Bank competition, institution and economic development: Evidence from Asia during 1999-2007

From a sample of Asian countries over the period 1999-2007, this paper investigates the link between bank competition and economic development. In general, although banking market power has a U-shaped relationship with economic growth, banking market power tends to improve economic growth. However, the positive impact of banking market power on economic growth only occurs in agricultural sector, but not in industrial sector. It is also shown that higher banking market power in countries with greater economic freedom erodes overall economic growth and industrial growth. On the contrary, there is no significant relationship between banking market power and agricultural growth in countries with greater economic freedom. Therefore, when economic freedom increases and financial service investments come into a country, any policy to boost banking competition becomes necessary. In this phase, as well, industrial sector is more important than agricultural sector.Banking Competition, Economic Freedom, Economic Growth, Asia

Threshold Effect and Financial Intermediation in Economic Development

This paper reformulates the finance-growth nexus in the case of developing countries. Using the Neoclassical growth framework, our contribution is threefold. First, we show that entrepreneurship is a growth-enhancing factor in both financial intermediary equilibrium and financial market equilibrium. Second, we show that agent's saving is one of the determinants of the optimal proportion of long-term investment and hence, we characterize the role of bank as financial intermediary. Third, our model is characterized by the existence of multiple steady states equilibrium with threshold effect that impedes the economy to reach a long-run higher steady state equilibrium. Furthermore, we show that financial intermediary is better than financial market, in order to reduce threshold effect and to ensure the long-run steady state equilibrium of capital stock.Threshold Effect, Financial Intermediary, Economic Growth, Developing Countries

Threshold Effect and Financial Intermediation in Economic Development

This paper analyzes the theoretical finance-growth nexus. Using the Neoclassical growth framework, we raise a new issue where our finance-growth nexus has multiple stationary states with threshold effect. Threshold effect prevents the economy to reach long-run steady state equilibrium of capital and hence financial economists in developing countries should be aware of such an impediment. We show that the development of banking sector should be more supported than financial market, since banking sector is better than financial market in order to reduce threshold effect and ensure the existence and uniqueness of a higher long-run steady state equilibrium of capital stock.Threshold Effect; Financial Intermediation; Economic Growth; Developing Countries

Intensitas dan Luas Serangan Beberapa Isolat Fusarium Oxysporum F.sp. Zingiberi pada Jahe Gajah

Ginger is one of the spices and medicinal commodities which is cultivated in Indonesia. One of the obstacles encountered in the cultivation of ginger is the rhizome rot disease which is mainly caused by Fusarium oxysporum Schlecht f.sp. zingiberi Trujillo. This study is aimed to know the growth ability and virulence level of the isolates on ginger rhizome and plants. The research was conducted in the laboratory and in the screen house by using Complete Random Design consisted of 10 treatments and 4 replications. The parameters observed were growth ability of F. oxysporum f.sp. zingiberi, rhizome rot disease symptoms, incubation period, extensive decay and weight difference of the rhizomes. The results showed that F. oxysporum f.sp. zingiberi which was stored for 4 years in sterile soil medium was still capable to cause damage to the rhizome and plants. Incubation periods of rhizome decay and plant symptoms were from 3 to 11.5 and 55.5 to 68.5 days, respectively. The most virulent isolate was MSO1 with extensive decay of rhizome and the wilting intensity were 108.95 mm2 dan 33.88%, respectively. IntisariJahe merupakan salah satu komoditas rempah dan obat yang banyak dibudidayakan di Indonesia. Salah satu kendala yang dihadapi dalam budidaya jahe adalah adanya gangguan penyakit busuk rimpang yang disebabkan (terutama) oleh Fusarium oxysporum Schlecht f.sp. zingiberi Trujillo. Penelitian bertujuan untuk menguji daya tumbuh dan virulensi isolat F. oxysporum f.sp. zingiberi pada rimpang dan tanaman jahe gajah. Penelitian dilakukan di laboratorium dan di rumah kasa menggunakan Rancangan Acak Kelompok Lengkap (RAKL) yang masing-masing terdiri dari 10 perlakuan dan 4 ulangan. Parameter yang diamati meliputi daya tumbuh F. oxysporum f.sp. zingiberi, gejala penyakit busuk rimpang, masa inkubasi, luas pembusukan dan selisih bobot basah rimpang. Hasil penelitian menunjukkan bahwa F. oxysporum f.sp. zingiberi yang telah di simpan 4 tahun dalam medium tanah steril mampu menyebabkan kerusakan pada rimpang dan tanaman jahe. Masa inkubasi gejala busuk pada rimpang serta gejala pada tanaman masing- masing berkisar antara 3–11,5 serta 55,5–68,5 hari. Isolat yang paling virulen adalah MSO1 dengan nilai luas pembusukan pada rimpang dan intensitas penyakit masing-masing sebesar 108,95 mm2 dan 33,88%

Bank Competition, Institution and Economic Development: Evidence from Asia during 1999-2007

International audienceFrom a sample of Asian countries over the period 1999-2007, this paper investigates the link between bank competition and economic development. In general, although banking market power has a U-shaped relationship with economic growth, banking market power tends to improve economic growth. However, the positive impact of banking market power on economic growth only occurs in agricultural sector, but not in industrial sector. It is also shown that higher banking market power in countries with greater economic freedom erodes overall economic growth and industrial growth. On the contrary, there is no significant relationship between banking market power and agricultural growth in countries with greater economic freedom. Therefore, when economic freedom increases and financial service investments come into a country, any policy to boost banking competition becomes necessary. In this phase, as well, industrial sector is more important than agricultural sector

BANK CAPITAL INFLOWS, INSTITUTIONAL DEVELOPMENT AND RISK: EVIDENCE FROM PUBLICLY - TRADED BANKS IN ASIA

This paper examines the relationship between bank capital inflows and financial stability. Using a sample of publicly-traded commercial banks in Asia over the 2002-2008 period, our empirical results show that higher banking inflows measured by the share of foreign liabilities in banking reduces systematic risk, but increases bank-specific risk and total risk. A deeper investigation further suggests that an increase in total risk and bank-specific risk is driven by strong institutional development. Specifically, higher foreign liabilities in banking exacerbate bank-specific risk and total risk in countries with greater economic freedom. Hence, the reinforcement of prudential regulations is necessary to overcome bank-specific risk and total risk, particularly when the countries move to a more liberal economic environment. JEL Classification : G21, G28, G38 Keywords : Banking Globalization, Economic Freedom, Capital Market Measures of Ris

The procyclicality of loan loss provisions in Islamic banks: Do managerial discretions matter?

This paper is the first to examine whether the loan loss provisioning behavior of Islamic banks is procyclical. From a dynamic panel data methodology, the empirical results show that loan loss provisioning in Islamic banks is indeed procyclical, as higher economic growth leads to a decline in loan loss provisions. A closer investigation is also conducted to examine whether capital management, income smoothing, or signaling behavior can alter the procyclicality of loan loss provisions. Specifically, our results document that only capital management behavior can overcome the procyclicality of loan loss provisions. This paper therefore advocates the importance of strengthening discretionary behavior in Islamic banks in terms of capital management using loan loss provisions, particularly during economic boom

The procyclicality of loan loss provisions in Islamic banks

From a sample of Islamic banks around the world from 1997 to 2012, this paper examines whether loan loss provisioning in Islamic banks is procyclical. Our empirical findings highlight that loan loss provisioning in Islamic banks remains procyclical, although the " expected " loan loss model (E-LLM) has been implemented for Islamic banks in several countries. A closer investigation further documents that Islamic banks also use loan loss provisions for discretionary managerial actions, especially related to capital management in which loan loss reserves and provisions are inflated when bank capitalization declines. Eventually, this paper highlights that higher capitalization can mitigate the procyclicality of loan loss provisions in Islamic banks. In other words, loan loss provisioning becomes countercyclical for Islamic banks with higher capitalization. This paper therefore casts doubts on the adoption of the E-LLM for Islamic banks to promote countercyclical effects, because the E-LLM may be influenced by managerial discretion, including opportunistic capital management using loan loss provisions that may undermine the importance of maintaining sufficient bank capitalization