Journal Screenshot

International Journal of Academic Research in Business and Social Sciences

Open Access Journal

ISSN: 2222-6990

Association between Size, Ownership and Operational Risk Management (Comparative study of Private and Public Banks)

Qamar Zaman, Liaqat Ali

http://dx.doi.org/10.6007/IJARBSS/v7-i10/3363

Open access

Background: The study analyzed the relationship between the size and ownership on operational risk management. The study was conducted in the banking sector of Pakistan and the banks both public and private commercial banks working in Peshawar, Khyber Pakhtunkhwa, Pakistan were selected in the study for the data analysis. the objective of the study was to evaluate the banks size effect and separate effect of public and private ownership on operational risk management.
Methodology: The study used quantitative techniques for the data analysis as the variables in the study were quantitative. The data of the variables were collected from the annual reports from their official websites. The study used panel pooled, fixed effect and random effect models for the data analysis.
Findings: According to pooled OLS and fixed effect models, size of the bank and private and public ownership have significant. As per random effect, size and public ownership have significant while private ownership has insignificant effect on operational risk management in the banks working in Pakistan.

Basel Committee. (2002), “Operational risk data collection exercise – 2002”, Bank for
International Settlements, Basel, Switzerland.
Basel Committee. (2004), “Basel II: International convergence of capital measurement and
capital standards: A revised framework”, Bank for International Settlements, Basel,
Switzerland.
Basel Committee. (2006), “Observed range of practice in key elements of Advanced
Measurement Approaches (AMA)”, Bank for International Settlements, Basel, Switzerland.
Basel Committee. (2011), “Global systemically important banks: Assessment methodology and
the additional loss absorbency requirement”, Bank for international settlements, Basel,
Switzerland.
Benston, G. J., Hanweck, G. A., and Humphrey, D. B. (1982), “Scale economies in banking: A
restructuring and reassessment”, Journal of money, credit and banking, Vol. 14 No. 4, Part 1, pp. 435-456.
Berger, A. N., and Humphrey, D. B. (1991), “The dominance of inefficiencies over scale and
product mix economies in banking”, Journal of Monetary Economics, Vol. 28 No. 1, pp. 117-148.
Berger, A. N., Hanweck, G. A., and Humphrey, D. B. (1987), “Competitive viability in banking:
Scale, scope, and product mix economies”, Journal of monetary economics, Vol. 20
No. 3, pp. 501–520.
Breusch, T. S., and Pagan, A. R. (1979), “A simple test for heteroskedasticity and random
coefficient variation”, Econometrica, Vol. 47 No. 5, pp. 1287-1294.
Buchelt, R., and Unteregger, S. (2004), “Cultural risk and risk culture: Operational risk after Basel II”, Financial Stability Report 6.
Chernobai, A., Jorion, P., and Yu, F. (2011), “The determinants of operational risk in U. S.
financial institutions”, Journal of Financial and Quantitative Analysis, Vol. 46 No. 6,
pp.1683–1725.
Chernobai, A., Rachev, S. T., and Fabozzi, F. J. (2007), “Operational risk: A guide to Basel II
capital requirements, models, and analysis”, John Wiley & Sons, Inc.
Darwish, S. Z. (2015). Risk and Knowledge in the Context of Organizational Risk Management. Risk, 7(15).
Dowd, V. (2003), “Measurement of operational risk: the Basel approach”, Operational Risk:
Regulation, Analysis and Management, Prentice Hall-Financial Times.
Fitch Ratings. (2004), “Operational risk management and Basel II implementation: Survey
results”, New York.
Fontnouvelle, P. D., Dejesus-rueff, V., Jordan, J. S., and Rosengren, E. S. (2006), “Capital and
risk : New evidence on implications of large operational losses”, Journal of Money, Credit, and Banking, Vol. 38 No. 7, pp. 1819–1846.
Gardener, E. P., and Ayling, D. E. (1984), “Operational approaches to risk management in
financial institutions: A technique for commercial banks”, Managerial Finance, Vol.10 No. 1, pp. 15-19.
Gropp, R., and Heider, F. (2010), “The determinants of bank capital structure”, Review of
Finance, rfp030.
Hausman, J. A. (1978), “Econometrica: Specification tests in econometrics”. The Econometric
Society, Vol.46 No. 6, pp. 1251–1271.
Hunter, C. W., and Timme, S. G. (1989), “Does multiproduct production in large banks reduce
costs”, Federal Reserve Bank of Atlanta Economic Review, pp. 2-11.
Janakiraman, U. (2008), “Operational risk management in Indian banks in the context of Basel
II: A survey of the state of preparedness and challenges in developing the framework”.
Asia Pacific Journal of Finance and Banking Research, Vol. 2 No. 2.
Li, S. (2003), “Future trends and challenges of financial risk management in the digital
economy”. Managerial Finance, Vol. 29 No.5, pp. 111-125.
Mehra, Y. S. (2013), “Operational risk management in Indian banks: impact of ownership and
size on range of practices for implementation of advanced measurement approach”, paper presented at the Money and Finance Conference (MFC), Indira Gandhi Institute of
Development Research,
Moody’s Investors Service. (2003), “Moody’s analytical framework for operational risk
management of banks”, London.
RBI. (2007), “Prudential guidelines on capital adequacy and market disciplineimplementation of
the new capital adequacy framework”, Reserve Bank of India Review.
Rime, B.. and Stiroh, K. J. (2003), “The performance of universal banks: evidence from
switzerland”, Journal of Banking and Finance, Vol. 27, pp. 2121-2150.
Shaffer, S. (1991), “Economies of super scale in commercial banking”, Applied Economics, Vol.
9, pp. 159-179.
Wheelock, D. C., and Wilson, P. W. (2001), “New evidence on returns to scale and product mix
among US commercial banks”, Journal of Monetary Economics, Vol. 47 No. 3, pp. 653-
674.
Wooldridge, J. M. (2002), “Inverse probability weighted M-estimators for sample selection,
attrition, and stratification”, Portuguese Economic Journal, Vol. 1 No. 2, pp. 117–139.
Zardkoohi, A., and Kolari, J. (1994), “Branch office economies of scale and scope: Evidence
from savings banks in Finland”, Journal of Banking and Finance, Vol. 18, pp. 421-432.

N/A