The impact of listing on banks’ performance: case study from Saudi Arabia
-
DOIhttp://dx.doi.org/10.21511/bbs.15(3).2020.01
-
Article InfoVolume 15 2020, Issue #3, pp. 1-9
- Cited by
- 1285 Views
-
306 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Using quarterly data from 2010 to 2019, this paper investigates the impact of listing status on the performance of the National Commercial Bank (NCB), the largest commercial bank in Saudi Arabia, by applying a combination of financial ratios analysis and efficient frontier analysis with a mix of parametric and non-parametric tests. The overall results show that although the NCB performance is superior compared to their counterparts, this superiority has deteriorated after the bank was listed in 2014. This result was captured by the deterioration in the efficiency measures of NCB, indicating the significance of using the efficient frontier analysis as an additional monitoring tool by the Saudi regulators. The financial ratios analysis also shows that even though the NCB profitability has increased, there is an increase in the bank’s overall risk after being listed. Therefore, Saudi regulators should closely monitor their listed banks as these banks are directed toward high-risk assets.
- Keywords
-
JEL Classification (Paper profile tab)C12, C61, G21, G32
-
References34
-
Tables3
-
Figures3
-
- Figure 1. Saudi banks’ market share (%) concerning deposits, loans, and assets in 2018
- Figure 2. NCB’s assets, loans, and deposits from 2000 to 2018, USD billion
- Figure 3. Efficiency measures of the NCB over the sample period
-
- Table 1. Variables definition
- Table 2. Descriptive statistics of all variables of the NCB
- Table 3. The results of the pre- and post-listing empirical design of the NCB
-
- Alqahtani, F., Mayes, D. G., & Brown, K. (2017). Islamic bank efficiency compared to conventional banks during the global crisis in the GCC region. Journal of International Financial Markets, Institutions and Money, 51, 58-74.
- Alsharif, M. (2020). Banks Efficiency, Ownership Type and Listing Status in Gulf Cooperation Council Countries: A cross-countries analysis. International Journal of Advanced Science and Technology, 29(10s), 228-241.
- Alsharif, M. (in press). Stock Returns and Banks Efficiency in Saudi Arabia. Journal of Economics, Finance and Administrative Science.
- Alsharif, M., Nassir, A. M., Kamarudin, F., & Zariyawati, M. A. (2019). The productivity of GCC Islamic and conventional banks after Basel III announcement. Journal of Islamic Accounting and Business Research, 10(5), 770-792.
- Argaam. (2019, November 13). A look at largest initial public offerings in Tadawul.
- Ariff, M., & Can, L. (2008). Cost and profit efficiency of Chinese banks: A non-parametric analysis. China Economic Review, 19(2), 260-273.
- Banker, R. D., & Natarajan, R. (2008). Evaluating Contextual Variables Affecting Productivity Using Data Envelopment Analysis. Operations Research, 56(1), 48-58.
- Berger, A. N., & Mester, L. J. (1997). Inside the black box: What explains differences in the efficiencies of financial institutions? Journal of Banking & Finance, 21(7), 895-947.
- Bitar, M., Hassan, M. K., & Walker, T. (2017). Political systems and the financial soundness of Islamic banks. Journal of Financial Stability, 31, 18-44.
- Black, K. (2013). Applied business statistics: making better business decisions (7th ed.). Danvers, United States: Wiley.
- Brissimis, S. N., Delis, M. D., & Tsionas, E. G. (2010). Technical and allocative efficiency in European banking. European Journal of Operational Research, 204(1), 153-163.
- Chu, S. F., & Lim, G. H. (1998). Share performance and profit efficiency of banks in an oligopolistic market: Evidence from Singapore. Journal of Multinational Financial Management, 8(2-3), 155-168.
- Cooper, W. W., Seiford, L. M., & Tone, K. (2007). Data Envelopment Analysis: A Comprehensive Text with Models, Applications, References and DEA-Solver Software (2nd ed.). New York, USA: Springer US.
- De Haan, L., & van den End, J. W. (2013). Bank liquidity, the maturity ladder, and regulation. Journal of Banking & Finance, 37(10), 3930-3950.
- Dong, Y., Firth, M., Hou, W., & Yang, W. (2016). Evaluating the performance of Chinese commercial banks: A comparative analysis of different types of banks. European Journal of Operational Research, 252(1), 280-295.
- Ghosh, S. (2012). The Post Offering Performance of IPOs from the Banking Industry. In Money and Finance (pp. 1-20). India: Mumbai.
- Gorton, G., & Schmid, F. (1999). Corporate governance, ownership dispersion and efficiency: Empirical evidence from Austrian cooperative banking. Journal of Corporate Finance, 5(2), 119-140.
- Houge, T., & Loughran, T. (1999). Growth fixation and the performance of bank initial public offerings, 1983–1991. Journal of Banking & Finance, 23(8), 1277-1301.
- Jain, B. A., & Kini, O. (1994). The Post-Issue Operating Performance of IPO Firms. The Journal of Finance, 49(5), 1699.
- Jeitschko, T. D., & Jeung, S. D. (2005). Incentives for risk-taking in banking – A unified approach. Journal of Banking & Finance, 29(3), 759-777.
- Jiang, C., Yao, S., & Feng, G. (2013). Bank ownership, privatization, and performance: Evidence from a transition country. Journal of Banking & Finance, 37(9), 3364-3372.
- Jiang, C., Yao, S., & Zhang, Z. (2009). The effects of governance changes on bank efficiency in China: A stochastic distance function approach. China Economic Review, 20(4), 717-731.
- NCB. (2018). The National Commercial Bank Annual Report. Jeddah, Saudi Arabia.
- Pagano, M., & Roell, A. (1998). The Choice of Stock Ownership Structure: Agency Costs, Monitoring, and the Decision to Go Public. The Quarterly Journal of Economics, 113(1), 187-225.
- Röell, A. (1996). The decision to go public: An overview. European Economic Review, 40(3-5), 1071-1081.
- Schneider, C. W., Manko, J. M., & Kant, R. S. (1981). Going Public - Practice, Procedure and Consequences. Villanova Law Review, 27(1), 1-51.
- Siems, T. F., & Barr, R. S. (1998). Benchmarking the Productive Efficiency of U.S. Banks. Financial Industry Studies, 4, 11-24.
- Stake, R. E. (1978). The Case Study Method in Social Inquiry. Educational Researcher, 7(2), 5-8.
- Sufian, F. (2011). Banks total factor productivity change in a developing economy: Does ownership and origins matter? Journal of Asian Economics, 22(1), 84-98.
- Wang, X., Xu, L. C., & Zhu, T. (2004). State-owned enterprises going public: The case of China. Economics of Transition, 12(3), 467-487.
- Wu, H. L., Chen, C. H., & Lin, H. L. (2009). Can a stock market listing help to improve the operational performance of China’s banks? Journal of Economic Policy Reform, 12(1), 13-28.
- Yin, H. (2014). The Post-Issue Performance of IPO Banks: International Evidence. Banking and Finance Review, 6(1), 25-36.
- Yin, H., Yang, J., & Mehran, J. (2015). Do Chinese banks perform better after IPOs? Managerial Finance, 41(4), 368-384.
- Zainal, Z. (2007). Case study as a research method Zaidah. Jurnal Kemanusiaan, 5(1), 1-6.