Heterogeneous impact of Covid-19 on the US banking sector Heitmann, Dennis; Chowdhury, Mohammad Ashraful Ferdous; Islam, Mohammad Saiful
The North American journal of economics and finance,
September 2023, 2023-09-00, Volume:
68
Journal Article
Peer reviewed
Open access
•The study aims to demonstrate the impact of Covid-19 on US banks.•Overall, Covid-19 adversely impacts financial performance of US banks.•The impact of the Covid-19 is heterogeneous among the sampled ...banks.•Covid-19 leads to decline in profitability, cost efficiency and level 3 assets to securities ratio of US banks.•Credit risk and regulatory capital risk of US banks increase due to the Covid-19.
This study discusses the impact of Covid-19 on important financial performance indicators and risk indicators of US banks using quarterly panel data of the 87 insured U.S.-chartered commercial banks, covering periods from 2017 to 2021. Based on random effect and two step system GMM models, we provide strong empirical evidence of the adverse impact of the pandemic on important accounting and market-based measures and risk indicators. The presence of Covid-19 implies declining profitability, deteriorating cost efficiency and decreasing level 3 assets to securities ratios. It also adversely impacted key risk indicators by increasing credit risk and the risk of regulatory capital. Using quantile regression, we have also identified heterogeneity among banks in terms of financial performance and risk indicators. The findings of the study will add value in research to the existing literature and provide the newest findings to the stakeholders who are engaged with the US banking sector.
This article examines competitive conditions and market structure in the banking industry, and investigates their interrelationship. Competition is measured using the Panzar–Rosse model. In order to ...distinguish competitive behaviour on local, national and international markets, for each country, three subsamples are taken: small or local banks, medium-sized banks and large or international banks. For all 23 countries considered, estimations indicate monopolistic competition, competition being weaker in local markets and stronger in international markets. Subsequently, a relationship for the impact of the market structure on competition is derived and tested empirically, providing support for the conventional view that concentration impairs competitiveness.
Purpose
Given the large global investments made in FinTechs and the context of Brazilian credit (which has been suffering from the effects of the crisis in the last decade), the purpose of this paper ...is to study the propensity of consumption of credit services offered by FinTechs of loans. In order to discover the factors that influenced the propensity to apply for FinTech loans, a theoretical model was designed, which was tested by means of a survey given to individuals who might contract loans.
Design/methodology/approach
The final sample consisted of 507 individuals whose data were analyzed through structural equation modeling (SEM), with estimation of partial least squares.
Findings
From the results of the research, it was possible to draw a profile of the FinTechs of Brazilian loans and also to estimate the antecedents of the propensity to utilize this type of service.
Research limitations/implications
The model proposed in this work was developed to measure the propensity to consume in relation to the credit services offered by lending FinTechs.
Practical implications
The consumer should intensify the use of these channels to shape financial products and services to their needs, thereby democratizing access to credit, which is often restricted in quantity and quality by policies of institutions that dominate the Brazilian lending market.
Originality/value
Aspects such as trust, personal innovation, perceived utility, ease of use and social influence, as well as the constructs that precede them like privacy, stigma and transactional distance, explain 41.5 percent of the propensity to use services from lending FinTechs in Brazil.
We compare fees charged by investment banks for conducting IPOs in the United States and Europe. In recent years, the "7% solution," as documented by Chen and Ritter (2000), has become even more ...prevalent in the United States, and is now the norm for IPOs raising up to $250 million. The same banks dominate both markets, but European IPO fees are roughly three percentage points lower, are much more variable, and have been falling. We review explanations for the gap in spreads and find the evidence consistent with strategic pricing. U.S. issuers could have saved over $1 billion a year by paying European fees.
Banking and Finance in Japan Tatewaki, Kazuo
Banking and Finance in Japan (RLE Banking and Finance),
1991, 20121012, 2012, 2012-10-12, Volume:
32
eBook, Book Chapter
The Tokyo market has often been a difficult financial environment for the non-Japanese to understand. This volume, written for an international readership provides a study of the financial centre ...behind one of the world's largest economies.
Introduction to Islamic Banking and Finance is a succinct guide to the key characteristics of Islamic banking highlighting how these differ from conventional banking. This detailed book illustrates ...how Islamic banking is consistent with the Sharia'a, a key element of which is the prohibition on collecting and paying interest. This central religious precept appears to rule out most aspects of modern finance but it does allow money to be used for trading tangible assets and business, which can then generate a profit. Brian Kettell's book looks at all aspects of Islamic banking, including chapters on its creation and evolution through to detailed discussions of the issues involved in the Sharia'a contracts of Murabaha, Mudaraba, Musharaka, Ijara, Istisna'a, and Salam. Islamic insurance (Takaful) is also covered. Finally the book takes a look at Sharia'a law and Sharia'a boards, indicating the roles and responsibilities that come with membership. Islamic banks have been operating in places such as Bahrain, Saudi Arabia, Malaysia and Dubai for some time. Conventional bankers have traditionally viewed the sector as a small, exotic niche but recent years have seen a dramatic surge in popularity. A number of Western investment banks have started working with Muslim clerics to create new ranges of financial products designed for devout Muslims, a large and growing market. Although estimates of the size of the Islamic finance industry vary greatly, everyone agrees that it is expanding rapidly and this is the perfect book for anyone looking to understand the industry.
The analysis of the relationship between bank competition and financial stability remains a controversial issue and widely discussed in the academic and political community. Using a sample of 117 ...listed banks in 16 European countries for the years 2011 to 2018, the article explores the impact of market power, measured by the Lerner index, on the bank stability, measured by distance-to-default and Z score. Our results show that for the overall sample, higher market power in banking decreases the risky behavior of banks, confirming the “competition-fragility” view. We do not find any support for a U-shaped relationship between competition and bank risk-taking. However, our findings differ from previous studies pointing out that the relationship between bank competition and risk-taking is differentiated depending on whether the bank is based in a country with a more stable banking system or a less stable one. In countries with a less financially stable banking system, increased competition leads to increased bank risk-taking. In countries with a more stable banking system, market power seems not to influence banks’ financial stability. Public policies must guarantee banking competition but limiting excessive bank risk-taking, especially in countries with less financially sound banking systems. The consolidation of European banking can be a key element for achieving these policies.
This study utilises higher objectives postulated in Islamic moral economy or the
maqasid al
-
Shari’ah
theoretical framework’s novel approach in evaluating the ethical, social, environmental and ...financial performance of Islamic banks.
Maqasid al
-
Shari’ah
is interpreted as achieving social good as a consequence in addition to well-being and, hence, it goes beyond traditional (voluntary) social responsibility. This study also explores the major determinants that affect
maqasid
performance as expressed through disclosure analysis. By expanding the traditional
maqasid al
-
Shari’ah,
, we develop a comprehensive evaluation framework in the form of a
maqasid
index, which is subjected to a rigorous disclosure analysis. Furthermore, in identifying the main determinants of the
maqasid
disclosure performance, panel data analysis is used by including several key variables alongside political and socio-economic environment, ownership structures, and corporate and
Shari’ah
governance-related factors. The sample includes 33 full-fledged Islamic banks from 12 countries for the period of 2008–2016. The findings show that although during the nine-year period the disclosure of
maqasid
performance of the sampled Islamic banks has improved, this is still short of ‘best practices’. Through panel data analysis, this study finds that the Muslim population indicator, CEO duality,
Shari’ah
governance, and leverage variables positively impact the disclosure of
maqasid
performance. However, the effect of GDP, financial development and human development index of the country, its political and civil rights, institutional ownership, and a higher share of independent directors have an overall negative impact on the
maqasid
performance. The findings reported in this study identify complex and multi-faceted relations between external market realities, corporate and
Shari’ah
governance mechanisms, and
maqasid
performance.
•Post-2007, European banks displayed lower market-to-book ratios than US banks.•Policy rates and European bank performance positively associated.•European underperformance linked to increased deposit ...funding.•European banks struggled with non-performing loans.•US banks benefited from higher profitability and cost efficiency.
In the 2007–2017 period, the market-to-book ratios of European and US banks diverged markedly. We use panel regressions to investigate the determinants of M/B ratios for 112 European and US banks. We show that higher US valuations were driven by profitability and cost efficiency. The underperformance in Europe was associated with declines in the net interest margin and low policy rates, as well as with inadequate resolution of non-performing loans and an increasing share of deposits. Our results stress the importance of provisioning and NPL resolution in Europe. Moreover, low-for-long policy rates may be detrimental for bank franchise values.
In ihc context of competitive mate searching, males may use cues from conspccifics, such as movement cues and/or courtship signals, to locate mates. For ground-dwelling wolf spiders, substrate-borne ...vibratory cues may be particularly important sources of information, given the potential presence of many visual obstacles. This study explores the possible use of conspecific male cues in wolf spiders by asking: (i) Do male Schizocosa retrorsa (Banks. 1911) wolf spiders use vibratory cues from conspecific males to alter their searching or signaling behavior? (ii) Can males assess the density of conspecific males using conspecific male cues'? (iii) Docs the variation in conspecific male density affect the behavioral response of focal males to the conspecific cues? To answer these questions, we tested the effects of (i) the number of conspecific males and (ii) the activity of conspecific males (e.g.. courtship yes/no) on a focal male's behavior. We recorded the following focal male behavior: (a) the presence absence of courtship behavior, (b) temporal, structural signal characteristics of the multimodal courtship signaling, and (c) locomotory patterns. Our results suggest that, (i) S. retrorsa males assess their competitive environment through substrate-borne vibratory cues generated by courting or non-courting behavior of conspecific neighbors, (ii) S. retrorsa males may alter their reproductive behavior between male searching and courtship signaling by the assessment of cues associated with conspecific male density, and (iii) the assessment and perception of density-dependent conspecific courtship signaling can be used as social information to adjust the reproductive behavior.