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This volume presents current developments in the fields of banking and finance from an international perspective. Featuring contributions from the 2nd International Conference on Banking and Finance Perspectives (ICBFP), this volume serves as a valuable forum for discussing current issues and trends in the banking and financial sectors, especially in light of the global economic challenges triggered by financial institutions. Using the latest theoretical models, new perspectives are brought to topics such as e-finance and e-banking, Islamic banking, international cross-border regulatory cooperation, bank fraud, the global financial crisis, microfinance, and corporate control transactions. Offering an opportunity to explore the challenges of a rapidly changing industry, this volume will be of interest to academics, policy makers, and scholars in the fields of banking, insurance, and finance.



Corporate Debt Bias: Reasons and Possible Solutions

This paper examines the asymmetric taxation of debt and equity and its consequences on the capital structure of companies and the economy as a whole. Policy options, the main ones of which include the restriction or elimination of interest deductibility and the allowance for corporate equity, are proposed as solutions to the corporate debt bias. Country-specific examples of the implementation of policy options to eliminate the tax bias on debt financing are presented. Moreover, information on the availability of tax incentives for the encouragement of equity financing in Turkey is given.
Güneş Topçu

The Effect of Financial Crises on Banking Performance in Developed and Emerging Economies

The aim of the study is to examine the effect of crises on the stability of the bankingsystem in 46 developed and emerging economies for the years 1999–2014. The variables are tested by using the two-step dynamic panel data analysis. The results indicate that the banking crises have an impact on the banking system stability. On the other hand, it is obsereved that the comparative conditions and the volatility on asset prices are the determinants on performance-stability relations. The most important finding is that the credit to GDP gap influence bank performance negatively.
Necla Tunay, Nesrin Özataç, K. Batu Tunay

The Dynamic Effect of Financial Crises and Economic Volatilities on the Insurance Sector

In this study, the effect of the international financial crises and the volume of the economic performance of the market share of the insurance sector and the premiums accumulated through life and non-life insurance sector are analysed. A dynamic panel data analysis is used to examine 30 developed and emerging economies for the years between 1995 and 2014. The results indicate that the crises and volatilities in economic conditions influence insurance sector negatively.
Necla Tunay, Nesrin Özataç, K. Batu Tunay

Multi-objective ATM Location Problem in a Metropolitan City

Location problems are considered as an important branch of the strategic decision-making process. It is incontrovertible that finding the optimal locations of Automatic Teller Machines (ATMs) plays a salient role in retaining and enhancing the market share of the banks. In this study, a multi-objective linear mathematical model is developed to minimize the ATMs’ establishment costs, the surcharge costs, the interchange costs, and the number of lost customers simultaneously. In order to demonstrate the applicability of the proposed model, a case study of Tehran metropolis is presented. The General Algebraic Modeling System (GAMS), which is an optimization compiler, is used to solve the problem. The result indicates the establishment location of the new ATM machines by considering the current outsiders’ ATMs.
Mahmoud Golabi, Arman Nedjati, Gökhan Izbirak

Frontline Employees at the Ghanaian Local Banks and the Stress of Long Hours of Work

A research model was designed to evaluate the ideal working time for front frontline employees at the Ghanaian local banks to reduce emotional exhaustion among the employees. Twenty local banks were involved in the research. Customer service and job involvement including organizational commitment and job satisfaction were the variables. Banks have traditionally paid much attention to customer behavior because it has several effects on revenue generation from customers. The present competition among banks has generated a new climate of approach to manage local banks through customer relationships that include job commitment, Job contribution, job satisfaction and turnover intentions among employees. It is resulted that majority of Local banks employees in Accra work long hours and get less paid. The results therefore show how most employees are emotionally exhausted and have turnover intentions, but difficult to find new jobs to replace the present stressful employment.
Selira Kotoua, Mustafa Ilkan, Hasan Kilic

Examining the Relationship between the Stock Returns and Earnings Measures – Evidence from Borsa Istanbul

This paper investigates the relationship between stock returns and different types of earnings measures (such as net income, gross profits, operating profitability, cash-based operating profitability and accruals) for the firms traded on Borsa Istanbul. We construct portfolios by sorting firms according to the implied earning measures from low to high and analyze whether there are differences among them. Our sample period is from June 2007 to December 2015 covering 172 firms in average. Our results consistent with the previous studies indicating the profitability of equally and in some cases value weighted extreme portfolio investment strategies based on earnings measures.
Asil Azimli, Pınar Evrim Mandaci

Performance Ranking of Development and Investment Banks: ANP Application

Traditionally, Analytic Hierarchy Process (AHP) and Analytic Network Process (ANP) methods used for Multi-criteria decision making problems. Hierarchical definitions are not enough when relations between the components of multi-criteria decision-making problems are not one-sided rather mutual, Both AHP and ANP based on mutual comparison. ANP is the general form of AHP and considers the interactions and feedbacks between the components which are not directly related rather than creating a network that makes it possible to able to eliminating the levels which are in the hierarchical structure. In this study, ANP model based on the main criteria which are capital adequacy, asset quality, liquidity, profitability and income - expenditure and related 13 criteria which is known sub-criteria of development and investment banks. The framework investigates financial performances of 6 privately-owned development and investment banks by using Analytic Network Process based on experts’ opinions and related literature for the period 2011–2015 in Turkey.
Sedat Karataş, İlyas Akhisar

Longevity Risk in Life Insurance

In last years, longevity risk became as an important issue. One of the sectors that deal with longevity risk in their evaluations is insurance sector uses human life information as an input. If longevity risk is neglected, this case will cause to put false financial equivalence and also will bring the institutions face to face with serious losses during their capital adequacy calculations. The aim of this work is showing that capital liability is decreasing when we use longevity swap that is one of hedging approaches. Longevity swap is selected as an instrument for hedging. Lee-Carter model is applied to swap and mortality ratio equation. Estimation is done to swap and mortality ratio equation by using Monte Carlo simulation. Two conditions which are hedged and non-hedged cases were compared and has shown that under definig correct swap cost hedging provides to its user remarkable saving.
Elif Ceylan, Seher A. Tezergil

Estimating the Effect of Common Currency on Trade in West African Monetary Zones: A Dynamic Panel-GMM Analysis

The purpose of this study is to evaluate the effect of common currency on economic performance of ECOWAS member nations in terms of international trade patterns. To achieve this objective, we applied the Generalized Method of Moments (GMM) estimation technique to a dynamic panel gravity model of bilateral trade between ECOWAS countries. A dummy variable of common currency was introduced to determine if the ECOWAS member states that have already adopted a common currency (WAEMU) fare better than those that are yet to adopt a common currency (WAMZ). Results show that adoption of common currency by WAEMU states has led to better trade performance in comparison to WAMZ states. We conclude that there is a strong case for monetary integration in the ECOWAS sub-region.
Cagay Coskuner, Godwin Oluseye Olasehinde-Williams

Measuring the Financial Stability of Islamic and Conventional Banks in Turkey

The objective of this study is to measure and compare the financial stability of Islamic and conventional banks operating in Turkey for the period of 2006–2015. The sample consists of twenty-nine banks, including five Islamic and twenty four conventional banks. The study focus on three kinds of variables: bank specific, banking sector, and macroeconomic. The study builds on quantitative tools using panel regression in which the z-score used as a proxy for financial stability. We find that financial stability for large commercial banks is less than for small commercial banks, and financial stability for large Islamic banks is less than for large commercial banks. Small Islamic banks tend to be financially more stable than large Islamic banks, large Islamic banks financial stability is less than large commercial banks, and small Islamic banks tend to be financially more stable than large Islamic banks. The major results show that the existence of a financial crisis has a negative and significant impact on financial stability of banking sector in Turkey. The findings also indicate that the bank size, loan to asset ratios, cost to income ratio, income diversity and HHI have a negative and significant impact on financial stability of banks operating in Turkey. Banks operating in Turkey with higher Islamic banks’ share have contributed effectively to improve the financial stability in turkey. The study showed that the oil prices and political stability have a negative and significant effect, while stock prices have a positive and significant effect on the financial stability of the banks operating in Turkey. Macroeconomic variables GDP and inflation have significant effects on stability, which explains the importance of financial and economic policies of the government in increasing the financial stability.
Marei Elbadri, Eralp Bektaş

Divergent Media Channels for Expediting Financial Literacy Outreach

Financial inclusion is imperative for the development and growth of any economy which eventually materializes only through financial literacy. Financial literacy is the understanding about financial products/services and individual’s ability and confidence, to make informed choices based on risk and opportunities to improve financial wellbeing. Although the financial literacy movement has gained momentum but still there remains a question about whether financial literacy campaigns and programs really meet the desired outcomes as set. There are evidences that individuals under-save, lack to understand the financial products/services, fail to invest wisely resulting indebtedness. Customers everywhere would benefit from having greater financial knowledge and is relevant for all regardless of wealth and income. The research aims to study the role of media in stimulating financial literacy and in what way effective usage of different channels of media can facilitate in achieving higher financial literacy rate in India.
Deepa Pillai, Bindya Kohli, Dipayan Roy

Analysis of the Effect of Developments in Banking Sector on the Economic Development: The Case of Turkey

Banks, which are the building blocks of the financial system, manage the loanable fund supply and demand in economics through their “mediation” function. Enlargement of financial market volume also brings increase in national income and employment. Other important function of the banks in macroeconomic aspect is the fact that the provided funds to the financial system guide to sectors which will provide the most value to the economic growth. In this respect, existence of a strong financial system depends on a healthy growing and developing financial sector. In a country, such as Turkey, which has a saving gap, the importance of the banking sector on best usage of financial savings and procurement of economic growth through a stable economic development is undeniable.
In this work, based on this point of view; the relationship between the developments in the banking sector and the economic development, within Turkey’s economy, is tested by regression analysis method. Within this work, Human Development Index (HDI), as a dependent variable, is used to define the economic development. In order to show the development of the banking sector, independent variables, part of banking sector in finance sector (BGY), monetary easing (M2GY), development in the total credit volume of the banking sector (KGY), development in the total deposits volume of the banking sector (MGY) and development in the total assets of the banking sector (AGY) variables are used. As a result of the regression analysis and performed tests, it is concluded that HDI variable will increase by 14% if AGY variable increases by 1%, HDI variable will increase by 18% if KGY variable increases by 1%, HDI variable will increase by 17% if MGY variable increases by 1%, HDI variable will increase by 27% if BGY variable increases by 1% and HDI variable will increase by 21% if M2GY variable increases by 1%. As a result of the literature work and the analysis performed, it is concluded that the developments in the banking sector positively effects the economic development in Turkey.
Gökhan Işıl, Esra Erik

Effect of Oil Price Volatility on Clean Energy Stock Market Performance

Recently clean energy firms become more attractive for the investors, this leads to the more comprehensive studies in this field. Thus the aim of this study is investigating the impact of oil price volatility on the performance of S&P500 clean energy market by contributing oil price and technology market performance. To explore this relation the Zivot-Andrews test was conducted to check the stationarity of the time series, since a structural break is found during year 2007–2008, and then Bound test co-integration is applied, because of different levels of integration among time series in order to check the probable existence of the long-run relationship in the model. The results indicate that clean energy sector performance converges to its long-run level by 1.09% speed of weekly adjustment. The most magnitude finding of this paper is that, oil price volatility has significant long-run effect on the performance of clean energy sector. However, no significant short-run impact is observable.
Negar Fazlollahi, Saeed Ebrahimijam
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