

IT investment and financial performance are crucial issues for the Islamic banking industry. An Islamic banking (IB) that is established in a technologically advanced setting, employs mostly young and tech-savvy employees, and adheres to Islamic principles in all aspects of its activities, needs to invest in IT. This investment in information technology is essential if they are to remain competitive and achieve solid financial performance. This study aims to investigate the effect of IT investment on Islamic banking performance in Indonesia. The study used data of 14 Islamic banks in Indonesia, from 2012 to 2021. By employing panel regression analysis, the study revealed that IT investment has a significant impact on Islamic banking performance, indicated by ATM and Expenses for Human Resources (BG), which has the coefficient 1.75e-07 (Alpha 0.060) and 4.73e-14 (Alpha 1%), respectively. The study also documented a significant relationship between IT investment and IB performance, caused by Sukuk issuance and the Shariah supervisory board. Sukuk issuance has a negative impact on banking performance in relation to IT investment, while shariah governance (board of directors and shariah supervisory board) has a positive impact. Hence, it is also important for an Islamic banking to minimize the use of Sukuk, which until now was still categorized as debt, and to maximize the role of good governance to back up IT spending.

Credit risk is a significant factor affecting the financial stability of banks. Keeping the credit risk under control is essential to maintain a bank’s cash flow. This paper examines the various profitability, microeconomic and macroeconomic indicators that affect a bank’s credit risk. The study uses the dataset of 31 banks from 2012 to 2021 and employs a panel data modelling approach to account for any variations in risk-taking behavior. The results revealed a statistically significant negative relationship between return on equity and credit risk when nonperforming loans proxy credit risk. This finding was consistent across fixed effect, random effect, and pooled OLS methods, at 1 percent significance (P value < 0.00), indicating that the extent of credit risk decreases as profitability increases. It was further found that bank age and ownership type positively affect a bank’s credit risk, while factors such as bank size and operational efficiency negatively affect credit risk when nonperforming loans proxy credit risk. Further, macroeconomic variables showed that gross domestic product is positively associated with credit risk, while inflation negatively affects credit risk. Overall, the findings of this paper demonstrated that credit risk is affected by both micro and macroeconomic factors. The paper also addresses significant policy implications as it helps various stakeholders to examine the determinants of credit risk, make credit decisions, and ultimately lower their credit risk.

This study empirically examined the relationship between corporate governance factors, namely CEO duality, independent directors, board meeting frequency, board size, gender diversity, audit committee size and audit committee meetings, and intellectual capital performance. The above premise is studied using data of 26 commercial banks listed on the Indian Stock Exchange (NSE) from 2010 to 2020. The study used purposive sampling as the methodology and multiple regression models with VAIC and ROA as attributes. VAIC measures the efficiency of intellectual capital. ROA is used to determine financial performance. The results of the study reveal that the use of observational data, independent directors, frequency of board meetings and audit committee size has a positive and significant effect on intellectual performance at a 10% significance level. According to the study’s findings, audit committee meetings have a positive impact on intellectual capital performance at a 1% significance level, while board size has a negative impact at a 5% significance level. Among the study results, CEO duality, board meeting frequency and board size have a positive and significant effect on financial performance with 1% significance. Board gender diversity has a negative impact on financial performance. The study’s findings indicate that there is no single best way to design corporate governance that applies to all corporate situations, and that good corporate governance factors have a significant impact on improved intellectual capital performance.

Risks inherent in banking businesses should be managed to prevent financial losses to the sector’s stakeholders and negative externalities to the global economy. To this end, this study examines the effect of risk management on the performance of deposit money banks in Nigeria. A sample of eight (8) deposit money banks with international authorization are purposively selected out of 12 deposit money banks due to data availability. Panel data analysis techniques were adopted to analyze the secondary data that were obtained from the annual reports of banks. Findings based on the disaggregated model results reveal that both liquidity and capital risk variables exert a negative but insignificant effect on performance. However, credit risk drives performance of the internationally authorized banks positively and significantly. Furthermore, Management quality (MQ) is the only control variable that has a significant influence on the performance of the selected deposit money banks. The study concludes that credit risk and management quality significantly and positively drive performance among the financial entities.

Employees are the most valuable part of every organization in the world, and the success of the organization depends on how well its employees do their jobs. Nowadays, commercial banks in Bangladesh are growing overwhelmingly, so the competition is enhancing one bank to another. Employee performance at the firm level and workplace productivity has not been empirically studied in the context of Bangladesh. The purpose of this study is to find out the variables that affect how well employees at banking institutions in Bangladesh do their jobs. People who worked in private banks in Bangladesh were the focus of this study and the final sample size was 250. The sample size was suitable for quantitative regression analysis. The questionnaire was sent to the e-mail ids of employees, and the questionnaires were adopted from the previous studies. To test the model and hypothesis, SPSS is used to analyze collected data in this study. The regression analysis was duly run with using the SPSS 26.0 version. The study shows that competence, compensation, leadership, and motivation have a big and good effect on how well employees do their jobs in regard to private commercial banks in Bangladesh. So, bank authorities should identify the factors influencing the improvement of the performance of bank employees, and they need to focus on employee productivity-enhancing activities.

This study aimed to examine the impact of a firm’s total accruals and operating cash flows on future profitability (one-year-ahead ROA) using a static model on unbalanced panel data for all the (15) banks and (18) insurance companies listed on the Amman Stock Exchange from 2002 to 2019. The final sample of the study, for analysis, consisted of 280 observations taken from the banking sector and 410 observations from the insurance sector. The pooled sample of banks’ observations showed no significant impact of a firm’s total accruals and operating cash flows on one-year-ahead ROA. This result is consistent with previous studies’ results, which are still under debate, especially in developed countries. The investors of the Jordanian banks are not counting on the accrual earnings components, which are affected by the different estimation procedures of GAAP and managerial discretion. The pooled sample of the insurance companies’ observations showed a significant impact of a firm’s total accruals and operating cash flows on one-year-ahead ROA. The result showed a higher variable value of a firm’s operating cash flow than the firm’s total accruals for the pooled sample of insurance companies. This result indicates a more incrementally negative relation between the growth in operating assets and a one-year-ahead ROA in addition to the probable impact of the lower rate of economic profits and the conservative bias in accounting.

Shadow banking is usually considered as offering financial and financial-related support outside of the mainstream conventional financial system. The biggest issue facing micro-, small, and medium-sized businesses (MSMEs) in Nigeria is the inconveniences and challenges associated with obtaining funds or credit from conventional banks, which encourages remote business operations and small-scale expansion. Thus, shadow banking activity is still widespread among MSMEs in Nigeria. This study used MSMEs operating in the Marian and Watt markets to analyze the impact of shadow bank interest income, savings products, and loans on the performance of MSMEs. A systematic Likert scale questionnaire was given to a group of 160 people, with 157 questionnaires duly returned. The survey research design was adopted, while the SPSS software was used to analyze the data acquired. As such, shadow banking interest income has a non-significant positive impact (0.022%) on the performance of MSMEs in Calabar metropolis; shadow banking savings products have a negative but significant impact (–0.160%) on MSME performance in Calabar metropolis, while shadow banking loans have a positive and significant effect (0.194%) on micro-, small, and medium-scale firm performance in Calabar metropolis. The study concluded that shadow bank operators should ensure that their service costs are standardized and supplied at affordable rates to attract MSMEs to patronize them for more successful business operations.

In this paper, penalties to banks violating economic sanctions have been investigated and discussed. This topic has sparked renewed interest and attention following the beginning of the conflict in Ukraine due to the Russian aggression in February 2022 and the ongoing general deterioration in the global economic climate. Thus, based on the experience with penalties to banks for violations of economic sanctions from 2007, a theoretical model has been proposed. It is proposed that this model may be informative in devising the optimal level of penalties based on behavioral characteristics of banks and regulators. The model is based on the economic examination of the motives and incentives for bank misconduct, by drawing on the Shapiro-Stiglitz model addressing typical consequences of asymmetric information in principal-agent models. From a policy perspective, the proposed model also has the potential to provide opportunities for standardization of restrictions posed on banks as a result of bank misconduct. Relevant policy implications concerning penalties are put forward that may be implemented for future considerations, particularly in cases related to violations of economic sanctions.

Attaining customer satisfaction and loyalty is seen as a prerequisite for successful bank management. The purpose of the study is to identify and explain the mechanism through which e-banking quality is related to loyalty by including satisfaction as a mediating variable in South Africa. The study adopts a descriptive research design and a quantitative mediation analysis. The data collected through SurveyMonkey comprised a sample of 310 participants who used online banking. The results of the mediation analysis confirm that e-banking quality has a considerable and positive effect on customer satisfaction, which in turn has a significant and positive effect on loyalty in e-banking. The direct effect of e-banking quality on loyalty is also confirmed. Furthermore, the study’s findings show that the quality of e-banking has a significant and favorable indirect effect on loyalty, as mediated by customer satisfaction. Because the direct effect of e-banking quality on loyalty remained significant after the satisfaction intervention/mediation in the model, the mediation is regarded as partial. The findings of this study offer essential marketing guidance for banking professionals who design and implement e-banking solutions for their customers.

Theoretical explanations based on information asymmetry constitute the dominant paradigm of the near disappearance of PLSs (profit and loss sharing). This assumption implicitly implies a hypothesis on the power of contractual choice exclusively monopolized by Islamic banks. The theoretical positioning in this study to explain the arbitrage between PLSs and markups is based on a lack of demand. In this sense, this paper attempts to verify the demand trade-off of Moroccan companies between PLSs and markups. A logistic regression was used to establish several findings. The evidence suggests that past banking relationships with conventional banks and debt maturity both favor the commercialization of markups. On the other hand, financial quality of firms has no direct impact on the choice between PLSs and markups. This assertion implies that it is incorrect to assume that sole entrepreneurs undertaking high-risk projects choose to be funded by PLSs. Combining that with the fact that companies that agree to be funded by PLSs agree to share profits, private information and decision-making power, it can be said that PLSs can have a good chance of thriving in Morocco if Islamic banks provide a favorable climate for their marketing.

This study presents the effect of employee stock ownership plans on the firm performance of joint stock commercial banks in Vietnam. By using the Cobb-Douglas production function model and regression analysis model, combined with the use of financial statement data and Employee Stock Ownership Plan (ESOP) issuance reports of 18 banks listed on Ho Chi Minh and Hanoi stock exchanges from 2015 to 2019, it is found that ESOP had a positive impact on the performance of banks, but there was a lag of about two years. It can be seen that ESOP issuance has a positive effect on the financial ratios of joint stock commercial banks. Especially, the higher the issuance ratio in accordance to the size of a bank, the better the influence on the indices. Though there are many advantages of ESOP compared to traditional bonus programs, only eight joint stock commercial banks in Vietnam have applied ESOP. Banks in particular and businesses in Vietnam in general need to prepare knowledge and resources to expand and promote the true effectiveness of ESOP. From there, some suggestions and recommendations to make the ESOP program really effective for both employees, banks and shareholders will be given.

In a global pandemic, there is a need for banks to improve service delivery through financial technologies. Since the fight against COVID-19 is the community responsibility, the role of banks in channeling cash to all stakeholders is essential for the contemporary human race. This study investigated the impact of the government response to COVID-19 on the resilience of banks. A multivariate Structural Equation Model (SEM) was used to specify the links between the exogenous factors (government’s social and financial responses) and the endogenous variables (resilience of bank customers, employees and investors). A research survey approach was used where 543 respondents were sampled. A self-constructed online questionnaire was used to harvest responses from customers, employees and investors of the selected banks. The result of the analysis showed a significant relationship between government’s social response and the resilience of bank customers. However, such a relationship does not hold between government’s social responses and other resilience indicators (employees and investors). Furthermore, the result revealed that government’s financial responses do not affect the resilience of banks. The study concluded that the government’s social response during the COVID-19 pandemic influenced bank customers’ resilience in Nigeria. It was recommended that banks, as part of the policy, develop tools to complement government actions during the pandemic, thereby ameliorating its impact on their customers.

Acknowledgment
The authors will like to acknowledge all respondents who took part in the survey.

This article investigates the capacity of banks to create shareholder value amidst regulators and stakeholders’ growing demands for reductions in financing to greenhouse gas emitting companies. The purpose of the study is to evaluate the shareholder value creation capacity of banks amidst transition risks resulting from reductions in loans from high greenhouse gas emitters. The study compares reductions in balance sheet corporate loans to returns on equity from income statements. The comparison is done for periods during which interest rates move downwards as a way of stress testing banks’ capabilities to generate shareholder value. A risk-return analysis is conducted to determine the rate of change in risk compared to shareholder value. A hypothesis-testing focus is used to test a value-creation proposition concerning the rate of change in corporate loans and return on equity. The results of the study strongly suggest that banks can create shareholder value when faced with loan reductions to high greenhouse gas emitting companies, even within constrained repricing conditions such as negative interest rate movements. Of the cases analyzed 88% have a similar outcome of value creation, which is supported by a rejection of the null hypothesis at p-value ≤ 0.05, justifying statistical significance. Furthermore, 53% of the changes in return on equity is explained by the changes in loans to greenhouse gas emitting companies. The study concludes that banks could still create shareholder value if they reduce funding towards high greenhouse gas emitting companies, provided they devise prudent strategic portfolio tilts in assets.