The impact of adopting Basel III liquidity coverage ratio, stable funding ratio, and leverage ratio on lending in the Malawian banking sector

Thomson Kumwenda, Ronald Mangani, Jacob Mazalale, Exley Silumbu — Wed, 06 Mar 2024 00:00:00 +0000

This paper examines the impact of adopting Basel III Liquidity Coverage Ratio, Stable Funding Ratio, and Leverage Ratio on lending in the Malawian banking sector. Malawi’s banking industry regulators are planning to transition to Basel III from the current Basel II regime. This paper pioneers an assessment of the implications of this move for the banking industry. The study uses monthly data for the period January 2010 to December 2022, the Feasible Generalised Least Square (FGLS) Panel Regression model with bank-specific variables (X) and macroeconomic controls (Z). The study finds that Tier 1 has a positive and significant impact on Malawi’s banking sector lending growth, while Tier 2 has a negative and insignificant impact on banking sector-wide lending growth effects. The non-risk weighted asset Basel III leverage ratios have significant and negative impacts on Malawi’s bank sector lending growth. And that the liquidity coverage ratio (LCR) had a positive and significant effect in explaining variability in lending in Malawi banking overall, while the introduction of the stable funding ratio (SFR) had a positive and significant impact on banking sector-wide lending growth effects. The study also found that the Basel III Capital and Liquidity Rules have different effects on firm-level lending for the 8 banks in Malawi.

Does digital transformation promote innovation performance? Evidence from listed Chinese firms

Zhiwei Jin, Jie Qin — Thu, 14 Mar 2024 00:00:00 +0000

This study examines the impact of digitalization on firm innovation. Using a comprehensive sample of publicly listed Chinese firms, we construct a micro-level digitalization indicator using a textual analysis of annual financial reports. It was found that digitalization leads to a significant upswing in a firm’s innovative output. Rigorous robustness checks and stability tests were conducted, including variable substitutions and different models, such as the Tobit and Poisson models. Additionally, the study utilizes a treatment effects model to account for unobserved heterogeneity and control for potential biases, ensuring the reliability and validity of the findings. Whether an enterprise is state-owned (SOEs) or non-state owned (non-SOEs), the digitalization of enterprises has dramatically enhanced their innovation capabilities. Digitalization has a significant effect on financially constrained firms. Compared to non-SOEs, the effect of financial constraints is more pronounced among SOEs. Highly digitalized firms also experienced higher growth rates and lower leverage ratios relative to firms with low digitalization, and they are more likely to receive governmental subsidies. Furthermore, the findings suggest that policymakers should prioritize initiatives aimed at promoting digitalization across all sectors of the economy. By fostering an environment conducive to digital innovation, governments can stimulate economic growth and enhance firms' competitiveness on a global scale. In essence, the study underscores the transformative potential of digitalization in driving innovation and economic progress.

Journal of Accounting, Business and Finance Research

The impact of adopting Basel III liquidity coverage ratio, stable funding ratio, and leverage ratio on lending in the Malawian banking sector

Does digital transformation promote innovation performance? Evidence from listed Chinese firms