Sailesh Tanna

The Effect of Board Size and Composition on the Efficiency of UK Banks

Abstract We examine a sample of 17 banking institutions operating in the UK between 2001 and 2006 to provide empirical evidence on the association between the efficiency of UK banks and board structure, namely board size and composition. Our approach is to use data envelopment analysis to estimate several measures of the efficiency of banks, and then to use panel data regressions for investigating the impact of board structure on efficiency. After controlling for bank size and capital strength, we find some evidence of a positive association between board size and efficiency, although this is not robust across all our specifications. Board composition, by contrast, has a robustly significant and positive impact on all measures of efficiency.

What Drives Acquisitions in the EU Banking Industry? The Role of Bank Regulation and Supervision Framework, Bank Specific and Market Specific Factors

We investigate the determinants of commercial bank acquisitions in the former fifteen countries of the European Union by evaluating the impact of bank-specific measures, such as size, growth and efficiency of banks, and external influences reflecting industry level differences in the regulatory and supervision framework, market environment and economic conditions. Our empirical analysis involves multinomial logit estimation at various levels in order to identify those characteristics that most consistently predict targets and acquirers from a sample of over 1400 commercial banks. The overall results indicate that, relative to banks that were not involved in the acquisitions, (i) targets and acquirers were significantly larger, less well capitalized and less cost efficient, (ii) targets were less profitable with lower growth prospects, and acquirers more profitable with higher growth prospects, (iii) external factors have affected targets and acquirers differently, and their effects have not been consistent or robust to sample size changes.

The impact of foreign direct investment on total factor productivity growth: International evidence from the banking industry

Purpose - The purpose of this study is to examine the association between inward foreign direct investment (FDI) and bank level productivity changes. Design/methodology/approach - The paper uses an international sample of 566 publicly quoted commercial banks operating in 75 countries, covering the period 2000-2004. The empirical analysis is conducted in two stages. First, a non-parametric Malmquist analysis is employed to decompose total factor productivity (TFP) change of banks into pure efficiency, scale efficiency and technological change. Then, panel regressions are performed to identify the productivity impact of FDI while controlling for relevant bank-specific and country-specific characteristics. Findings - The results indicate that inward FDI has a negative short-term level effect but a positive long-term rate effect on TFP change, which is consistent with the evidence from the Malmquist analysis suggesting that banks experience episodes of technical regress and progress. Originality/value - The paper explores for the first time the link between FDI and bank level total factor productivity, hypothesising that aggregate FDI inflows yield productivity changes in the banking sector as part of the overall environmental effect on the economy, and providing supportive cross-country evidence.

The impact of civil war on foreign direct investment flows to developing countries

ABSTRACT We investigate the impact of civil war on foreign direct investment (FDI) flows to developing countries. We employ a new data-set that disaggregates FDI inflows to primary, secondary and tertiary sectors. Second, we control for a richer set of economic and institutional variables that could determine FDI inflows including population, gross domestic product (GDP) per capita, the degree of trade openness, exchange rate variability, inflation, the governance structure of the host country using International Country Risk Guide data and its regime type using the POLITY autocracy–democracy data. We also address the reverse causality between FDI and conflict and the potential endogeneity of explanatory variables by employing dynamic system generalised method of moments (GMM) techniques in estimation. Our results indicate that primary sector FDI flows to developing countries are not significantly affected by civil war, whereas secondary and tertiary sectors FDI are more sensitive to such outbreak, potentially leading to reversals of existing FDI. Among institutional variables, government stability and control of corruption are more significant compared to regime type, law and order, and bureaucratic quality.

Multivariate Analyses of Factors Affecting Dividend Policy of Acquired European Banks

Dividends, particularly of acquired banks are influenced by several structural adjustments especially after mergers. The paper evaluates the various factors affecting dividend of both acquired and non-acquired banks. Using data from 120 large mergers and acquisitions in Europe, the study finds that while the levels of liquidity, risk, composition of the financial structure are pertinent factors in the dividend policy of banks, the price earning (PE) ratio is specifically fundamental to non-acquired banks. The significance of the variable in the non-acquired banks indicates that growth in bank investments and future projects exert more aggressive impact on banks that are not acquired or less likely to merge. This finding is novel as previous studies on dividend policy do not make this distinction.

An Application of Support Vector Machines in the Prediction of Acquisition Targets: Evidence from the EU Banking Sector

In this paper, we investigate the relative performance of both linear and non-linear support vector machines (SVMs) models with a polynomial and an RBF kernel in the development of classification models for the prediction of EU bank acquisition targets. The training sample consists of 274 banks, half of which were acquired between 1998 and 2001. The validation sample consists of 31 banks acquired during 2002, and 429 non-acquired banks. We use eight financial variables reflecting the following bank characteristics: capital strength, profitability, efficiency in expenses management, loan activity, liquidity, size, growth, and market power. The models are evaluated in terms of their classification accuracy, as well as with ROC analysis. In both cases, the differences between the models are only marginal.

Accounting analyses of momentum and contrarian strategies in emerging markets

Abstract We analyse the momentum and contrarian effects of stock markets in Brazil, Russia, India, China and South Africa (BRICS) using accounting data. The five markets show different characteristics with the Indian market having the strongest momentum effect. Stock markets in China and Brazil show significant short-term contrarian profit and intermediate to long-term momentum profit while South Africa shows short-term momentum effect and intermediate to long-term contrarian effect. The Russian stock market reveals largely insignificant momentum portfolio returns. We also find evidence that the contrarian profits in South Africa and China are caused by relatively high loser returns while positive momentum profit in India results from relatively high winner returns.

Economics and Political Implications of International Financial Reporting Standards

Economics and Political Implications of International Financial Reporting Standards focuses on the consequences and determinants of the adoption of the International Financial Reporting Standard (IFRS), which has remained a top issue in International Accounting. This timely publication brings to the forefront issues related to the political and economic influences and impacts of IFRS in addition to providing a platform for further research in this area.

FDI Spillover Effects in China’s Manufacturing Sector: New Evidence From Forward and Backward Linkages

This paper assesses the spillover effects of inward foreign direct investment (FDI) on firm-level productivity growth in China’s manufacturing sector over the period 2006–2009. We use a detailed industrial classification of data to characterise both intra-industry and interindustry linkages, in contrast to most previous studies for developing countries. Our findings suggest that there is a negative short-term effect and a positive long-run effect from FDI at both linkage levels. Among the interindustry linkages, in line with previous studies, the backward linkage is an important channel for domestic firms to obtain technology spillovers in the long run. However, our results also indicate that forward linkages are equally important, as we find a strongly positive impact of this linkage on productivity growth of domestic manufacturing firms in China.

Are serial acquirers good targets for acquisition? An accounting perspective

This study uses the positivist agency theory to examine if serial acquirers with consistently negative cumulative abnormal returns over their past acquisitions are more likely to become targets themselves. The study is based on the assumption that firms that make repeated value reducing acquisitions and depress their stock price are more attractive targets than firms that make good returns to their shareholders through acquisitions, and whose share prices increase correspondingly. Our findings show that serial acquirers that are considered bad bidders are more likely to become targets themselves compared to those that are considered good bidders. While this is the case in the USA and Europe, we find limited evidence to show that the same disciplinary tool is applicable in other parts of the world.