Narrow Results

Purpose: The key objectives of the study are to investigate whether increased bank size is essential for banking efficiency in Pakistan, further, to explore the influence of market power or economies of scale on size–efficiency relationship. Design/Methodology/Approach: The dynamic two-step system GMM approach is applied on bank-level data of a panel set of 31 commercial banks of Pakistan, over the period 2006 to 2022. For robustness, the selected period is further divided into three time spans, 2006–2010, 2011–2019, and 2019–2022, and to explore size-efficiency association among different size categories, the entire data is divided into two groups. Findings: The study reveals two key outcomes. First, size is a c ore variable in describing efficiency movement in Pakistan as a significant positive relationship is evinced between bank size and net interest margin in both groups even in the period of COVID-19. Second, both market power and economies of scale strongly influence size–efficiency relationship. However, the impact of these variables is insignificant for medium and small banks. Further, all bank-specific and macroeconomic variables are significantly allied with banking efficiency. Originality: The study is premiered to examine the bank size–efficiency relationship in the light of market power and economies of scale for the banking sector of Pakistan. The originality of this research is the deep examination of bank size–efficiency relationship with two effectual macroeconomic variables. Research Implications: The core policy implication is that size is a fundamental factor while market power and economies of scale are driving forces of size–efficiency association in Pakistan.

This study investigates the effects of Basel II and Basel III capital adequacy rules and the regulatory framework adopted by Chinese banking regulators on the efficiency of the banking sector in China during the post-Basel II era (2007–2017) and compares the results with that of the pre-Basel II era (1996–2006). The study finds that both cost and profit efficiency of the banking industry have improved significantly from the pre-Basel II era (1996–2006) to the post-Basel II era (2007–2017). Subperiod analyses show that the risk-based capital ratio (Tier 1 capital ratio) is significantly positively associated with profit efficiency during both pre- and post-Basel II eras. Overall, the “Big Four” national banks and regional commercial banks signal higher profit efficiency during the post-Basel II era.

The paper proposes an empirical investigation of scale economies, scope economies, and market power of the network organizational structure of Italian cooperative banks. For 452 cooperative banks (and a control group of 223 commercial banks) over 2006–2018, empirical findings show that cooperative banks experienced cost economies of scale and scope, but they experienced scale diseconomies and constant scope economies on the revenue side. Unlike commercial banks, cooperative banks did not seem to benefit on the earnings side from increases in scale and diversification. Moreover, cooperative banks experience greater market power than commercial banks. Traditional advantages, in terms of network economies and relationship lending, are proven empirically to persist for the network organizational structure.

Islamic finance or Qur’anic finance is an ethical finance based on Sharia, prohibition of riba, prohibition of gharar and maysir, and sharing of losses and profits (3P) because it promotes investment in licit sectors. And, it prohibits investment in illicit sectors. These principles are the main pillars of Islamic banking governance. In this context and given the interest of Quranic finance in this chapter, we sought to highlight the theoretical foundations relating to the notion of efficiency in general and more particularly of its specificity on Islamic finance since the latter has occupied more and more a rather important place in scientific research. We then presented the different forms of banking efficiency. Finally, we presented Islamic banking governance, risk management within Islamic banks, and governance of these banks.