Shrimal Perera

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.

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...

Human progress in South Asia: A multifaceted analysis

This study utilises a number of UNDP indices (the Human Development Index, the Gender-related Development Index, and the Human Poverty Index) to examine human progress in selected South Asian countries. It identifies the better and worse performers within the region, assesses whether their performance has been consistent over time, and deduces any broad policy implications. Within South Asia, Sri Lanka shows relatively better performance while Nepal, Bangladesh and Pakistan substantially lag behind. Notwithstanding the improvements over time, even the best performers in the region are at best ‘average’ compared to developing country standards. We emphasise the magnitude of the existing deprivations and the need to take corrective and preventive policy measures.

Product diversification and bank risk: evidence from South Asian banking institutions

ABSTRACT We investigate whether the product diversification activities of South Asian banking institutions have led to an increase or decrease in their solvency and profit risks. Using the data of five countries – India, Bangladesh, Nepal, Pakistan and Sri Lanka – for the period 2000–2016, we analyse the effect of both income and assets diversification activities on the Z-score and SDs of ROA (Return on Assets) and ROE Return on Equity). Among income diversification activities, securities trading income has a significant positive influence on bank risk while other categories have no influence. With respect to assets diversification, non-interest-bearing assets and loans given to government were found to have a significant positive influence on bank risk, while mortgage loans and non-classified loans have opposite influences. However, the impacts of securities trading income and loans given to the government are mainly confined to private sector banks and state-owned banks, respectively. We also uncover some country-specific diversification influences on the above relationships.

Loan Term Interdependences and Information Asymmetries

This study examines whether loan terms are jointly determined and if information asymmetries’ effects on them across revolving and term loans. A simultaneous equation model is applied for revolving and term loans made by US commercial banks to US corporate borrowers from 1987 to 2009. The findings suggest that loan terms are jointly determined and that information asymmetries’ effects on them differently across loan types. The research contributes literature in several ways. It first provides evidence the determinants of largest set of loan terms in a simultaneous context therefore may better reflect reality. This is also the first examines the effect of information asymmetries on loan terms, especially on covenants and loan size, in such a context. Lastly, this is the first study that distinguishes revolving and term loans to inspect these issues.

EXIT MARKET LIQUIDITY AND VENTURE CAPITALISTS’ INVESTMENT BEHAVIOUR: EVIDENCE FROM AUSTRALIA, CANADA AND THE UNITED KINGDOM

This study investigates the effect of exit market liquidity on venture capitalists’ (VCs’) investment behaviour. The sample consists of 4,758 investment rounds disbursed by venture capital funds in three selected common law-based OECD countries (Australia, Canada and the United Kingdom) during 1990-2005. The results indicate that investments in early-stage projects by VCs are not related to exit market liquidity conditions after controlling for exogenous factors. Empirical results, however, show that exit market liquidity is positively associated with VCs’ investments in new projects (as opposed to follow-on projects). Put differently, new firms (including start-ups) are more likely to obtain venture capital funding during times of liquid exit market conditions. Arguably, these findings highlight the importance of ‘timing’ of new project launch.