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PurposeThe purpose of this paper is to investigate use of efficiency analysis as a technique for investigating bank safely and soundness.Design/methodology/approachThree different data envelopment analysis (DEA) models were applied to set of data for the major New Zealand banks over a ten‐quarter period – a CCR model, a profit efficiency model and a non‐oriented slacks‐based approach.FindingsMost useful results are obtained using the slacks‐based approach.Research limitations/implicationsThe period covered by the study was from late 2005 until early 2008, prior to the global financial crisis having major impacts on the New Zealand banking sector.Practical implicationsThe study is of particular value in the New Zealand context where there has historically not been any bank deposit insurance, obliging depositors to make their own assessments of bank safety and soundness.Originality/valueThe paper makes a contribution to very small literature which uses efficiency analysis to explore bank safety and soundness. It also makes use of the slacks‐based DEA approach, which has not yet been widely used in the banking literature.

PurposeThe purpose of this paper is to present competing theories that argue: that boards of directors of locally incorporated subsidiaries of trans‐national entities contribute positively to local operations; and that locally constituted boards are an unnecessary expense and can confound the governance efforts of the trans‐national entities' boards of directors.Design/methodology/approachThe relative merits of the competing theories are considered by examining whether a small sample of trans‐national entities choose to limit the role of their boards to the local regulator's minimum requirements, or to voluntarily exceed them.FindingsThe paper finds that in all cases board construction meets the local regulator's requirements, but in some cases, trans‐national entities have chosen to exceed minimum requirements, suggesting that in some cases a well constructed local board can make a positive contribution to local operations.Research limitations/implicationsThis research is limited by the fact that it considers one sector (banking) in one jurisdiction (New Zealand). Future research could consider other sectors and locations.Practical implicationsThe results in this paper suggest that there is latitude for regulators to expect more of local boards than is currently the case. Moreover, there is no conclusive empirical support for the argument that a local board is an unnecessary expense and might confound the governance initiatives of a parent company.Originality/valueTo the best of the authors' knowledge, this is the first paper to empirically examine the two competing theories of locally constructed boards of directors set out above. It is of interest to regulators and others considering the role of local boards of directors.

PurposeThe study aims to analyze the changes in banking market structure and their impact on the bank efficiency.Design/methodology/approachThis study uses a one-stage stochastic frontier analysis (SFA) to compare the impact of the market structure and the GFC on the economic efficiency of the major banks in both countries.FindingsA significant negative impact of the GFC is observed on bank efficiency. Overall, Canadian banks posted better efficiency scores than their American counterparts. Additionally, cost-efficient banks are found to be more resilient to crises and more profit-efficient in the post-GFC period. The authors found that market power had a positive impact on the cost and profit efficiency of banks. Higher levels of equity, market power and concentration helped banks be more cost-efficient.Research limitations/implicationsOnly large banks are selected for study although it represents the majority stake of both banking sectors.Practical implicationsBanking regulators should include more measures to assess the banking market structure and performance.Originality/valueAs per the best knowledge of the authors, it is the first study to assess the change in banking market structure and efficiency of the US and Canadian banking sectors in the post-GFC period.

ABSTRACT**:  Research into the benefits of mergers in small financial institutions, in particular credit unions, is sparse. This study helps to fill this gap by analyzing recent intense merger activity in New Zealand credit unions. The major driver for these mergers was not the usual reason of attempting to increase efficiency for competitive purposes but rather enforced government action. Data envelopment analysis is used to explore changes in efficiency in merged credit unions between 1996 and 2001. Those credit unions not involved in merger activity are used as a control group. Overall, credit unions have become more efficient over the period, notably in those that undertook mergers. The Malmquist index indicates significant technological progress over the period but a slight regression in terms of efficiency.

Purpose
The purpose of this study is to investigate the impact of International Accounting Standard 39 (IAS 39) on income-smoothing activities and pro-cyclical behavior through loan loss provisions using a sample of Hong Kong banks.


Design/methodology/approach
Fixed effects estimator is used, and the analysis covers the period from 2000 to 2009.


Findings
The results suggest that Hong Kong banks engage less in income-smoothing activity after they comply with the IAS 39. No evidence supports loan loss provisions of Hong Kong banks exhibiting more pro-cyclical behavior after IAS 39 adoption.


Research limitations/implications
Compliance with IAS 39 should improve the quality of bank financial reporting. The reduction in income-smoothing activities among Hong Kong banks after IAS 39 adoption fairly supports the effectiveness of International Financial Reporting Standard (IFRS) and countries that have yet to comply with IFRS may take action to apply the standards. Bank regulators should take pro-active action in addressing the issue of pro-cyclicality of loan loss provisions, as IAS 39 focuses more on improving the financial information quality, while pro-cyclicality is associated with the economic cycles.


Originality/value
Hong Kong banking industry is unique, as it was among the first IFRS adopters in the East Asia region and it has its own legal framework for developing accounting standards. The results of this study are expected to shed some light on the effects of IAS 39 adoption on income smoothing and pro-cyclicality of banks in the East Asia region, where the accounting cultural value dimensions and institutional structures are different than that of European countries.