Emerging Trends in Banking and Finance

The aim of this paper is to investigate the macroeconomic and sector-specific factors likely to affect nonperforming loans (NPLs) for the Turkish banking sector. The study covers a quarterly time series span of 2006–2015 and uses the time series econometric methods of the Johansen cointegration test, vector error correction model (VECM), and the Granger causality test. In the analysis, we use the industrial production index (IPI), top 100 companies among the Borsa Istanbul Stock Exchange Index (BIST 100), and exchange rates between the Turkish lira to euro (EUR) and Turkish lira to U.S. dollar (USD) as proxies for the state of the economy and bank-specific factors; return on asset (ROA) and return on equity (ROE) are proxies for the managerial efficiency of banks in determining NPLs. The general findings support the relevance of both micro- and macroeconomic fundamentals significantly affecting Turkish NPLs. In this study we also illustrate the adverse impact of external foreign currency financing on the ability to service debt for Turkish credit market participants. The findings may prove to be helpful when designing macro- and microeconomic policies aimed at mitigating systematic risk.

Since the 1980’s, Malaysia’s external debt has been on an increase as a result of several economic factors, including two economic crises. Rapid increase in the external debt has become a national concern. In this study, we aim to investigate the determinants of Malaysia’s external debt for the period of 1970 to 2013 by using annual data. For this aim, we have performed the Johansen cointegration test, vector error correction model (VECM), and Granger causality test. The findings show that there is a long-run relationship between the variables and the GDP, recurrent and capital expenditure Granger causes external debt. These findings indicate that GDP growth is a solution for the external debt problem. In contrast, we believe that recurrent expenditures should especially be kept under control, and we offer several policy recommendations, such as reforming subsidy systems. Also, finding alternative sources to finance capital expenditure is important for a healthy growth of the economy.

This paper attempts to propose a measure of “optimality of bank financial structure” as a proxy of regulation fairness, in terms of the “theory of the banking firm” under constraints of liquidity and capital adequacy. This has been conducted using Lagrange function to assess the optimal weights of assets that include cash, governmental investments, loans, non-governmental investments and other assets, and the optimal weights of liabilities that include deposits, equity and other liabilities. The paper argues that “optimality of bank financial structure” may affect both of “banking efficiency” and “financial stability”. This has been conducted using a sample of 15 countries, over the periods from the 2004 to 2015. Using panel analysis according to OLS and GMM techniques, results indicate that hypotheses regarding the significance of this impact could be accepted.

This paper investigates the possible causal relationship between the research and development expenditure and high-technology export in Turkey. Time-series data are collected over the period ranging from 1995 to 2014. The motivation to conduct this research arose from the fact that research and development expenditures have an important role in contributing to high-technology export all over the world and both of these economic terms report increasing trend in the observed period. Moreover, up-to-date studies on the matter to do not take into account the case of Turkey, therefore there was a need to conduct an empirical research. For this purpose, this paper suggests the econometrics of time-series including Johansen cointegration test to explore the presence of cointegrating relationship between economic terms of interest. In addition, authors are interested to explore whether the causal relationship exists between research and development expenditure and high-technology export in Turkey and use Granger causality test for this purpose. In order to control for the potential reverse causality and in order to investigate the long- and short-run relationship between economic terms of interest, the paper suggests ARDL approach. Johansen cointegration test suggests the cointegrating relationship between the research and development expenditure and high-technology export. Granger causality test reports a bidirectional relationship between the economic terms of interest. Therefore, the research and development expenditure is reported to contribute to high-technology export. Besides that, results indicate that the improvement in high-technology export may contribute to research and development. In terms of ARDL model it is important to emphasize a significant positive short- and long-run relationship between economic terms of interest in the initial model. The extended model controls for the impact of economic freedom. The obtained results do not differ in sign and significance from the initial model. Therefore, the initial model can be considered stable.

As post October 2012, the arrangement of loan loss provisioning in Indonesia had changed into Allowance for Impairment Losses (CKPN). As a new form of loan loss provisioning, CKPN aims to prevent banks from losses by forming a provision for the asset impairment based on bank self-assessment. There have been many works done concerning cyclicality of loan loss provisioning in some countries with the result that the establishment of provision by banks tends to be procyclical. As a result of this behaviour, if there is a weakening of the economy, banks will tend to form additional provisions that can reduce their profitability and CAR. This study examines how loan loss provisioning of Indonesian banks especially since the implementation of allowance for impairment losses (CKPN) responds to their earning, credit growth, and to the changes in the business cycle (reflected by GDP growth) using panel data of 102 banks in Indonesia during the period of 2011q1–2017q1. We find empirical evidence that banks on average have followed an income-smoothing pattern as evidenced by the positive and significant relationship between loan loss provisions and bank earnings. On the contrary, credit growth and GDP growth has an undesirable negative coefficient which means tend to be procyclical. As a conclusion, the results suggest that, on average, Indonesian behaviour of banks loan loss provisioning follow a procyclical pattern that is potentially worsening the business cycles, especially during a recession period.

Foreign Direct Investment, and related to it, economic growth are among the main indicators in all countries that are looking for their growth. The challenge is for developing and transition countries such as SEE and Kosovo. The high level of FDI globally (2007) has not yet been repeated. In economic literature, it is considered as a “need” for the analysis of the factors that influenced the chronic level of FDI over a decade. Facing the theoretical criteria, the model Borensztein, et al. (1998), FE and RE technique through macro Panel Stata, judged in its entirety, it is concluded that the improvement of FDI requires money also to improve the specific factors in each country, as we conclude that the FDI determinants in CE, SEE and Kosovo are economic growth, domestic (local) investments, and government spending. Despite the importance of foreign capital flows, the paper emphasizes the importance of cooperation between domestic and foreign firms and the idea that the expectations of foreign investors and the benefits of the local economy are realized on the basis of improving their long-term profits.

There have been significant changes in the presentation of health services along with technological innovations and developments experienced in the second half of the twentieth century. Due to the nature of the health care services, many different, complex and economically expensive services are required to be carried out together. For this reason, it is significantly importance that health services are delivered effectively and efficiently to people without sacrificing quality. In this study, the health care performance and efficiency of OECD countries have been analyzed in two stages. The data obtained from the OECD database. First, the efficiencies were determined by data envelopment analysis using the MaxDEA program, then the values of these countries were taken as dependent variables and Panel Data Analysis was applied with the R package program. As a result of analyzes, the socio-economic variables affecting the health care services of the countries have been determined.

Stock market modeling and risk managing have recently been one of the most important topics in finance. Using a method borrowed from the statistical and Bohmian quantum mechanics, this study seeks to answer the question of how quantum potential controls the price returns. The interconnection between today’s and yesterday’s prices has led to the emergence of quantum potential describing the collective behavior of stocks returns in the various times. It is shown that, using the empirical data of some market indices, the quantum potential walls confine the variations of the price return into a definite interval where the distance between the walls can be a proxy for the risk of the relative stock index. In other words, the investigation of different return frequencies shows that the market risk increases as the distance between the potential walls increases. The magnitude of the risk is different for different indices allowing the traders to decide on their portfolio selection and their investment horizon. Our results are consistent with the behavior of the developed and emerging markets.

Intellectualization and globalization are modern characteristics of sustainable development of national economies. The countries are in competition with each other for having modern knowledge holders and creators of new technology and culture. Human capital has become not only the driver and competitive strength but also prevailing form of social wealth and base for intellectual and social capital not only economic but also civilizational progress in broad terms. Amid globalization of economics specific processes take place making impact on human capital. Migration can have a diverse impact and change quality and quantity indices of human capital. The article deals with main trends in use of human capital at modern world labor market. Migration impact has been analyzed in the OECD countries on development of human capital, possible strategies of behavior on the world stage have been identified.

The amalgamation of tourism destination marketing and entrepreneurship contributes to the comprehension of how majority of the tourism marketing takes place in the destination market settings. This study therefore seeks to investigate the void that exists in the literature of tourism and entrepreneurship through a designed conceptual research model to examine the relationships between tourism and entrepreneurship through questionnaire and to highlight their contribution to the tourism relevant literature. Data from entrepreneurship organizations and tourism firms were collected from employees that deal with visitors in Ghana to analyze the results. The findings propose that the digital word of mouth plays important role in destination market satisfaction, potential visitors’ intentions, attractions and the future direction of tourism and entrepreneurship capabilities.

This research paper concentrates on failures of microfinance in alleviating poverty and food insecurity in the rural northern Regions of Ghana. This article contends that the rural northern Ghanaians have failed to grasp the opportunities provided by many microfinance services, to help out lift the canker of poverty and the chronic food insecurity, but rather migrating to the rural areas of southern Ghana. The article adapted descriptive and survey investigation strategies. A snowballing sampling procedure was used to sample and investigate 300 respondents, comprising 200 (66.6%) females and 100 (33.3%) males who are practicing mostly Susu-an informal microfinance service in their new rural settlements in the Bono Ahafo Region of Ghana-Sunyani. Scientific Package for Social Science (SPSS) statistical software was employed to analyze the survey data, and the results presented in tables form. The sum and summary of this study reveals that, Susu-informal form of micro-lending and saving is an effective financial tool to improving the rural northern women to alleviate her from poverty and chronic food shortage, however, the patriarchal environmental beliefs, which is part and parcel of these women lives are the main standing blocks against this worthy cause. The study recommended that, districts assembles should enforce the by-laws that for bit any outmoded unproductive cultural activity currently in the rural northern set ups, the women be sensitized about their rights and privileges with the support of the men, among others.

Sitting in the intersection of commerce, banks and mobile revolution, mobile payments are expected to grow by double-digits in the forthcoming years. There has been an increasing and intensive interest in mobile payments domain from banks, telecom companies and technology giants. Notwithstanding the introduction of numerous innovative mobile payment solutions, mobile payment experience is still frictional and restricting. This paper analyses the current mobile payment market starting with a historical development perspective and proposes a new solution to improve the mobile payment experience. The advantages of proposed solution for customers, merchants and banks are discussed in detail and compared with existing solutions.

This study aims to evaluate the performance of G20 economies. For this purpose, financial sector-based factors are taken into the consideration. Within this framework, 9 different indicators are identified. As a result of DEMATEL analysis, it is concluded that domestic credit provided by financial sector is the most important indicator whereas the indicator of automated teller machines has the weakest importance. In addition to this aspect, with the help of TOPSIS methodology, it is identified that Italy has the best performance while Argentina is on the last rank. While considering these aspects, it is recommended that G20 countries should focus on the significant criteria emphasized in the study in order to increase their performance.

Due diligence takes important part at the level of decision making for merger and acquisition of banks. There is no standard or rules for due diligence format. Some of the consultancy firms are giving the checklist for due diligence. This study is prepared according to the experiences of due diligence in several banks in Turkey after the economic crises in 2000 and 2001. In banking sector, banks can work with financial advisors, auditors; or they prefer to arrange a group of workers for doing the analysis in their corresponding fields in the departments. The study method is based on a literature review of several theories and hypothesis for bank M&A’s, as well as the study of a successful case on bank merger from Turkey.

After the global crises, it is observed that not only the banking sector but also the insurance industry has systemic risk sources. Moreover, there are studies that found that insurance companies are even more risky compared to other financial intermediaries. In regard to this, life and non-life insurance companies and banks’ systemic risk causalities are analysed. Systematic risk measurements and conditional capital inadequacy were used. Dumitrescu-Hurlin panel causality tests were used to analyse the weekly global data for the years between 2005 and 2015. The main aim of the study is to find out if there is a relation between the systemic risk of life and non-life insurance and commercial banks. However, the results of the past studies indicate that the transfer of bank systemic risk has a strong role. The results of the study reveal that especially in regard to conditional risk based value where the systemic risks of life and non-life insurance companies and banks have strong causalities. It can be concluded that insurance companies’ systemic risk has a potential to be spreaded regarding to the geographical area.

In this study, the bound of macrofinance and the quality of Credit Portfolio in 23 emerging economies are investigated using Panel Var Models and Dumitrescu-Hurlin Panel causality tests. The relation between the credit quality, the credit volume, credit to GDP gap, real interest rate, inflation and current deficit are investigated for the years between 1998 and 2015. It is observed that except growth there are strong relations between those variables. There is unidirectional relation between the credit quality and the economic growth. Panel VAR model action and reaction function indicate that the shocks on credit gap, growth and current deficit cause a strong and long term effect on the credit quality. The countries that have been investigated are found to have a steady current deficit and the growth period are mostly had an international effect. It is inevitable not to have such an effect on current deficit and growth. Credit volume and credit deficit also indicate cyclicality and growth accordingly.

This paper performs empirical analysis on determinants of profitability in Islamic and Conventional Banks. The main focus of this study is to evaluate and measure of financial performance of Islamic and conventional banks during the global financial crises in emerging market economies. To evaluate empirically performance of the banks, various financial ratios are employed. We measure performance in terms of liquidity, profitability, solvency, and efficiency. Our findings reveal that there are similarities and differences in profitability determinants of Islamic and Conventional banking firms. The cost to revenue ratio has inverse relationship with profitability indicators in both banking systems. However, there are differences in financial performances between Conventional Banks and Islamic banks which are found in overall picture of all banks in terms of net income margin.