JEM Vol. 42(4), 2020
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Peter Nderitu Githaiga
2020; 42(4): 5-19. doi.org/10.22367/jem.2020.42.01
Aim/purpose – This paper aims at examining the impact of revenue diversification on the quality of loan portfolio. The interest has been stimulated by the growing appetite for nontraditional activities among banks due to the declining interest income and rising nonperforming loans.
Design/methodology/approach – The study considers a sample of 67 countries and quarterly banking sector financial reports over the period 2016Q1-2018Q4.The data are extracted from the International Monetary Fund Financial Soundness Indicators (FSI) database and are analysed through fixed effect regression as supported by the Haus-man test.
Findings – The study finds that revenue diversification impairs the quality of the loan portfolio. The findings are attributable to loss of focus, lack of expertise in managing non-lending activities, and possible agency problems. Moreover, the study controls for several banking sector-specific factors that affect the quality of loan portfolio. The results show that credit growth and banking sector performance improve the quality of loan portfolio quality. However, the banking sector capitalisation and cost efficiency lower the loan portfolio rate, but the banking sector size has no significant effect.
Research implications/limitations – Based on the findings, the study recommends that practitioners and regulators focus on innovative loans appraisal and monitoring practices instead of diversifying into non-interest generating activities.
Originality/value/contribution – Unlike previous studies that focused on the relationship between income diversification and bank performance, this study contributes to the literature by examining the relationship between revenue diversification and quality of loan portfolio, thus bringing in a new insight into the bank revenue diversification debate.
Keywords: Quality of loan portfolio, revenue diversification, nonperforming loan, banking sector, Hirschman–Herfindahl index.
JEL Classification: G21, G28. .
Marcin Gruszczyński , Paweł Majczak
2020; 42(4): 20-47. doi.org/10.22367/jem.2020.42.02
Aim/purpose – This paper investigates the accuracy of leading indicators in the case of the 2001 sovereign default crisis and the 2018 currency turmoil in Argentina.
Design/methodology/approach – In this paper, we conducted early warning signals analysis based on a-priori selected variables. For each of the macroeconomic variables, we computed yearly changes and selected the threshold to minimise the noise-to-signal ratio, i.e. the ratio of percentage of false signals in ‘normal’ times to percentage of good signals in a two-year period preceding each of the crises.
Findings – The predictive power of indicators differs significantly in various crisis epi-sodes. For the 2001 crisis, the decline in value of bank deposits was the best leading indicator based on the noise-to-signal ratio. For the 2018 currency crisis, the lowest noise-to-signal ratio was observed for the lending-deposit rate ratio.
Research implications/limitations – The survey is limited mostly by the data availabil-ity and their quality.
Originality/value/contribution – This paper gives a complex review of the major early warning indicators in the context of the most recent history of Argentina’s economy. It applies a set of classical leading indicators to two modern cases of financial crises. The paper proposes an original ‘knocking the window’ approach to the presentation of tradi-tional warning concepts in the context of current economic events.
Keywords: Argentina, currency crisis, early warning signals, sovereign debt crisis.
JEL Classification: E44, F37, H12.
Scott W. Hegerty
2020; 42(4): 48-69. doi.org/10.22367/jem.2020.42.03
Aim/purpose – This study examines the time-series properties of home loans and do-mestic credit in Poland and the three Baltic countries, first in the univariate sense by identifying structural breaks in the series, and then using a multivariate model to identify the key drivers of loan growth.
Design/methodology/approach – Structural break tests are conducted using the method of Bai & Perron (1998), while orthgonalised VARs are used for the macroeconomic model.
Findings – The Estonian and Lithuanian home lending growth series have structural breaks in 2007, preceding the onset of the 2008 Global Financial Crisis. Estonian home lending has two additional structural breaks in 2009 and 2013. Neither of the two Polish lending series has any break after the sample begins in 2009, indicating more stability in the country’s markets. In the macroeconomic model, consumer price inflation and real effective exchange-rate appreciations have the largest influence on lending and credit growth, and Poland more affected than the Baltic countries.
Research implications/limitations – This study opens the door to future research be-hind the specific causes of structural breaks in these series. While there is some evidence of an ‘early warning’ before the 2008 crisis, longer data series are needed for Poland and especially in the case of Latvia.
Originality/value/contribution – This study offers insight into the lending markets in an area of the world that was significantly impacted by the 2008 crisis. Understanding the behaviour and causes of lending growth will help avoid future problems.
Keywords: Home lending; domestic credit; Poland, Baltics, time series.
JEL Classification: E51, C22.
Joanna Krywalski Santiago
2020; 42(4): 70-98. doi.org/10.22367/jem.2020.42.04
Aim/purpose – This paper bases on the social exchange and social identification theo-ries with the purpose of understanding if the internal communication helps to improve organisational identification, supplemented by the effect of perceived organisational support. The exact aim of this research is to gain a better understanding of the internal communication process from the employees’ perspective, and to explore how the satis-faction with internal communication influences employees’ attitudinal and behavioural responses. Specifically, this study tends to examine the effect of the satisfaction with internal communication on organisational identification. Subsequently, it also aims to investigate the mediating role of perceived organisational support.
Design/methodology/approach – This study is operationalised through quantitative approach. The hypotheses were tested in a cross-sectional survey which was completed by 132 employees working in a variety of jobs and organisations in Portugal, mostly in the sector of transportations and storage. The research focused on employee satisfaction with the internal communication of the organisation for which they are working, measured with the Internal Communication Satisfaction Questionnaire. The research model was analysed using SmartPLS, a structural equation modelling tool.
Findings – The results suggest that the importance of how an organisation communi-cates internally is important to encourage the employees’ organisational identification. The results indicate also that there is a significant relationship between satisfaction with internal communication and perceived organisational support which mediates the rela-tionship of internal communication and organisational identification.
Research implications/limitations – This research is cross-sectional, which limits the causality of its findings. Additionally, the use of filter-question caused a significant reduction in the reached sample size.
Originality/value/contribution – This paper addresses the internal communication to investigate the employee-based perceptions. It proposes a conceptual model and supports it with empirical findings. As a result, this study addresses concerns that are the current management fads and addresses the research gap, as only a few empirical studies have previously examined the internal communication as an antecedent of organisational identification.
Keywords: internal communication; internal communication satisfaction; perceived organisational support; organisational identification.
JEL Classification: M3; M5; M540.
Idowu Daniel Onisanwa , Mercy Ojochegbe Adaji
2020; 42(4): 99-117. doi.org/10.22367/jem.2020.42.05
Aim/purpose – The poor investment climate is one of the reasons advanced for the slow pace of growth in Nigeria; evidenced by the absence or inadequate amount of investible funds in the productive sectors. While the money market in Nigeria provides very limited investment options, the underdevelopment and underutilisation of the Nigerian Stock Market constitute a drawback to the investment climate. However, any economy desiring sustainable development requires a long-term source of fund. Therefore, this study ascertains the performance of the stock market and investment growth nexus in Nigeria.
Design/methodology/approach – The study is based on the neoclassical growth theory with a slight modification in the wake of Levine’s specification (2003), an augmented investment growth relationship was specified. This study utilises the Autoregressive Distributed Lag (ARDL) in establishing the co-integration relation between stock market development and investment growth. Gross capital formation was used as a proxy for investment growth while the stock market indicators are market capitalisation ratio, total value traded ratio and turnover ratio. The study utilises data covering 1981 to 2018, sourced from the Nigerian Stock Exchange annual reports and diverse publication of the Nigerian Bureau of Statistics.
Findings – The market capitalisation ratio had a negative impact on gross capital for-mation both in the short run and the long run, but its significance is only evident in the short run. The turnover ratio had a negative and significant impact on investment growth. The total value traded ratio exerted a positive and significant impact on gross capital formation both in the short run and the long run. The coefficient of the error correction term was negative and statistically significant.
Research implications/limitations – The total value traded ratio enhanced investment growth in Nigeria. Both market capitalisation and turnover ratio dampen investment growth. The Stock Exchange is not efficient and does not possess the amount of liquidity required to finance long term investment need in Nigeria. Emphasis on measures geared towards increasing efficiency and liquidity should be intensified by the government. Meanwhile, the sectorial analysis of the impact of stock exchange movements in Nigeria and the use of other estimation techniques may create room for more robust relationships.
Originality/value/contribution – The study directly investigates the capability of the Nigerian stock market in driving investment, both in the short and long run.
Keywords: Auto-Regressive Distributed Lag, investment growth, Nigeria, Stock Market.
JEL Classification: G11, G140, O430.
2020; 42(4): 118-139; doi.org/10.22367/jem.2020.42.06
Aim/purpose – The paper explores the issue of building interdisciplinary research teams from the point of view of the evaluation requirements for Polish researchers and research units. The main aim of the paper is to determine the possibility of creating interdisciplinary research teams involving management and economics researchers.
Design/methodology/approach – The author searched 30,404 journals. An assumption was made that team creation should reflect the evaluation requirements of several measurement factors of similarity between disciplines, these were duly developed. An analysis of the possibility of developing effective interdisciplinary teams to maximise the possible number of places for publications and points scored was performed and discussed. The analysis was performed by considering all of the scored journals useful for the development of young researchers and well-regarded journals publishing original research prepared by experienced scientists.
Findings – The analysis indicates that the relevant journals are not evenly spread among the various scientific disciplines examined. Considering the possibility of finding many shared journals for publication while achieving favourable interdisciplinary research outcomes and scoring a high number of evaluation points, researchers in the fields of economics as well as finance and management and quality sciences should mainly cooperate with researchers in the field of socio-economic geography and sociological sciences.
Research implications/limitations – The analysis was based on the Polish national research evaluation system, which may limit the generalisation of the results.
Originality/value/contribution – The results presented in the paper may be useful for researchers, research team managers and authorities who run research units and create effective research teams.
Keywords: interdisciplinary research, research teams, evaluation, research evaluation, university evaluation, evaluation system.
JEL Classification: I23.