Michael T. Skully

Competition and structure of South Asian banking: a revenue behaviour approach

This paper examines the nature of competition and structure in South Asian banking markets. It also assesses whether traditional interest-based product market segments are more competitive than those that also include fee- and commission-based products. The reduced form Panzar–Rosse specification tests show that bank revenues appear to be earned under conditions of monopolistic competition during the period 1995 to 2003. In Bangladesh and Pakistan competition is greater in the traditional interest-based product markets while Indian and Sri Lankan domestic commercial banks seem to face more competitive pressure in the fee-based product market from other financial intermediaries.

Insurance and Economic Growth: A Cross Country Examination

While insurance plays an important role in the financial sector, it is often ignored in the financial development-economic growth literature. This paper examines the relationship between insurance and economic growth via a global cross-country study over 1980 to 2006, using both cross-sectional estimations and dynamic panel data techniques. We find a significant positive relationship between economic growth and overall insurance, as well as more specifically for life and non-life insurance. We find weak evidence that a country’s stage of development may influence this relationship; but strong evidence that the quality of a country’s legal system and protection of property rights is positively related to insurance growth. The study adds to the existing literature in respect to the legal factors as well as offers further support for the role of insurance in the finance-growth literature.

The impact of securitisation and structural changes of the Australian mortgage markets on bank pricing behaviour

This paper investigates the impact of securitisation and structural changes of the Australian mortgage market on bank pricing behaviour. Since the mid-1990s, securitisation has dramatically increased and, thus, intensified competition between banks and mortgage corporations (new entrants). To respond to the competition, banks largely reduced their mortgage interest rates. However, there is no study on what caused their price reductions. We present a simple model to explain the potential factors that may affect bank behaviour. This is the first examination of the issue from both the perspectives of cost effects and market structural changes by testing four major bank data. It finds that lender yield spreads are significantly related to bank market share, existing and new loan concentration indexes and securitisation, respectively. The findings further indicate that declined concentration and increased competition have significantly caused lender spread changes. The findings are consistent with both the securitisation literature (e.g., Gorton and Pennacchi, 1995; Kolari et al., 1998; Ambrose et al., 2004) and price concentration studies (e.g., Berger and Hannan, 1989).

Market Discipline and Deposit Guarantee: Evidence from Australian Banks

This study examines depositor market discipline of Australian banks and its interaction with the 2008 deposit and wholesale funding guarantee. Prior to 2008 market discipline is found for Australian-incorporated banks. Depositors did not distinguish between major and small banks, but some differences in the degree of market discipline were found for foreign bank subsidiaries. Following the introduction of the 2008 guarantees, market discipline was reduced except for nonhousehold depositors at banks that did not access the wholesale guarantee. Market discipline is also evidenced at foreign bank branches, but weaker for those accessing the wholesale guarantee.

The Global Financial Crisis and Its Impact on Australian Bank Risk

This paper examines the global financial crisis (GFC) and its impact on Australian banking risk. An augmented market model is developed to identify changes in listed Australian bank systematic risk in relation to three key events: the GFCs start in August 2007, the market downturn in Australian and global share markets in January 2008, and the announcement of Australias Deposit and Wholesale Funding Guarantee (DWFG) scheme on 12 October 2008. The study also examines changes in bank systemic risk during these event periods. The Australian market offers a unique opportunity to observe the impact of the introduction of the DWFG in that it lacked any explicit deposit insurance prior to the crisis. Initially, the crisis period had little impact on bank systematic risk while bank systemic risk increased considerably. The share market downturn caused a marked increase in both systematic and systemic risks for Australias major internationally connected banks followed by a reduction in both systematic and systemic risks with the introduction of the guarantee scheme for all Australian banks.

Are Profitable Microfinance Programs Less Efficient at Reaching the Poor? A Case Study in Cambodia

We examine the relations between the financial and outreach efficiency of Cambodian microfinance institutions (MFIs). Data Envelopment Analysis (DEA) finds that commercially focused MFIs are no less efficient at reaching the poor than non-profit ones. Larger MFIs appear as efficient at reaching the poor while smaller MFIs can also be highly profitable. Overall Cambodian MFIs have become less outreach efficient while increasing their profitability. This could reflect a shift in some MFIs to improve their financial efficiency rather than serving the most clients. Our findings confirm that financial and outreach objectives are not mutually exclusive but do not always coincide.

Market concentration and pricing behaviour of Sri Lankan banks

Purpose – The purpose of this paper is to investigate whether the level of market concentration in Sri Lankas banking sector is positively associated with bank‐specific interest spreads after controlling for other bank‐specific and exogenous influences.Design/methodology/approach – A pooled, time‐series and cross‐section model is utilized which distinguishes between banks’ dominance in loan and deposit market segments. Results are presented for the total sample as well as for a truncated sample of private‐owned banks.Findings – Changes in industry concentration do not affect bank‐level interest margins of Sri Lankan banks. Nevertheless, the dominant Sri Lankan banks seem to extract them and banks’ cost structures are priced in their interest spreads. The less‐capitalized, high risk banks operate with narrow interest margins, possibly due to the relatively higher deposit rates they pay to attract deposits. Although regulatory changes seem to have no effect, the growing capital market exerts negative prici...

Dividend Reinvestment Plans in Australia

Dividend reinvestment plans (DRPs) were introduced in Australia in 1982 primarily to help shareholders purchase new shares without transaction costs. Variants of the basic DRP were soon developed for taxation reasons to allow for income streaming. This paper examines the basic characteristics and the development of Australian DRPs on firm value through information asymmetry and taxation is also discussed. With significant participation rates, DRPs will continue to be a major source of new capital for Australian companies.

Islamic finance in Australia

From a single product offering in 1963, the Islamic financial services industry has grown to an estimated

Romanian Financial Markets

1.6 trillion in assets. Products must comply with profit and risk-sharing criteria and regulations preventing banks from venturing into activities with high risk and excessive uncertainty. This timely volume analyses these matters and considers the range of new products, discussing both conceptual and practical dimensions. It connects Islamic finance to the mainstream theoretical literature on financial intermediation while also exploring its differences. The expert contributors also examine why an ethical foundation is important and why the system requires well-thought-out regulations to ensure outcomes that protect the community’s well-being.