Sushanta Mallick will present at the WIDER Seminar Series on 05 February
Abstract - Is financial inclusion good for banks?
In light of the recent policy debate on inclusive financial intermediation, we investigate whether inclusive banking can boost bank-level performance. Using an international sample of banks, we find that there is a strong positive association between financial inclusion and bank efficiency.
On exploring the plausible channels of the impact, we find that greater financial inclusion helps banks in reducing the volatility of their deposit-funding share as it provides more stable long-term funds for banks, while also mitigating the negative effects of their return volatility.
We then show that the positive association is stronger in countries with limited restrictions on banking activities or more capital regulation stringency, as the deposit channel enables greater flow of low-cost funds into the banking system.
This association is robust to bank fixed effects, instrumental variable analysis, and a difference-in-differences estimator that exploits cross-country and temporal variation in the timing of actively promoting inclusive agenda (with hand-collected data on membership of an inclusive policy network of countries), implying that inclusive financial development is good for banks too.
About the speaker
Dr Sushanta Mallick is a Professor of International Finance at the School of Business and Management, Queen Mary University of London, UK. Since January 2015, he has been the Co-editor-in-Chief of ‘Economic Modelling’ – a leading 35-year old scholarly journal published by Elsevier. He holds a PhD in economics from the University of Warwick, UK.
WIDER Seminar Series
The WIDER Seminar Series showcases recent and ongoing work on key topics in development economics. The weekly sessions held in Helsinki are open to local and visiting researchers, policy makers, and others interested in development topics. Click here to learn more.
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