EFFECT OF RISK AND MARKET COMPETITION ON EFFICIENCY OF COMMERCIAL BANKS: DOES OWNERSHIP MATTER?

Anupam Das Gupta; Afsana Yesmın

doi:10.17261/Pressacademia.2022.1550

Research Article

EFFECT OF RISK AND MARKET COMPETITION ON EFFICIENCY OF COMMERCIAL BANKS: DOES OWNERSHIP MATTER?

Year 2022, Volume: 11 Issue: 1, 22 - 42, 30.03.2022

Anupam Das Gupta Afsana Yesmın

https://doi.org/10.17261/Pressacademia.2022.1550

Abstract

Purpose– This study aims to investigates the impact of risk and market competition on the efficiency of Bangladeshi commercial banks,
having an special effect of ownership.
Methodology– We select 43 commercial banks out of 61, adjusting outliers and missing data from 2000-2019. The two-step Generalize
Methods of Momemts (GMM) opt for to investigate unbalanced dynamic panel data of 666 obsevations. Unit root, multicolinerity, and other
prediagnostic tests support our selected method of investigation.
Findings– The two-step Generalize Methods of Moments (GMM) reveals that the impact of risk, stability, and market competition has a
homogeneous effect on cost and human capital efficiency in Aggregate industry, Conventional, and Private banks’ data. With the increase of
risk (stability), the efficiency of banks increases (decreases); having an exception, the human capital efficiency of private banks decreases
with risk-taking. However, market competition depicts the inverse association with the efficiency of Commercial banks, Conventional banks,
and Private banks.
Conclusion– The nonlinear and quadratic effect of risk and market competition on different ownership of banks is also found valid in the
Bangladeshi banking industry. Finally, the reaction of Islamic and Public banks asserts the opposite response to Conventional and Private
banks, respectively.

Keywords

Efficiency, ownership, market competition, GMM estimators

References

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Year 2022, Volume: 11 Issue: 1, 22 - 42, 30.03.2022

Anupam Das Gupta Afsana Yesmın

https://doi.org/10.17261/Pressacademia.2022.1550

Abstract

References

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Bougatef, K., & Mgadmi, N. (2016). The impact of prudential regulation on bank capital and risk-taking: The case of MENA countries. Spanish Review of Financial Economics, 14(2), 51-56.
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Das Gupta, A., Sarker, N., & Rifat Rahman, M. (2021). Relationship among cost of financial intermediation, risk, and efficiency: Empirical evidence from Bangladeshi commercial banks. Cogent Economics & Finance, 9(1), 1967575. doi: https://doi.org/10.1080/23322039.2021.1967575
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Deelchand, T., & Padgett, C. (2009). The relationship between risk, capital and efficiency: Evidence from Japanese cooperative banks. ICMA Centre Discussion Papers in Finance, 9, 2009-12.
Deelchand, T., & Padgett, C. (2009). The relationship between risk, capital and efficiency: evidence from Japanese cooperative banks. ICMA Centre in Finance. Retrieved from http://dx.doi.org/10.2139/ssrn.1525423
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Deyoung, R., Hasan, I., & Kirchhoff, B. (1998). The Impact of Out-of-State Entry on the Cost Efficiency of Local Commercial Banks. Journal of Economics & Business, 50(2), 191-203.
Doan, A.-T., Lin, K.-L., & Doong, S.-C. (2018). What drives bank efficiency? The interaction of bank income diversification and ownership. International Review of Economics & Finance, 55, 203-219.
Ehsan, S., & Javid, A. Y. (2018). Bank ownership structure, regulations and risk-taking: evidence from commercial banks in Pakistan. Portuguese Economic Journal, 17(3), 185-209
ElBannan, M. A. (2015). Do consolidation and foreign ownership affect bank risk taking in an emerging economy? An empirical investigation. Managerial Finance.
Evanoff, D. D., & Ors, E. (2003). Local Market Consolidation and Bank Productive Efficiency. Ssrn Electronic Journal. doi:10.2139/ssrn.367200
Fang, J., Lau, C.-K. M., Lu, Z., Tan, Y., & Zhang, H. (2019). Bank performance in China: A Perspective from Bank efficiency, risk-taking and market competition. Pacific-Basin Finance Journal, 56, 290-309.
Farruggio, C., & Uhde, A. (2015). Determinants of loan securitization in European banking. Journal of Banking & Finance, 56, 12-27.
Fiordelisi, F., Marques-Ibanez, D., & Molyneux, P. (2011). Efficiency and risk in European banking. Journal of Banking & Finance, 35(5), 1315- 1326. doi:10.1016/j.jbankfin.2010.10.005
Fungáčová, Z., & Poghosyan, T. (2011). Determinants of bank interest margins in Russia: Does bank ownership matter? Economic Systems, 35(4), 481-495. doi:10.1016/j.ecosys.2010.11.007
Goddard, J., Molyneux, P., & Wilson, J. O. (2004). The profitability of European banks: a cross‐sectional and dynamic panel analysis. The Manchester School, 72(3), 363-381.
Gujarati, D. N. (2009). Basic econometrics: Tata McGraw-Hill Education.
Gupta, A. D. (2018). Concurrent relationship of risk, capital and efficiency of commercial banks: Evidence from a developing country. (Ph.D. Thesis), Huazhong University of Science and Technology.
Gupta, A. D., & Moudud-Ul-Huq, S. (2020). Do competition and revenue diversification have significant effect on risk-taking? Empirical evidence from BRICS banks. International Journal of Financial Engineering, 7(01), 2050007.
Gupta, A. D., Sultana, I., & Das, D. (2021). Do Competition, Size, and Development Indicators Matter for the Efficiency of BRICS Banks? Journal of Finance and Economics, 9(2), 53-64.
Hammami, Y., & Boubaker, A. (2015). Ownership structure and bank risk-taking: Empirical evidence from the Middle East and North Africa. International Business Research, 8(5), 271.
Haque, F. (2019). Ownership, regulation and bank risk-taking: evidence from the Middle East and North Africa (MENA) region. Corporate Governance: The International Journal of Business in Society, 19(1), 23-43. doi:10.1108/CG-07-2017-0135
Haque, F., & Shahid, R. (2016). Ownership, risk-taking and performance of banks in emerging economies. Journal of Financial Economic Policy, 8(3), 282-297.
Harimaya, K., & Ozaki, Y. (2021). Effects of diversification on bank efficiency: Evidence from Shinkin banks in Japan. International Review of Economics & Finance, 71, 700-717.
Hauswald, R., & Marquez, R. (2006). Competition and strategic information acquisition in credit markets. The Review of Financial Studies, 19(3), 967-1000.
Hu, J. L., Li, Y., & Chiu, Y. H. (2004). Ownership and nonperforming loans: Evidence from Taiwan's banks. The Developing Economies, 42(3), 405-420.
Isshaq, Z., Bokpin, G. A., & Amoah, B. (2012). Efficiency and risk-taking behaviour of Ghanaian banks Finance and Development in Africa (pp. 53-74): Emerald Group Publishing Limited.
Isshaq, Z., Bokpin, G. A., & Amoah, B. (2015). Efficiency and risk-taking behaviour of Ghanaian banks. Finance and Development in Africa, 53- 74.
Javaid, M. E. (2016). Bank Specific and Macroeconomic Determinants of Bank Profitability. Journal of Management Info, 10(1), 38-54.
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Primary Language	English
Subjects	Finance, Business Administration
Journal Section	Articles
Authors	Anupam Das Gupta This is me 0000-0002-0094-4541 Afsana Yesmın This is me 0000-0002-0332-8912
Publication Date	March 30, 2022
Published in Issue	Year 2022 Volume: 11 Issue: 1

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APA	Gupta, A. D., & Yesmın, A. (2022). EFFECT OF RISK AND MARKET COMPETITION ON EFFICIENCY OF COMMERCIAL BANKS: DOES OWNERSHIP MATTER?. Journal of Business Economics and Finance, 11(1), 22-42. https://doi.org/10.17261/Pressacademia.2022.1550

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