The word governance comes from a Latin word – gubernare – which means to steer. Cicero has written ‘he that governs sits quietly at the stern and scarce is seen to stir’. Thus my colleague, Dr Collette Kirwan, has conceptualised the board as being the navigator of the company.

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What is Corporate Governance

The aim of this study is to understand the bank lending behavior during financial crisis, in particular whether an increase of credit risk during this period can lead banks to reduce their lending activity. A second object is to investigate whether cooperative and commercial banks show different behaviors. The analysis is based on a sample of Italian banks (listed and no listed), an example of a country undergoing a credit crunch. The sample consists of 488 listed and unlisted Italian banks observed 2007-2013. Unlisted banks are included because they are the most numerous in the Italian banking system. Findings show a negative impact of credit risk on bank lending behavior, with regard to both credit risk measures: the nonperforming loans and the loan loss provision ratio.

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The Impact of Non-performing Loans on Bank Lending Behavior: Evidence from the Italian Banking Sector

Basel III: Effects of capital and liquidity regulations on European bank lending

Basel III and Bank-Lending: Evidence from the United States and Europe

Background: The banking sector plays an important role in economic activity: it mobilises savings and channels them to productive sectors thus encouraging the efficient allocation of resources. The competitive nature of the environment under which the banking sector operates is of paramount importance.Aim: The main aim of this study was to investigate the relationship between competition, efficiency and soundness in the South African banking sector.Setting: The setting for this study was the South African banking sector.Methods: We used a data set of 17 local and international banks for the period 2004–2015 and stochastic frontier models to analyse efficiency.Results: Results show that the impact of competition on efficiency depended on the measure of competition used. When using the Lerner index there was a negative effect of competition on efficiency while the opposite was true when using the theoretically robust Boone indicator.Conclusion: In the case of bank soundness, competition using the Boone indicator is negatively related to the Z score, implying that competition enhances bank soundness and these results supported the prudent and efficient management hypothesis.

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An analysis of competition, efficiency and soundness in the South African banking sector

This paper investigates the determinants of bank lending behaviour in Ghana. Using the GMM-System estimator developed by Arellano and Bover (1995) and Blundell and Bond (1998), we find that bank size and capital structure have a statistically significant and positive relationship with bank lending behaviour. We also find evidence of negative and significant impact of some macroeconomic indicators (central bank lending rate and exchange rate) on bank lending behavior. Again, competition in the industry was found to have a positive and significant impact on bank lending behaviour. Finally, relationship banking was found to have a positive correlation with bank lending behaviour in Ghana. Thus, policies aimed at maintaining stable macroeconomic fundamentals would greatly accelerate bank lending decision. Keywords: Banks, lending behaviour, Ghana

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Determinants of Bank Lending Behaviour in Ghana

This paper aims to examine the effects of financial freedom and competition on bank profitability.,The study uses system generalized method of moments and data from 139 banks across 11 Sub-Saharan African countries during the period 2006-2012.,The results of the study show that higher market power (less competition) is positively related to bank profitability, but operating efficiency is a more important determinant of profitability than market power. Also, both financial freedom and economic freedom show a positive impact on bank profits. The authors find evidence that banks with higher market power operating in countries with higher freedom for banking activities are more profitable than their counterparts in countries with greater restrictions on banking activities.,The results have shown that allowing banks greater freedom to operate would enhance their performance, without necessarily damaging the economy, as operating efficiency appears to be a more important reason for the observed profitability than market power.,This study provides insight on the ambiguous relationship between competition and bank profitability by considering the moderating effect of financial freedom which has not been taken into account in previous studies.

Freedom, competition and bank profitability in Sub-Saharan Africa

We analyse bank performance in Ghana over the period 2001–2007. We posit a two‐equation simultaneous system for return on assets and volatility of earnings. In addition to other explanatory variables, this study is interested in the impact of deposits as a proportion of total assets and the proportion of housing and construction loans that banks extend. The triangular system is estimated by the least squares dummy variable approach. We find that the coefficients of the deposit ratio are very small in both equations and not at all significant. At the 10% significance level, the ratio of total loans to assets is positive and significant in both equations. Housing and construction loans tend to increase return on equity and decrease volatility. Increases in equity to assets ratio increase return on assets and decrease volatility of earnings significantly. The impact of non‐interest income is small and tends to increase return on assets and decrease volatility. Non‐performing loan ratio has the expected sign ...

Housing and construction finance, deposit mobilisation and bank performance in ghana.

This study aims to analyze the potential implications of economic freedom and competition for bank stability.,Using system generalized method of moments and data from 139 banks across 11 Sub-Saharan African (SSA) countries during the period 2006–2012, this study considers whether the degree of economic freedom affects the relationship between competition and bank stability.,The results show evidence of the competition-fragility hypothesis in SSA banking, but suggests that beyond a setting threshold, increases in market power may also be damaging to bank stability. Financial freedom has a negative effect on bank stability, suggesting that banks operating in environments with greater financial freedom generally tend to be less stable or more risky. The authors also find evidence of a conditional effect of economic freedom on the competition–stability relationship, implying that bank failure is more likely to occur in countries with greater economic freedom, but with low competition in the banking sector.,The results suggests to policy makers that a moderate level of competition and economic freedom may be the appropriate policy to ensure the stability of banks.,The study provides insight on the competition–bank stability relationship, by providing new empirical evidence on the effect of economic freedom, which has not been previously considered.

Economic freedom, competition and bank stability in Sub-Saharan Africa

Purpose




This study aims to consider the effect of financial (banking) freedom and competition on bank efficiency.




Design/methodology/approach




With data from 11 Sub-Saharan African countries over the period 2006-2012, the study estimates both competition (market power) and bank cost efficiency using the same stochastic frontier framework. Subsequently, Tobit models, including instrumental variable Tobit regression, are used to assess how financial freedom affects the relationship between competition and bank efficiency.




Findings




The results show that increase in market power (less competition) leads to greater bank cost efficiency, but the effect is weaker with higher levels of financial freedom. This is not consistent with the quiet life hypothesis.




Practical implications




Policymakers usually take the view that opening up banking markets to greater competition may lead to higher efficiency. However, the results have shown that allowing banks to maintain some level of market power may be necessary to ensure banking system efficiency.




Originality/value




This study deepens the understanding of the inconsistent relationship between competition and bank efficiency, by using the same framework to measure both competition and efficiency, and by providing new empirical evidence on how the level of financial freedom affects this relationship.

Emmanuel Sarpong-Kumankoma

Papers

Determinants of Bank Lending Behaviour in Ghana

Freedom, competition and bank profitability in Sub-Saharan Africa

Housing and construction finance, deposit mobilisation and bank performance in ghana.

Economic freedom, competition and bank stability in Sub-Saharan Africa

Freedom, competition and bank efficiency in Sub-Saharan Africa