Complex Interaction between Tripod Variables - Literature review Example

Referee Report Referee Report Summary The study shows that policy makers have liberated financial markets by ensuring that interestrates are deregulated and foreign competition promoted. Many studies only show the prevailing market impacts on financial service delivery in the developed countries and none has been done in relation to the developing countries. The aim of the paper is to investigate how the market power influences bank stability and efficiency in the developing countries. The study gives the characteristics of the developing country markets to include deregulation process, financial liberation and bank privatization. The dynamics of the bank structures does not favor the competitive conditions, bank stability in general, and financial service delivery. The paper documents and analyzes the complex interaction that is between tripod variables. It also analyses the links between market power and the market stability in its literature review part. The data used by the author entail the financial statement of the banks at the bank level for the years between 1999 and 2005. The results of the study show that increase in the market power degree increases the bank stability. The result of the study, therefore, justifies the ‘traditional view’ that holds that increase in competition can impact on the bank stability. The study agrees that increased competition can significantly impact the banking systems in developing economies that are stressed. Major Issues Strengths of the Paper The article has consulted a wide number of literature (Bansal et al, 2012: 73). The research gap identified is issued at the introductory level of the research. The article focuses on the problem identified (Gough, 2011: 126). A focus on developing countries is of great importance since the countries are still under great dynamics of development (Ariss, 2010: 765). The literatures used are mostly peer reviewed articles thus making it more reliable (Cisco, 2014: 41). The author ensured that accuracy was met through the use of data from the bank level (Zaki & Ochsner; 2011: 159). The study is also comprehensive enough due to the employment of the distinct Learner specifications to determine the market power implications (Maudos & De Guevara, 2007: 2103). The report article has a consistent flow with the parts of the study linked appropriately (Johnson & Weiss, 1990: 131).The sources of data used in the study are provided thus allowing for comparison of validity or reliability. Weaknesses of the Study The calculation of data at the methodology level is generalized and does not give specific consideration to the developing countries. In addition, it is also characterized by assumptions, for instance, the author assumes that the banks in all the developing countries behave the same. He says “…in pricing loans, the bank managers cover their funding cost…” (Ariss, 2010: 768). The author does not give a way through which the assumptions are addressed. The number of assumptions, therefore, affects the applicability of the article in a real life situation (Zaki & Ochsner, 2011). The author also admits that there are weaknesses associated with the calculation of the data. The reliability and accuracy of the calculation is in doubt. In addition, the author employed the use of parametric “stochastic frontier analysis” to estimate cost and profit efficiency (Ariss, 2010: 768). The author does not give how the limitations associated with the formula are addressed (Hossain et al. 2012). The other weakness of the article is that the author does not give the specific objectives that the study plans to achieve (Allen, 1926: 16). In addition, the division of the main objective that is done in the literature review section does not clearly show the specific objectives. It makes it hard for the reader to recognize what the article aims to achieve. The same way it becomes hard to determine how the study aims to address the main objective. The article also has weakness in relation to the clarity of what the author meant by ‘developing countries’. The author would have defined ‘developing countries’ since the standard definition shows that the data do not represent the target population fully. The list of developing countries used by the author does not include China and South Africa. The author ought to have included China in the sample since it is BRICS’ largest developing country. Similarly, South Africa ought to be included in the list to make the data sample fully representative. South Africa is a middle income country and the largest economy in Africa. Countries like Nepal, Angola, Cambodia, Senegal, Zambia, Sudan, Mozambique and Burkina Faso ought to have been excluded (Ariss, 2010: 769). According to the definition in the 2013 report published in the United Nations, these countries are categorized as least developed counties (The World Bank, 2015). The author employed the use of Learner Index in the calculation of the market power of the developing countries. Due to the weaknesses associated with the learner index, the calculation became cumbersome and difficult to understand. The main weakness associated with learner index is the difficulty in gathering specific costs and prices. Instead of Learner Index, the author ought to have employed Herfindahl- Hirshman Index (HHI). Since developing countries differ in economic power, they were to be measured in relation to industry through use of HHI. The index should also have shown the amount of competition among the banks. HHI use could have been of much positive impact since it differentiates the smaller and larger banks. The index gives larger firms more weight through its measures such as concentration ratio (Raper, Love & Shumway, 2000: 225). The article also has a weakness in relation to shortening words, for example, “Eq. 8” (Ariss, 2000: 770) which is not a formal way of writing. The author also used colloquial language often in the article, for instance, “This finding” (Ariss, 2000: 770) making the work less formal. The other weakness is in relation to the labeling of the tables. The author started by Table 1 to 4 and allover sudden decided to name the last table “Table A.1” (Ariss, 2000: 774). The data in the table (A.1) is not explained in text rendering it useless. In relation to referencing it is not clear which style the author decided to use. The references does not use the conjunctive ‘and’ in areas where there are more than one author of a document (Ariss, 2000: 775). The author uses the article “we” (Ariss, 2000: 774) to define sensitive analysis; it is not clear who the other people are. The weakness of the article is also under the appendix section in which the author refers us back to the articles body. Appendix should not be part of the article but rather attached to the article (Ariss, 2000: 775). Another weakness of the article is with regard to the format. Inclusion of the acknowledgement part of the report was not necessary (Ariss, 2010: 775). Journals normally have limited space for article publication, thus need for short and precise study reports. The information in the article should be generally minimized (Haslam, 210: 263). The other weakness is that the article has not used qualitative primary data. The importance of using qualitative primary data is that it explains the situation of the developing countries (Heaton, 2008: 33). The article has not also given the reasons why the market power implications differ with that of the developed nations. It does not compare the aspects of the two categories of countries and how they affect the market. It also does not compare the developing countries since some are more developed than others. Instead it generalizes all the countries thus making the results unreliable (Heaton, 2008: 34). The literature review part of the study is not approached appropriately (Cisco, 2014: 41). The author just uses the literature to supports the points stated but does not compare the literatures. The author also does not give a conclusion in relation to the information collected from the literature (Cisco, 2014: 43). The approach that the author gives in literature review makes the work fake. It looks like he just picked the sources and fitted them into the paragraphs. A good piece of literature review should have comparison of the articles and giving an opinion at the end of it all (Ariss, 2010: 767). The other weakness of the article is in the sampling method used by the author. The author decided to use the data from BankScope data base which is a bias data (Gabler, 2001: 46). The banks that are represented in the data must have something in common. The unique banks are therefore not represented in the data sampled. Addition to that, the data collected at the ground level would have been more reliable that the one forwarded at the database. The poor practice is what made the data to be dominated by some regions while others are not efficiently represented. Even the author admits this; “…the Eastern Europe and Central Asia region dominates the sample” (Ariss, 2010: 767). In relation to data, the author at some point in the article gives statistics without citations (Fergusson, 2009: 184). Example,“...observed for banks in developed countries (generally above 60%)... assets is 51% for banks operating in Latin America...emerging markets stands at less than 39% for Middle East” (Ariss, 2010: 769). The statistics given at this point is very vital; without citation to support it, the data is useless. Conclusion and Recommendation The article has several weaknesses that need to be addressed since most of them are changeable. The weaknesses are in the areas of data collection, data analysis and omission of specific objectives. The methodology used to select countries that represented the developing world was not appropriate. The balancing of the article was also not appropriate with the introduction segment taking a big part of it. In terms of structuring, including the acknowledgment section in the article made it look informal. Several of the formulas used by the author have weaknesses yet making the work cumbersome. It would be better if the author of the article included qualitative primary data to support the secondary data. The source of the data was also not that much reliable; the data at the ground would have been more detailed. The use of Learner Index instead of Herfindahl- Hirshman Index complicated the work. The author also was poor in in-text citing among other weakness. I therefore recommend the article to be revised and the shortcomings addressed before publication. References Allen, E. W. (1926) ‘Need for Specific Objectives in Economic Research’, Journal of Farm Economics, Vol. 8, No. 1, January, pp. 16- 25. Ariss, T. R. (2010) ‘On the implications of market power in banking: Evidence from developing countries’, Journal of Banking and Finance, Vol. 34, September, pp. 765-775. Bansal, P., Bertels, S., Ewart, T., MacConnachie, P. and O’Brien, J. (2012) ‘Bridging the Research- Practice Gap’, Academy of Management Perspectives, Vol. 26, No. 1, February, pp.73- 92. Cisco, J. (2014) ‘Teaching the Literature Review: A Practical Approach for College Instructors’, The ISSOTL Journal, Vol. 2, No. 2, May, May, pp. 41- 57. Cisco, J. (2014) ‘Teaching the Literature Review: A Practical Approach for College Instructors’, The ISSOTL Journal, Vol. 2, No. 2, August, pp. 41- 57. Fergusson, D. (2009) ‘Inappropriate Referencing in Research’, British Medical Journal, Vol. 339, No. 7714, July, pp. 184- 185. Gabler, S. (2001) ‘Sampling Methods’, Bulletin of Social Methodology, Vol. 1, No. 68, April, pp. 46- 47. Gough, D. (2011) Knowledge Translation in Context, Toronto: University of Toronto Press. Haslam, N. (2010) ‘Bite- Size Science: Relative Impact of Short Article Formats’, Perspectives on Psychological Science, Vol. 5, No. 3, May, pp. 263- 264. Heaton, J. (2008) ‘Secondary Analysis of Qualitative Data: An Overview’, Historical Social Science, Vol. 33, No. 3, August, pp. 33- 45. Hossain, M. K, Kamil, A.A, Baten, M.A. & Mustafa, A. (2012) Stochastic Frontier Approach and Data Envelopment Analysis to Total Factor Productivity and Efficiency Measurement of Bangladeshi Rice. [Online], Available: http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0046081 [4 May 2015] Johnson, D. & Weiss, R. (1990) ‘Research Quality and Ethics’, Science News, Vol. 137, No. 9, pp. 131- 143. Maudos, J. & De Guevara, J. (2007) ‘The cost of market power in the European banking Sectors: Social welfare cost vs. cost inefficiency’, Journal of Banking and Finance, Vol. 31, August, pp. 2103–2125. The World Bank (2015) Least Developed Countries: UN Classification, [Online], Available: http://data.worldbank.org/region/LDC [3 May 2015] Zaki, J. & Ochsner, K. (2011)‘Reintegrating Study of Accuracy into Social Cognition Research’, Psychological Inquiry, Vol. 22, No. 3, September, pp. 159- 182. Raper, K.C., Love, A. H. & Shumway, C. R. (2000) ‘Determining Market Power Exertion between Buyers and Sellers’, Journal of Applied Econometrics, Vol. 15, No. 3, June, pp. 225-252. Read More