PhD Thesis

Transmission Mechanism of Monetary Policy: The Effect on Bank Competition

2026-04-19T00:00:00Z

Transmission Mechanism of Monetary Policy: The Effect on Bank Competition Abedin, Sultana Shahida The changes in monetary policy affects the channel of bank lending directly as by the change of interest rate banks are given the signal of lowering the flow of loanable funds to the prospective borrowers if the interest rate is set higher by the policy makers. Some recent studies have confirmed that in the economy where banks are competitive with each other, the lending channel has comparatively minor adversity by the interest rate change. The primary objective of this study is to find out the effect of the change of monetary policy on banks when they are competitive among themselves. To obtain this objective, the measures of bank competition would be calculated and then they would be tested via empirical model to find out the effect interest rate change on banks when they are in a competitive situation. Finally, there will be comparative analysis between Western and Eastern regions‟ banks. In this study, 10 countries were selected, a mix of developed and developing, to see whether the banks are competitive or monopolistic and finally how the demand for loanable funds gets affected by the monetary policy change. To measure the competition Panzar- Rosse H statistics were calculated and the bank level data are collected from Bankscope. To analyze the impression of competition on bank lending channel the empirical model of Ehrmann et at (2003) was adopted, which is been followed by many other studies as well. As the data covered the global financial crisis era, to check whether the banks‟ competition could have the same impact on bank loan supply through and afterwards the catastrophe, the samples were divided into two groups – during and after the crisis, and the model was tested again. Interestingly the countries where there is monopolistic competition show less sensitivity compared to those which have no competition among themselves for interest rate change. It was observed that, during global financial crisis, bank competition cannot perform strongly to x | P age xi | P a g e combat the policy rate changes by ensuring their loanable funds‟ demand to be fulfilled smoothly and banks of eastern region needed more time to heal even after the crisis period. The study overall proves that the monetary transmission mechanism gets weaker when the banks are competitive in a country and suggests the policy makers to come up with some alternatives to preserve the true intention of Monetary Policy Change. This thesis is submitted for the degree of Doctor of Philosophy.

Impact of Climate Change and Financial Risks on Coastal Tourism in Bangladesh

2026-04-13T00:00:00Z

Impact of Climate Change and Financial Risks on Coastal Tourism in Bangladesh Nowreen, Samshad Bangladesh is embedded with diversified natural attractions, seasonal beauty, and different physiographic characteristics. Moreover, the country has a long coastline in the south with three major types of distinct land formations and biodiversity. These salient features of natural attraction ramify nature-based tourist destinations in the world. However, natural calamity along with the major threat of climate change induces natural disaster that threatens the top tourist destinations of Bangladesh, such Cox’s Bazar or Kuakata or the Sundarbans. It hinders the tourism growth of the neighboring countries of Bangladesh. Therefore, the research identifies the climate change impact on coastal tourism of Bangladesh, and the financial risks in coastal tourism arising from climate change. To conduct this research, mixed-methods research design that is predictive and explanatory in nature. Three distinct study areas had been selected for the research based on their physiographic condition. Two types of data were collected and analyzed: secondary data on climatic variables and images of vegetation coverage of the study areas, and financial data from five banks, all obtained from authentic and reliable sources. Moreover, a primary survey for an in-depth interview with 20 respondents had also been conducted. After triangulating and analyzing time series, results show that slow, gradual climate change is occurring across all climatic elements, triggering different types of calamities in the study areas. The Tourism Climate Index (TCI) model was used to analyze and predict future comfort seasons for travel in the study areas. Mostly, though the trend of rising temperatures is very low at present, it would be higher in the near future if Business As Usual (BAU) continues. As such, among the three regions, the top outdoor tourism and recreation destination of Bangladesh would experience the greatest rise in temperature, with prolonged and higher precipitation rates. Furthermore, the rise in hot weather has spread across the area over the last forty years, with a declining trend in v vegetation coverage across the whole area. There is an increasing rate of depositional landforms. Furthermore, TCI model shows that although Cox’s Bazar is the top-ranked outdoor tourism destination at present, it would gradually decline as it becomes less favorable to tourists because of the shrinkage of the tourist season, and the excellent tourist season would become moderate to tourists as climatic conditions will have higher temperatures, more cloudy sky, an increased rate of precipitation and windy weather. Consequently, analyzing credit risk by developing a model of TCI risk factors for bank loans, it has been identified that the risk factor for Cox’s Bazar will be the highest. Different banks will have different types of credit risks based on the model developed for the “Tourist Climate Index Value at Risk (TCI-VaR)”, which has found that credit lending for a prolonged maturity period would entail greater credit risk, which is currently neglected. It would be between 2.62% and 3.71% for 10-year and 5-year debt (10 million BDT), reflecting the impact of climate change. Kuakata would have a very low, rising trend in temperature and precipitation, though it is negligible at present. There is also widespread hot weather across the area. After using the TCI model to analyze tourists’ comfort in the study area, it shows that, though the tourist season would shrink, Kuakata would remain a more favorable place for outdoor or beach tourism, with excellent climatic conditions from November to March. In terms of investment, Kuakata would be least affected by climate change, as the TCI risk factor has been identified as negative. Thus, TCI-VaR credit risk will be -0.05% per 0.1 million BDT in debt for tourism. However, most banks do not lend money for tourism or recreational projects for tourists in this area, as Kuakata, as a tourist destination, is still neglected. Finally, the temperature and precipitation in Shatkhira show a rising trend upto year 2100. Moreover, the vegetation coverage has been gradually declining with wetlands. However, if other variables remain as control variables (such as deforestation, land encroachment, and vi hunting) due to climate change, this area would remain favorable for tourists, with very good climatic conditions from December to February, for the next eighty years. Furthermore, in terms of investment, the Sundarbans would be less affected by climate change, as the TCI risk factor has been identified as moderate. Likewise, Kuakata has also been neglected and has not burgeoned into a tourist destination. Banks would have to face a credit risk of 0.40% over 3 years for a 0.1 million BDT loan, which has been neglected as a aftermath of climate change. Therefore, from the research, it is clear that different study areas require different policy formulations for investments and tourism development zoning. The top tourist destinations in Cox’s Bazar are in a high-risk position for investment in outdoor or beach tourism due to climate change. Conversely, this research identifies other coastal destinations that would remain comfortable for outdoor tourism-based activities over the next hundred years. However, there might be other factors that degrade the destination; yet, policy formulation to keep the destination rich in natural resources is very urgent at present for sustainable tourism development. Besides, Cox’s Bazar, which is considered the top revenue-generating destination of Bangladesh, should be slowly transformed into an amalgamation of man-made and natural destinations to sustain development and preserve its top position. This thesis is submitted for the degree of Doctor of Philosophy.

Impact of Initial Public Offerings on Capital Market Development of Bangladesh

2025-07-08T00:00:00Z

Impact of Initial Public Offerings on Capital Market Development of Bangladesh Hossain, Md. Iqbal This thesis conducts a comprehensive analysis of the impacts of Initial Public Offerings (IPOs) on the development of the capital market in Bangladesh, which is recognized as one of the fastest-growing economies in South Asia. In this context, the increasing capital needs of entrepreneurs are primarily met by state-owned and private commercial banks, as well as non banking financial institutions, due to the underdeveloped nature of the stock market. Bank financing is influenced by monetary policies, particularly the bank rates set annually by the central bank. While some studies highlight the necessity of strengthening the debt and equity securities market to support Bangladesh's rapid economic growth, there are ongoing debates about the extent to which the capital market contributes to the development process by providing alternative financing sources for entrepreneurs through public and private offerings. To bridge this understanding gap, I examine the impacts of Initial Public Offerings on the development of Bangladesh's capital market through a meticulous examination of primary and secondary data sources, including closed-end questionnaire, IPO Prospectus and regulatory documents from different stakeholders of the capital market i.e., Ministry of Finance, BSEC, BB, DSE, CSE, published articles, daily newspapers etc. and use annual data from 1994 to 2023. Employing multiple regression analysis, I find that IPO financing, unemployment rate, foreign portfolio trade, and DSE Broad Index significantly and positively influence the Market Capitalization to GDP ratio of the capital market of Bangladesh. Notably, foreign portfolio trade exerts the largest effect on the Market Capitalization to GDP ratio, followed by IPO financing, unemployment rate and DSE Broad Index. The findings underscore the need to encourage more quality IPO issuances by addressing the barriers that deter large companies, including multinational corporations and state-owned entities, from pursuing public financing. Additionally, increasing the size of issuances and ensuring the proper utilization of IPO proceeds are essential steps to further develop the capital market of Bangladesh. This thesis is submitted for the degree of Doctor of Philosophy.

An Empirical Study of the Determinants of Non-performing Loan of State Owned Commercial Banks of Bangladesh

2025-04-10T00:00:00Z

An Empirical Study of the Determinants of Non-performing Loan of State Owned Commercial Banks of Bangladesh Hossain, Sheikh Mozaffar The issue of nonperforming loan (NPL) is crucial in the context of Bangladesh. It is more crucial in case of the state-owned commercial banks (SCBs). As per annual reports of Bangladesh Bank (BB), the overall NPL ratio of the banking industry is about 9% during the research period, 20009-2020. But the NPL ratio of the SCBs is about 22% during the same period. Despite having valuable strengths like sovereign ownership, qualified manpower and enormous infrastructure, the performance of the SCBs is disappointing. According to the annual reports of the SCBs, the average share of the industry NPL of the SCBs was 47.44% as against 26.71% share of industry asset during 2009-2020. This high rate of NPL has become a matter of concern for all. Though the regulators and the government have taken several steps, the NPL is increasing at a progressive rate. The first step of the way out of this situation is obviously subject to the identification of actual causes of the NPL. Under this backdrop, this paper attempts to identify the determinants of the NPL of the SCBs of Bangladesh. For this purpose, I studied a novel panel data for a period of 2009-2020 along with the analysis of primary data to identify the impact of the qualitative factors. Note that it is not possible to go back beyond 2009 since one of the SCBs, BDBL, commenced its function as a commercial bank in 2009. The NPL is not a local issue only. In fact, it has become a global issue since the Asian crisis of 1997 and this issue has attracted increased attention after the global financial crisis of 2007 2008. Since then, researchers have carried out many studies to find out the determinants of the NPL of banks. Those studies are mainly quantitative analysis, in which static or dynamic panel data are regressed using estimator such as Pulled OLS, Fixed Effect (FE) and Randoms Effect (RE) and GMM either discretely or together. A few studies are, however, conducted using VAR model specially where the feedback effects of NPL on the independent variables are examined. Except for a very few cases, almost all the previous studies used panel data over a period of 5 to 12 years. Some of the previous studies estimate the impact of only macroeconomic variables while some estimate the impact of only bank-specific factors. On the other hand, many of the earlier studies investigate the joint impact of macro and bank-specific variables. The common macroeconomic variables used in the previous studies are GDP growth rate, inflation rate, unemployment rate, exchange rate, weighted average lending rate and share price index. On the other hand, commonly estimated bank-specific variables are credit growth, bank size, loan deposit ratio, management inefficiency, ROA, and ROE. However, some very important issues are missing in all the earlier studies. One very important missing issue is the study of the impact of supply of loanable fund on the loan quality. Loan is a major asset for a bank created using fund, which largely depends on the demand for loanable fund. This asset or use of fund must be impacted by the liability or source of fund i.e., the supply of loanable fund, a major portion of which comes in the form of deposits collected from the depositors by the banks. Another missing component is the analysis of the impact of ICT combining with other explanatory variables for the NPL. Modern lending business uses ICT all the time. The success of lending business largely depends on the proper management of ICT risk of a bank. Similarly, the examination of the influences of risk associated with asset liability management (ALM) is missing in the previous studies though bank business is basically a business of ALM. Previous iv studies have also not estimated the influence of forbearance as far as I know. Banks grant the forbearance, especially in the form of interest waiver, not as an endowment but for facilitating the recovery of loans and advances. So, studies that attempt to identify determinants of NPL should cover the impact of the forbearance too. Nevertheless, quantitative analysis is not enough for identifying the determinants of the NPL even if the impact of the supply of loanable fund, ICT, ALM and forbearance is considered. There are factors such external pressure, internal malpractice, poor corporate governance, aggressive banking etc., which are believed to have significant impact on the NPL but it is not possible to maintain time series data on such factors. To capture the impact of such factors, survey based qualitative study is needed. Though there are some qualitative analyses available in literature on the determinants of NPL, those are not done simultaneously with the quantitative studies. Moreover, previous qualitative studies suffer from two major shortcomings. The first one is the inadequacy of sample size in most of the cases and the second one is the exclusion of conversant respondents. All the previous survey-based studies collected opinion either from bankers or from borrowers or both. But the opinions of the respondents of two very important categories namely, regulators and researchers are not considered in the previous survey-based studies as far as I know. Specially, anonymous opinion of the officials working in the regulatory body is very important because those officials deal with loan performance and have the real clues about the causes of NPL. Therefore, the present dissertation adopts a mixed method of quantitative and qualitative analysis in the investigation of factors responsible for the high NPL of the SCBs of Bangladesh. In the quantitative analysis, a total of 14 hypotheses are tested. These propositions include 5 macroeconomic issues and 9 on bank-specific factors developed through comprehensive review of literature and gap analysis. The macroeconomic factors are real GDP growth rate, unemployment rate, change in real effective exchange rate (REER), stock price index and real lending rate. Note that ‘inflation rate’ has been dropped from the initial specification for its autocorrelation with REER and ΔREER has been used instead of REER for stationary purpose. The bank-specific variables are deposit growth, loan deposit ratio, management inefficiency, credit growth, bank size, capital adequacy ratio, growth of interest waiver, ALM risk management and ICT risk management. Note that I avoided ROA or ROE since SCBs are losing concerns and they depend on continuous budgetary support from the government. However, the quantitative analysis on the impact of supply of loanable fund (represented by deposit growth), growth of interest waiver (as proxy of forbearance), ALM risk management and ICT risk management combining with the impact of other exogeneous and endogenous factors is the first of its kind to the best of my knowledge. In the qualitative analysis, I collected the opinion of 394 respondents with a five-point LIKERT scale against a minimum sample size of 385 required for a large finite population. The survey is conducted among four categories of respondents namely, state-owned banker, borrowers of SCBs, officials of regulatory body involved with offsite and onsite supervision and regulation of the SCBs and researches who usually conduct researches on credit related issues. Survey based qualitative analysis accommodating opinion of regulators and researchers along with that of bankers and borrowers is also the first of its kind as far as I know. I collected primary data v on seven broad issues. These issues are macroeconomic conditions, corporate governance, credit risk management, loan administration, external pressure and internal malpractice, legal and regulatory framework, and competition in the banking industry. The parameters or variables of the issues of macroeconomic conditions, credit risk management and loan administration are designed in such a way that the outcome of the qualitative analysis on these issues can confirm or deny the outcome of quantitative analysis. As for econometric techniques of analyzing the quantitative factors, four estimators namely Pooled Ordinary Least Squares (OLS), Fixed-effect (FE), Random-effect (RE) and Generalized Least Squares (GLS) are used. Moreover, a comparison of the estimations of these four estimators are made through Breusch and Pagan Lagrange multiplier test and Hausman test to find the most efficient result. In the estimation process, model specification is validated though various diagnostic tests including panel unit root test, multicollinearity test, omitted variable test, heteroscedasticity test, autocorrelation test, and cross-sectional dependency test. The estimators mentioned above are used to regress a total of 3 (three) models. The first two models capture the stand-alone impact of only macroeconomic and bank specific variables. The third estimates the joint impact of the bank-specific and macroeconomic factors. For the robustness of the study, GMM estimation is also performed, but the GMM model itself is not significant at conventional significance level of <0.05 in terms of AR(1). On the other hand, technical analysis of qualitative factors is done through principal component analysis (PCA). In the process of analyzing the principal component, I conducted various tests for ensuring a precise result. These include the reliability test of survey data through Cronbach’s alpha, linearity test, sampling adequacy test through KMO Bartlett’s test, data reduction suitability test through Bartlett’s test of sphericity, significant outlier test, data distribution test, communalities test etc. According to the outcome of the panel data regression, a combination of macroeconomic and bank-specific factors explains the variation of NPL ratio of the SCBs of Bangladesh while standalone macroeconomic or bank-specific factors cannot explain the variation. In terms of the significance of individual factors, regression of Pooled OLS, FE, RE and GLS estimators suggest that unemployment rate, real lending rate and change in REER have significant positive correlation with the NPL ratio. This outcome confirms the finding of most of the previous studies. The unpredicted direct relation between NPL ratio and real GDP growth rate, though not unprecedented, is probably the result of business expansion by large borrowers during economic upturn withholding the repayment of current loan. Among the bank specific variables, deposit growth has been found to have an inverse association with the NPL ratio showing the significance of the supply of loanable fund in explaining the variation of NPL ratio, which has not been explored before. Similarly, ALRM and ICTRM are also found to have significant impact on the NPL ratio when assessed combinedly with other traditional macroeconomic and bank specific variables. Other bank specific variables sch as loan deposit ratio and management inefficiency have significant positive association with the NPL ratio as per the estimations. Conversely, credit growth and bank size are found to have significant negative correlation with the NPL ratio. These are all in conformity with the previous findings and the current model specification. Other factors included in the specification namely, stock price index, forbearance, and CAR cannot explain the variation of NPL ratio of the SCBs. vi GMM estimation, though not significant at the level of AR(1) = Pr<0.05, suggests that previous year’s NPL ratio rises current year’s NPL ratio. Regarding qualitative analysis, PCA of primary data reveals that poor corporate governance is the most influential component, which raises NPL. The second influential factor is the inadequacy of legal and regulatory framework and the third one is inefficient loan administration. Other principal components, which intensify the NPL are: adverse macroeconomic conditions; pressure from influential quarter and malpractice by the bankers; poor credit risk management; and unhealthy competition in the banking industry. The paper highlights the need for policy adjustment and operational modification in line with the findings of the quantitative and qualitative analysis. Both the quantitative and qualitative analysis reveals that macroeconomic condition impact loan performance of SCBs. Accordingly, this paper recommends for considering potential movement of exogeneous factors while formulating the lending policies and caring out lending operations. This dissertation also suggests for considering external competitiveness of economy while sanctioning large loans to the exporter borrowers. The discovery of a significant inverse relation between the supply of loanable fund (represented by deposit growth) and NPL ratio warrants the need for building low-cost core deposit base by the SCBs for easing the credit risk management accommodating appropriate risk appetite. Meticulous compliance of internationally best practiced rules and regulations can easily resolve the loan deposit ratio, management inefficiency etc. issues and reduce the NPL. Current study suggests for establishing a formal coordination channel between BB and MoF for improving the capacity of the SCBs specially for maintaining credit quality through improving corporate governance, and controlling external pressure and internal malpractice. Such coordination between these two authorities can help establish compliance and credit culture in SCBs. Nevertheless, there are some more complex issues such as composition of board, disposal of a growing number of pending cases with money loan court, maintaining accountability of the sanctioning authority for concerned NPL, raising bank size by merging losing small banks with larger ones, and ensuring enough punishment for willful defaults. Disposal of these issues requires the reform of legal and regulatory frameworks, which is not possible without strong political commitment. This thesis is submitted for the degree of Doctor of Philosophy.