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Mining Existing Literature Reviews
This paper entails mining existing literature reviews of three dissertations concerning transition of veterans from armed forces to civilian-force. The mining and evaluation process will involve pointing out the common themes, quoted authors, outline organization and its rationale. Finally, the findings are summarized and provided along with each dissertation’s literature review outline and a highlight of how it is connected to the proposed dissertation topic.
Serving those who served: Retention of newly returning veterans from Iraq and Afghanistan in mental health treatment
Table 1 and Table 2 below provide outline of the literature review and summary of quoted authors respectively. Furthermore, the analysis of this literature will follow.
Outline for Literature Review
Definition of Mental Health Veterans with mental disorders Combat stressors Effects of OEF/OIF on mental health Evidence-Based Interventions Relevance to Veteran Affairs (VA) services to veterans with PTSDPTSD Diagnosis Mental Health/PTSD Interventions Retention and number of visits mental health services Favorable environmental intervention and support Teaching social emotional education to the veterans VA Chart and Psychotherapy protocols for monitoring Summary
Rate of PTSD and related veteran mental health services The risk of PTSD in discharged and retired OEF/OIF Veterans The rate of PTSD soldiers as in active-duty soldiers Diagnosis of PTSD and utilization of both mental and non-mental services by veterans PTSD mental and non-mental health services interventions and monitoring Implementing sustainable interventions for the purpose of dealing with PTSD stressors.
Time to Treatment among Veterans of Conflicts in Iraq and Afghanistan with Psychiatric Diagnoses
Table 3 and Table 4 below provide outline of the literature review and summary of quoted authors respectively. Furthermore, the analysis of this literature will follow.
Outline for Literature Review
Definition of Psychiatric Diagnoses Veterans of Conflicts in Afghanistan and Iraq Main cause of psychiatric diagnoses Effects of mental health treatment timing on OEF/OIF veterans after deployment Evidence-Based Interventions Chronic mental health problems Psychiatric DiagnosesPsychiatric Diagnoses Interventions Veteran Affairs (VA) health servicesEarly mental health treatment initiation Determinants of time to initial mental health visit (age, race or ethnic) VA services and timing of care for monitoring Summary
Seal Schell Wang Lane Olfson Litz Maguen O’Donnell Bryant Creamer
Rates of utilization of mental health and primary care services among OEF/ OIF/OND veterans The risk factors to psychiatric diagnoses among OEF/OIF Veterans Diagnosis of chronic mental conditions among OEF/OIF veterans Early mental health timing Prevention of psychiatric symptoms chronicity
A Hero’s Welcome? Exploring the Prevalence and Problems of Military Veterans in the Arrestee Population
Table 5 and Table 6 below provide outline of the literature review and summary of quoted authors respectively. Furthermore, the analysis of this literature will follow.
Mining Existing Literature Reviews
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Outline for Literature Review
History on Returning Military Veterans Definition of mental disorders that affected veterans Combat veterans from Vietnam and 9/11 wars The Link between Military Service, Combat-related Problems and CriminalityVeteran in Criminal Justice System Relevance to Criminal Justice System Veteran Affairs (VA) services to veterans with anti-social behaviors Retention and number of visits mental health services Favorable environmental intervention and support Teaching social emotional education to the veterans Creating awareness among veterans on the criminal justice systemAlternative approaches to veterans who have been arrested and incarcerated Summary
Mumola Noonan Mumola Fontana Rosenheck Seal, Bertenthal, Miner, Sen, & Marmar Greenburg Roy
Rate of incarcerated veterans with mental health conditions Historical comparison of the populations of incarcerated veterans and those who have transitioned The Link between Military Service, Combat-related Problems and Criminality Diagnosis and Treatment of Combat-related Problems among veterans Awareness and alternative approaches to incarcerated veterans
Summary of the mined literature reviews
The purpose of these dissertations literature reviews was to evaluate the growing concerns on the status of the mental health services offered to veterans returning home from Afghanistan (Operation Enduring Freedom [OEF] and Iraq (Operation Iraq Freedom [OIF]) mainly with regards to retention in mental health treatment of veterans with PTSD.
It is noted that retention as well as numbers of visits declined among OIF-OEF veterans primarily mainly due comorbid conditions and age; hence, the design of interventions should be aimed at specific health care barriers. In addition, it has also be noted that failure to effectively offer appropriate mental health services to veterans with PTSD prior to their transition from armed force to civilian-force results to increased criminal records.
Mining Existing Literature Reviews
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Thematic organizations in the three dissertations is done chronologically with authors adopting a pyramid-like approach, which starts with basic/background concepts, then diagnosis issues, and finally mental and non-mental interventions. An observation of the themes covered in the three dissertations, the common ones included growing rates of PTSD, Combat PTSD stressors or risk factors, the need for proper diagnosis of PTSD, available mental and non-mental health services for veterans facilitated by Veteran Affairs (VA).
The themes are strongly related to my dissertation topic because they are primarily covering on health services required for veterans, especially those with mental conditions or PTSD mostly arising from their role in combat particularly in Iraq and Afghanistan. Hence, these themes are mainly concerned with health services crucial for the transition of veterans from armed force (combat) to civilian force (non-combat) which is my dissertation topic.
Magen, S., Madden, E., Cohen, B. E., Bertenthal, D., & Seal, K. H. (2012). Time to Treatment among Veterans of Conflicts in Iraq and Afghanistan with Psychiatric Diagnoses. Psychiatric Services, 63(12) 1206-12. (Dissertation)
Design and development of low cost solar thermal systems for domestic use
Current trends in energy supply and use are patently unsustainable – economically, environmentally and socially. Without decisive action, energy-related emissions of carbon dioxide (CO2) will more than double by 2050 and increased oil demand will heighten concerns over the security of supplies. We can and must change our current path, but this will take an energy revolution and low-carbon energy technologies will have a crucial role to play.
Energy efficiency, many types of renewable energy, carbon capture and storage (CCS), nuclear power and new transport technologies will all require widespread deployment if we are to reach our greenhouse gas (GHG) emission goals. Every major country and sector of the economy must be involved. The task is also urgent if we are to make sure that investment decisions taken now do not saddle us with sub-optimal technologies in the long term.
Awareness is growing of the urgent need to turn political statements and analytical work into concrete action. To spark this movement, at the request of the G8, the International Energy Agency (IEA) is leading the development of a series of roadmaps for some of the most important technologies. By identifying the steps needed to accelerate the implementation of radical technology changes, these roadmaps will enable governments, industry and financial partners to make the right choices. This will in turn help societies make the right decisions.
The global energy need for heat is significant in both OECD and non-OECD countries: in 2009 the IEA reported that global energy demand for heat represented 47% of final energy use. Solar heat thus can make a substantial contribution in meeting climate change and security objectives.
Solar heating is a straightforward application of renewable energy; solar domestic hot water heating is already widely used in a number of countries but on a global level contributes to 0.4% only of energy demand for domestic hot water. Moreover, solar heating also includes technologies for other purposes such as space heating and space cooling, and hot water for industrial processes. As different solar heating technologies are at widely differing stages of development and use, policy support must offer custom-made solutions.
Aims and objectives
Investigate and analysis of current available low cost solutions, its materials, cost, design and manufacturing methods.
Design and develop a low cost solar water heating system for domestic use through appropriate thermal management.
Carry out research of the opportunities in low cost solar water heating systems and analyse its uses for domestic application.
Research and analysis suitable materials existent in todays market and compare their design and methods of manufacturing.
Analyse and compare price of other suitable materials in order to produce cost effective alternative.
Design and build solar thermal system using Creo Parametric.
Examine the performance of proposed low cost solar water heating systems for domestic purposes.
A solar water heating system for domestic use that is both affordable and effective in actualizing its intended purpose will be designed in this project. The system works by not only harnessing solar power and subsequently using this renewable source of energy to heat water depending on the environmental condition or intended use of the water rather than using electricity; but also by ensuring that domestic utility bills are significantly reduced as well as making sure that there is optimization of the effectiveness and efficiency of the system.
The Creo software will be outsourced for the designing of the solar water heating system, particularly for the purpose of domestic use. As a result, in the attempts to achieve the aims and objectives of the research project it will highly possible to ensure that solar water heating systems are not only made affordable, but also considerably efficient and effective.
Solar Hot Water Systems, abbreviated as SHWS are widely used in domestic as well as industrial applications. SHWS of 200 liter capacity are most suited for a family with two adults and two children. The performance of SHWS is a widely researched area. A briefly reviewed summary of studies on SHWS is presented and discussed in the literature review chapter.
A review of 50 years of research work on solar energy has been discussed by Hoogwijk and Graus (2008). The history of MIT, USA Solar House-I, MIT Solar House-II, MIT Solar House-III and MIT Solar House-IV are enumerated in detail. Useful heat gains ranging from 20 to 40% of the total incident solar radiation are reported. The relative performance of gray absorber, selective absorber and low-reflecting glasses are reported.
Heller (2000) has reported 15 years of research and development on solar heating in Denmark. As a result, I would like to ensure that I undertake a review of the possible low cost alternative materials as well as appropriate and effective models with potential to perform optimally. This goes a long way in ensuring that households are saved a significant proportion of their utility bills as well as improvement of the performance of the solar water heating systems.
In the recent decades, attempts have been made to design and fabricate low cost solar water heaters. Henning and Wiemken (2007) studied the effects of storage tank volume and configuration on efficiency of thermosyphon solar water heaters. Whereas Shariah and Shalabi (1997) presented the effects of auxiliary heater on annual performance of thermosyphon solar water heater simulated under variable operating conditions.
The effects of system configuration and load pattern on the performance of thermosyphon solar heaters were analyzed by Henning and Wiemken (2007); whereas, plastic film liquid layer solar water heaters have also been designed and developed. Thus, I will personally embark on the attempts to consider the effects of a wide array of factors that are likely to influence the performance of a solar water heating system.
Kalogirou and Papamarcou (2000) have modeled the thermosyphon solar water heating system and validated the model with experimental data. An analytical approach has been employed by Belessiotis and Mathioulakis (2002) to analyze the performance of thermosyphon solar domestic hot water system. An alternative approach to thermosyphon solar energy water heater performance analysis and characterization has been put forth by Norton et al (2001).
Modeling the performance of a large area plastic solar collector has been carried out by Janjai et al (2000). Artificial neural networks have been used by Kalogirou et al (1999) for the performance prediction of a thermosyphon solar water heater. Four types of system data are used to train the network. Prediction accuracy within 2.2 C is obtained. These studies have demonstrated that Domestic Solar Hot Water System (DSHWS) performance can be modeled with good accuracy.
Henning and Wiemken (2007) has reported the measurements of SHWS in residential houses’ performance over a period of 22 years and proposed methods for simulation. Upto 63% reductions in glass cover transmissivity were reported over the years due to fogging. As a result, I consider this as one of the ways of increasing the longevity of these solar water heating systems mainly because I have previously been a victim of cold showers due to breakdown of solar water heating system or electricity failures.
Various system configurations were investigated by Abd-al Zahra and Joudi (1984) to improve the performance of solar heaters. Lee and Sharma (2007) attempted to improve the solar absorption efficiency by an affordable solar selection coating and observed the tank water temperature to increase by 5 °C when compared to commercial black paint coating.
A 15 °C increase in tank water temperature over conventional ones was observed by Ardente et al (2005) using thermoplastic natural rubber tubing as absorber plate. This is highly likely to be an important strategy to me, especially during the winters when the temperatures are very low because it will ensure that the relevant water temperatures are maintained by the solar water heating system.
In recent times, considerable efforts have been made towards optimization of the system performance of SHWS while also ensuring that the prices of these systems do not go beyond the purchasing power of many households. I can personally articulate the inconvenience caused by poorly performing solar water heating systems, especially when there are numerous domestic chores mainly because at our elementary school I had to undergo this experience first-hand.
Duffie and Beckman (1991) have analyzed the performance optimization of solar water heater flat plate collector based on the impact of the number and type of cover plate. Therefore, it would be my pleasure and delight to embark on this noble and worthy project to make sure that I can contribute to the well-being of the living standards of the humanity.
Collector surface coating (black paint, black chrome painting), PU form density (high, low) of the collector insulation and tank (with and without) insulation are used as control parameters. It is undoubtedly evident that through these measures the insulation forms used on a day-to-day basis are going to be utilized in this project to ensure an appropriate model is designed and developed.
According to Ambrosini et al (2010), it is worthwhile to make significant attempts in ensuring that economic optimization of low-flow solar domestic heating water plants has been attained. The flow has been provided by solar PV panels. Life cycle cost analysis has been carried out and the PV powered system is found to be economic when compared to direct electricity use. This implies that even the households that are off-grid can enjoy the privileges enjoyed by those connected to electricity.
I can vividly connect with this because once in a while there are times during my travelling expeditions when I have been forced to bath with cold water or take longer time to warm the bathing water using other forms of water heating methods. Sharia and Shalabi (1997) have carried out experiments on rotor wind turbine with the help of wind tunnel towards optimization of the configuration of the wind turbine. Ardente et al (2005) has done the optimization of a natural circulation two phase closed thermosyphon flat plate solar water heater.
Mugnier and Jakob (2012) have optimized the minimum backup required for the SHWS under varying load conditions. Optimization of tilt angles for the solar collectors is attempted by Crawford et al (2003) and that for the low latitude countries. Optimal design for a thermosyphon solar water heater is carried out by Shariah and Shalabi (1997). Hoogwijk and Graus (2008) have attempted towards the optimization of tank-volume-to-collector-area ratio for a thermosyphon solar water heater.
Capital cost as well as economic viability of thermosyphon solar water heaters made from alternate materials is also essential in the attempts of improving the feasibility of such a project. This is because development and production of low cost materials without compromising the performance of the solar water heating systems intended for domestic use will make them more affordable, and this will go along way in promoting the adoption of these systems by a wider population. Considering the financial constraints facing many people globally, I am very sure that through increased affordability many people will have access to these solar water heating systems.
Wara and Abe (2013) have designed and developed a one dimensional transient numerical model for flat plate solar thermal devices and gave a description of the fundamentals of a model for the design as well as optimization of flat plate collectors. Dalenbäck (2010) has presented a detailed techno-economic appraisal of integrated collector in addition to the storage water heating systems. I consider the adoption of these new technologies to be really important since they play a crucial role promoting efficiency and effectiveness.
Lee and Sharma (2007) have made a performance evaluation of an integrated solar water heater as an option for building energy conservation. Daytime collection efficiencies of about 60% and overall efficiencies of about 40% are reported. Kalogirou (2009) has conducted a study on optimization of size and structure for solar energy collection system by considering three solar energy applications and economical indices like net present value and internal return rate. The author has suggested that best performance is obtained with the use of unglazed, single and double glazed collectors.
Duffie and Beckman (2012) have discussed the design of solar thermal systems utilized for storage of pressurized hot water for applications in the industries, in which the authors developed a design space methodology procedure for component sizing of concentrating collectors, pressurized hot water storage and load heat exchanger by considering the design variables as collector area, storage volume, solar fraction, storage mass flow rate and heat exchanger size.
I am highly optimistic that through these measures, it will be possible to ensure that low cost solar water heating systems are designed and developed that are effective and optimally functioning, which subsequently improves their performance. Liu et al (2012) have optimized the system parameters of solar hot water system of with the help of f-chart and models. In addition, Liu et al (2012) have emphasized that discharge from different levels in solar storage tanks will improve the performance of the system.
The research design to be adopted in this project is a mixed research design, because it will involve a review of both primary and secondary information concerning the research topic while at the same time enabling experimentation of the low cost solar system that shall be designed and developed in course of this project to determine its performance. As a result, the principal method that will be used in this project is experimentation, which shall involve conducting experimental trials on various low cost solar water heating systems in order to determine the optimal design in terms of performance efficiency and effectiveness.
Creo Parametric software is used to design and develop the proposed low cost solar water heating system intended for domestic use. The choice for the Creo Parametric software is because it is undoubtedly one of the most flexible and powerful 3D modeling software in the market today. This is because Creo Parametric has the core modeling strengths you’d expect from the industry leader, along with breakthrough capabilities in additive manufacturing, model based definition (MBD) and smart connected design. Streamlined workflows and an intuitive user interface complete the picture.
Abd-Al Zahra, H.A.A. and Joudi, H.A. (1983). An experimental investigation into the performance of a domestic thermosyphon solar water heater under varying operating conditions. Energy Conversion and Management, Vol. 24 Issue 3, pp. 205-214. Doi: https://doi.org/10.1016/0196-8904(84)90037-2
Ambrosini, A., Lambert, T. N., Staiger, C. L., Hall, A. C., Bencomo, M. and Stechel, E. B. (2010). Improved High Temperature Solar Absorbers for use in Concentrating Solar Power Central Receiver Applications’ SANDIA REPORT SAND2010-7080.
Ardente, F., et al. (2005) “Life cycle assessment of a solar thermal collector”, in: Renewable Energy 30, pp 1031-1054.
Arvizu, D., et al., “Direct Solar Energy”, in: IPCC Special Report on Renewable Energy Sources and Climate Change Mitigation [O. Edenhofer, O. et al. (eds)], Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
Belessiotis, V. and Mathioulakis, E. (2002). Analytical approach of thermosyphon solar domestic hot water system performance. Sol. Energy, Vol. 72, Issue 2, pp. 307–315.
Crawford; R., et al., (2003) “Comparative greenhouse emissions analysis of domestic solar hot water systems”, in: Building Research & Information, Volume 31, pp 34-47.
Dalenbäck, J-O (2010). “Success factors in Solar District Heating”. WP2 – Micro Analyses Report. European Commission, IEE-project “SDH-takeoff”. CIT Energy Management AB, Gothenburg.
Duffie, J. A. and Beckman, W.A. (1991). Solar Engineering of Thermal Processes. Hoboken, NJ: John Wiley and Sons.
Duffie, J.A. and Beckman, W.A. (2012). Solar Engineering of Thermal Processes. Hoboken, NJ: John Wiley Sons.
Dupeyrat, P., S. Fortuin, G. Stryi-Hipp (2011). Photovoltaic/Solar Thermal hybrid collectors: overview and perspective, ESTEC 2011. ESTIF (2011), Solar Thermal Markets in Europe, trends and market statistics 2010, ESTIF, Brussels.
European Solar Thermal Technology Platform (ESTTP) (2007) Solar Heating and Cooling for a Sustainable Energy Future in Europe, ESTTP Brussels.
Henning, H-M. and Wiemken, E. (2007). Solar Cooling, ISES Solar World Congress 2007, Beijing, China.
Hoogwijk, M. and Graus, W. (2008). Global potential of renewable energy sources: a literature assessment. Background report prepared by order of REN21. Ecofys, Utrecht.
Kalogirou, S. (2009). Solar Energy Engineering: Processes and Systems. London, UK: Elsevier Publications.
Lee, D.W and Sharma, A (2007). Thermal Performance of the Active and Passive Heating Systems Based on Annual Operation. Solar Energy, Vol. 81 Issue 2, pp. 207-215.
Liu, Y.-M., Chung, K.-M., Chang, K.-C. and Lee, T.-S. (2012). Performance of Thermosyphon Solar Water Heaters in Series’ Energies, Vol. 5, Issue 12, pp. 3266-3278.
Mugnier, D. and Jakob, U. (2012), “Keeping cool with the Sun” in: International Sustainable Energy Review, Vol. 6, Issue 1, pp. 28-30.
REN21 (2009), Background paper: Chinese Renewables Status Report, REN21, Paris. Singhal, A.K., presentation “Status & Prospects of Solar Heating & Cooling Technologies in India”, 1st IEA Solar Heating and Cooling workshop, 28-29 April 2011, Paris.
Shariah, A. and Shalabi, B.(1997). Optimal design for a thermosyphon solar water heater. Renewable Energy, Vol. 11, Issue 3, pp. 351-361.
UNIDO (2011), Renewable Energy in Industrial Applications. An assessment of the 2050 potential, UNIDO, Geneva.
Wara, S. T. and Abe, S. E. (2013). Mitigating Climate Change by the Development and Deployment of Solar Water Heating Systems. Journal of Energy Hindawi Publishing Corporation, Volume 2013, Article ID 679035, pp. 9-15.
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Pedagogical leadership is theorized as being one of the most important kinds of leadership in early childhood education, based on its recognition of best practices for teaching and learning. Leadership is considered one of the most imperative quality aspects in Early Childhood Education (ECE), due to its role in enhancing educational quality. Recent studies have established that the early childhood educator profile is changing and the need to possess leadership skills is necessary to respond effectively to the changes in the education environment.
Waniganayake (2014) notes that unlike in the past where teacher responsibilities exclusively focused on the education of young children, the contemporary early childhood settings have expanded in scope with increasing demands from the government, parents and other stakeholders. This demonstrates expanding roles for ECE professionals and hence the growing relevance of pedagogical leadership.
The relevance of effective leadership in enhancing the quality of pedagogy continues to gain significant importance in the field of early childhood, as stakeholders seek to achieve greater professionalism and enhanced outcomes as illustrated by children’s performance (Heikka, 2014). “The field of early childhood education and care has had a growing interest in pedagogical leadership rising from the need to increase quality and influence organisational change (Alameen, Male & Palaiologou, 2015).”
In this regard, there is greater focus on building relationships, mentorship, diversity and inclusiveness. Individuals in leadership work in partnership with others, providing leadership opportunities to other staff, students and others in the education community. This insinuates that leadership as traditionally defined does not always apply to early education realms. It is because while business and other sectors may observe leadership from a hierarchical perspective, effective early years leadership is mostly more collaborative or transformational in nature.
The traditional way of envisioning a leader as the one on top of the hierarchy is a just incomplete definition of how leadership is. Leadership is a process that is influenced by the shared vision and purpose by individuals or teams in connecting with each other. Effective leadership while being guided by the principal who provides direction goes beyond this by recognising the role played by all stakeholders as defined in shared values, visions and expectations. Leadership in early childhood education is an in-depth human quality that does not follow the conventional rule of authority.
Children are purely innocent to what this society gives to them in early childhood. If the society provides them with effective skills of leadership then that is what they are going to get regardless of gender or sect. If children are exposed to negative traits from the society then this would only end up in criminal activities. Children tend to strive hard to learn the way of living which society provides them.
The importance of early childhood education can be imagined from Siraj-Blatchford and Hallet’s (2014) idea of leadership, which states that “Effective and caring leadership is an evolving area of importance in developing quality provision for young children and families (p. 9).” Early childhood leadership is not only about the business of academics but it involves everyday routine of children’s services.
In recognition of the growing importance placed on leadership in early childhood education, this paper explores the concept of pedagogical leadership in the context of early education and how it influences the quality of education. In this relation, it will focus on what leadership means in the context of early childhood education, leadership styles in ECE, effective pedagogy in the early years, effective leadership in the early years and challenges and issues in early childhood leadership.
Background Study of Pedagogical Leadership
The Effective Provision of Preschool Education (EPPE) project changed the education landscape in Europe, and can be considered an influential study in the emerging importance of leadership in early childhood education (Siraj‐Blatchford, et al., 2008). The longitudinal study was the first of its kind and consisted of a young children’s development sample with the objective of investigating the impact of preschool education among three and four year children. Information for the study was collected from 3000 children and also involved interaction with their parents, home environment and school settings (Sylva, et al., 2004).
Through the research which as conducted between 1997 and 2004, it was established that education quality made a significant impact in the development of children (Sylva, et al., 2004). This is a function of leadership, which the study also established as being instrumental in ensuring quality and better outcomes among children.
Based on the study results, it was established that high performing centres included in the study had resilient leadership and a strong shared philosophy, and that managers ensured a strong lead in planning and curriculum development. In addition, leaders in these centres encouraged staff development, education focus, child-adult interaction, all essential aspects of leadership in early childhood education. Therefore this study illuminated the importance of effective leadership in preschool in a bid to enhance outcomes and it remains a point of reference in the realms of ECE.
Effective Leadership in the Early Years Sector (ELEYS) and Researching Effective Pedagogy in the Early Years (REPEY) also played an imperative role in illuminating leadership as an important issue in early education. The ELEYS research demonstrated the ideal setting for early year schools, noting that adult-child interaction, good curriculum knowledge among practitioners, parent involvement, formative feedback and behaviour policies influenced good outcomes for children Siraj-Blatchford et al (2007).
REPEY on the other hand argues for the provision of leadership for learning as a fundamental requirement in early learning. This can be done through social context considerations, collective working and a focus on children’s learning outcomes. This research is based on the passing of the Children Act of 2004 in England and the commitment of the government to reform children services through the ‘Every Child Matters’ campaign (Siraj-Blatchford, I & Manni, 2007). These two studies have influenced commitment towards leadership in ECE and are a good source of reference for leadership literature.
Early childhood is a sensitive stage where all leadership efforts should be directed towards ensuring the best outcome for the children. Leadership in early childhood education has been considered a pacesetter and a major influence of quality, hence the need to effectively understand what really consists of leadership in ECE. Kagan and Bowman (1997) proposed five faces of leadership that early childhood leaders should seek observe in order to promote the outcome of children in their schools.
The first face of leadership is administrative leadership. This involves the everyday operational activities and management of services (Kagan & Bowman, 1997). In executing administrative leadership, a leader is expected to maintain skills necessary in:
Dealing with people: This involves building effective relationships with staff, children, families, board members and colleagues among others
Structure: This entails the maintenance of infrastructure, complying with regulations, security issues and fire procedures among others
Processes: This includes the development of policies and procedures for governing school activities, including interaction of children and families.
Culture: This involved possessing knowledge on resource and referral agencies as well as changes in legislation.
Outcome: This includes maintenance of occupancy rates, fees, wages, budgets, petty cash and resources among others.
Environment: This involves awareness of the health and safety issues related to the occupation as well as the legislative requirements and aesthetics.
Pedagogy is understanding how learning process takes place which is supported by philosophy and practice.Pedagogical leadership entails the recognition of the best approaches in ensuring quality of early childhood care and education (Heikka, 2014). At the core of early childhood education lies the need to ensure that the quality of children’s lives is improved through enhanced growth, learning and development (Cheng, 2013; Kivunja, 2015).
In this relation, leadership in ECE is about identifying how best the children can learn. It is associated with the philosophy of the program, its goals and everyday practices that are advocated for in the managing the organisation (Murray & Clary, 2013). A leader is also expected to stay informed about issues and trends in early childhood education and care, and propagate the same information to staff. Leaders are expected to work closely with families and the community and ensure that all their actions demonstrate their knowledge of pedagogical leadership in everything they do (Sullivan, 2010).
Leaders is early education have an obligation to disseminate the importance of early childhood education to the community. This means that leaders must promote advocacy for best practices in early childhood education in order to influence the community and the overall outcome of ECE in the community (2008). It involved being increasingly visible in the community where one operates, developing community partnerships and participating in the education and training of ECE professionals through mentorship and networking. An early childhood leader is required to collaborate with community members and play a vital role in influencing policy making within the community.
Conceptual leadership is about being actively involved in the creation of new ideas with the aim of advancing the profession. This means that a leader should be capable of contributing to the ECE profession through innovative and futuristic thinking that leads to the development of pioneering ideas to influence early childhood education success (Kagan & Bowman, 1997; Rodd, 2013). This is equated to visionary leadership and is best achieved if one has a social conscience. This means that ideas are based on what leaders believe is the best for the advancement of children in early years.
Leaders in early childhood are expected to actively advocate for early childhood issues in order to improve the welfare of children and their families (Kagan & Bowman, 1997; Woodrow, C & Busch, 2008). Leadership involves taking a lead in looking out for better education quality and advocating for issues affecting early childhood education such as licensing requirements, affordable childcare, teacher salaries and other important issues (Rodd, 2013). Leadership in ECE is not only about working with individuals and organisations within their immediate sector but rather collaborating with others beyond their environment to create better outcomes in the early childhood sector.
Effective leadership in early childhood is defined by the ability of the leadership to effect high quality, through involvement of different stakeholders and upholding professionalism. This can be demonstrated in the following illustration, which demonstrates the importance of well set goals, high quality educators, professionalism in leadership, programming quality, and the involvement of families in ensuring outcomes for children. This is best achieved through pedagogical leadership, which is considered highly relevant in promoting high quality education in early childhood.
Pedagogical leadership can be considered the most effective leadership in early childhood and its principles should be emphasised to promote educational outcomes. Pedagogical Leadership tells us to reconsider the way we learn and work alongside with other adults. It is a common observation that development and growth take time and the best way children learn is by the interest and engagement with adults. Characteristics like curiosity, purposefulness and openness create an environment of learning both for the child and for the adult.
The Pedagogical Leader has an important role in creating a setting that supports values and vision for a healthy and quality learning environment. In this kind of environment, habits like organising time, spending money and supporting others come from the vision for growing child. In this way, children are nourished to produce leadership qualities and sense of responsibility. (Coughlin & Baird, 2013)
It has been recognised that effective leadership is the key to the growth of education and care. Teaching, learning and sustaining high-quality learning environment cannot be shaped without the skilled and committed leaders. There are minimal chances for effective leadership in early childhood without these skilled pedagogical leaders. According to a research, leadership comes only second when teaching has an influence on learning. Leadership is essential for an improved outcome and equality in education. (Leithwood et al., 2006: 4)
The style of leadership that is adopted within the organisation to a great extent determines the organisation’s performance. In this respect, the leadership style adopted in enacting pedagogical leadership should match the objective of the organisation in order to ensure that set goals are met. In early childhood, it has been established that pedagogical leadership is more about inclusiveness and that the traditional idea of leadership, demonstrated through hierarchical outlook is considered outdated.
Leadership is seen as a practice that is socially constructed and where the need to promote the quality of education and outcomes for children determines the leadership style adopted. The following leadership styles consist of some of the leadership styles adopted among early education institutions.
Directive leadership: In directive leadership, leaders are required to guide followers by spending as much time as possible with learners who are learning new tasks. The leader is expected to observe the learner provide feedback and develop suggestions for improving performance (Wieczorek-Ghisso, 2014). Directive leadership in ECE is seen as a means to ensure that the learner acquires the best knowledge possible to enhance the quality of education.
Facilitative leadership: This style seeks to empower group members by providing them with the resources necessary to execute their work. This style is aimed at ensuring that the needs of group members are met and that the outcome is satisfactory to the children and their families. While it may be directive at times, facilitative style is never authoritarian.
Participative leadership: This is where the leader promotes a collaborative atmosphere with teachers, such that everyone has an opportunity to participate in decision making. Ideas from followers are held in high regard and each view is considered important. Leaders are open with teachers and communication ensures that they can contribute to the everyday running of the school (Aubrey, et al, 2013). Participative leadership enhances motivation and is considered effective in advancing performance due to its ability to identify new ideas that would otherwise go unutilised.
Transformational leadership: Leaders depicting transformational leadership lead by showing concern to personal development of followers, such that they are committed to ensuring that they can discover their potential by acting as their role models. Through providing them with the required knowledge and resources, transformational leaders develop their followers into leaders and moral leaders through inspirational motivation, intellectual stimulation, idealised influence and individualise consideration (Hughes, 2014).
In ECE, this plays a role in enhancing motivation and thus high performance of teachers; consequently contributing to changes in school education. Transformational leadership is such that both the leaders and followers learn from each other and is therefore not about power holding.
Situational leadership: A commonly used leadership style is situational leadership, where leaders tend to apply different approaches in dealing with different issues. This according to Wieczorek-Ghisso (2014) is an approach which in the early years education context is based in levels of competency, such that continuous professional development is enabled. This is evidenced through the Blanchard model which provides four different leadership styles for four competence levels identified.
Blanchard’s quadrant, consists of four leadership styles namely directing, coaching, supporting and delegating. Each style is useful for different competency levels through which staff go through before they can be considered highly effective to work without much support.
Blanchard’s first competence level consists of staff portraying high commitment and low competence. These are members who are probably new in context and therefore lack the necessary skills to carry out required activities. This group may display high enthusiasm and willingness to learn but lack the skills to perform effectively. The suggested leadership style is the ‘directing’ approach, aimed at providing them with guidance to undertake activities through providing specific instructions and making follow up.
An employee who effectively succeeds in this quadrant such that they no longer require close supervision then moves to the second quadrant, representing low or some competence and low commitment. This group requires ‘coaching’ as the leadership approach. This requires leaders to explain the importance of task completion and monitoring of progress while providing encouragement and support.
When a staff is ready to move to the next quadrant, this means that they no longer need coaching but rather ‘supporting’. These are staff with high competence but with variable commitment. While they may have adequate experience, such teachers may lack confidence, motivation or initiative to undertake independent tasks. By supporting their daily activities, a leader can ensure that staff effectively accomplish tasks and that they develop high commitment.
This means that they are ready to graduate to the next quadrant, consisting of staff with high commitment and high competence. These are individuals who have mastered their roles and who are confident in their ability, experienced, knowledgeable and self-motivated, such that they do not require much supervision. In this situation, the leader employs ‘delegating’ approach, such that these individuals may be trusted with responsibilities without the need for monitoring or direction.
The model is considered effective because it aims at gradually developing staff capabilities to ensure that they can effectively respond to delegated tasks. It considers the different needs of staff and the required form of support needed to enhance competency and is thus considered an effective approach to leadership.
Leadership is an undertaking that requires individuals to demonstrate their ability to influence processes and other people for the attainment of set goals, such that leaders are expected to possess certain qualities that differentiate them from others (Ang, 2012). It is not any different in early childhood and pedagogical leadership, such that the following qualities of a leader ensure enhanced outcomes. Teachers with early childhood development degree give them the right skills to help every child learn. Practically speaking, teachers of early education of children must possess certain qualities that will enable them to motivate children along with finding joy every day (Aubrey, 2011).
When it comes to young children, leaders having the confidence of working with the children require enthusiasm and dedication to the work. Only this way, they could think of achieving the successful completion of their leadership duties. Teachers should have the enthusiasm to unlock each child’s door to learning. In addition, every child is different which makes the job even more challenging; thus requiring a patient nature along with good sense of humour to help the teacher to face this sloping path of ups and downs every day.
Every child has a different learning style and personality when he comes to school for early education. Each child would have his or her own style of doing anything. Due to this reason, teacher must always respect the differences and mange to teach in each child’s style rather than imposing on the child to adapt another style. Furthermore, each day teaching young children and at the same time educating them requires creativity.
Adapting to the style of learning that each child possess is flexibility. Regardless, the planning a teacher has done for each day, there should be flexibility to handle all the glitches that can throw off the day. A successful early childhood teacher would be the one who is always creative and flexible to make each day a positive one.
An effective pedagogical leader takes approaches that are unique and whose execution ensure that organisational goals and objectives are met. This skill requires critical thinking to ensure that ideas and strategies set the organisation apart from competitors through quality outcomes. Additionally, an inspirational leader motivates followers to perform by helping them discover their strengths.
He or she should be capable of influencing followers to perform by helping them discover their potential, providing them with the needed guidance and rewarding good performance (Murray & Clary, 2013).
Contemporary leadership literature indicates that active involvement of employees and other stakeholders in leadership decisions and undertakings can have an influential role on organisational outcomes (Grant, 2016). In early education, there is need to involve teachers, boards, students and the community in leadership, thus ensuring that the management can understand what the needs of others are.
When leadership considers the input of others, the likelihood of success is enhanced through diversity in ideas. In a world where leadership entails greater involvement of stakeholders in leadership and decision making, having a leader who is open and accommodating can have a considerable impact on the organisation. In early education, being open can encourage contribution from followers and thereby improve the outcome of schools.
Every leader’s mandate is to achieve the organisation’s goals and objectives and thus contribute to the overall performance of the organisation. In this relation, a leader must not lose focus on the main goals that the organisation seeks to achieve (Grant, 2016). This ensures that he or she can effectively lead others in achieving the goals, correct deviations, mentor and encourage others to achieve.
In doing so, the ability to influence others through endowing them with the power to perform is considered a major leadership quality. Leaders in early childhood should not only provide teachers with the necessary skills to perform tasks but they should also build their capacity to perform roles that are considered as being beyond their level, including independent decision making (David, 2012).
A leader should be concerned about the welfare of others, such that their decisions should be considerate about the feelings of others. This is essential in ensuring that followers feel appreciated, which promotes their productivity and willingness to contribute in organisational activities (Cheng, 2013). Being collegial involves recognising every individual as being important and avoiding self-exalting behaviour.
An effective leader sees themselves as part of the team and thus encourages others to work to work together towards achieving the organisation’s goals (David, 2011). This demonstrates the adoption of a give-and-take approach, such that the leader can learn from followers, just as followers learn from them.
Developing skills necessary to enhance the performance of early education institutions is imperative in enhancing pedagogical leadership. Waniganayake (2014) notes that while a majority of institutions have ECE graduates, most of these individuals are not equipped with the leadership strategies necessary to enhance performance. Waniganayake (2014) further notes that given the budding nature of ECE, the number of schools has grown significantly, leading to the demand for managers and principals.
This means that more ECE teachers find themselves in positions of leadership when they are fresh graduates with minimal knowledge and skills on leadership. In order for them to successfully execute the mandate given to them, such teachers require training to help them acquire the necessary leadership skills and qualities. This may be enhanced through different approaches as discussed below.
Group of individuals when come together to share passion and interest in collaborative learning is known as professional learning communities. Individuals participating in this learning communities build up knowledge through their interactions. There is a need of facilitator who helps them to start a dialogue of ideas that could enhance the connection to values and perspective. The professional learning communities is a powerful staff development strategies to help shift the focus from teaching to learning. (Coughlin & Baid, 2013)
Giving Time to absorb
Time is very precious and a necessity for any skill or development to be fully absorbed by both children and adults in the early learning environment. It is often practiced that learning communities make quick fixes and single training session to introduce change. However, to make changes sustainable, educators must be given time to share their complexities and practice growth in collaborative work.
Selection of Pedagogical Leaders for preschools
The building of strong leadership in the field, teacher’s education serves as an important role for building new resources and learning environment for the children. Student teachers should be selected on the merit of their experience that includes teamwork, engagement with kid and reviews from their pedagogical courses. These pedagogical leaders are also asked to provide a reflection of their leadership journey and opinions for life-changing experiences.
While the above discussion demonstrates approaches to developing pedagogical leadership skills, it is notable that there are various issues related to early years’ leadership that could affect such processes. These impact the outcome of pedagogical leadership and thus require to be addressed in order to address the challenges witnessed in early years leadership are discussed as discussed below.
Like in any other profession, the issue of age in leadership is prominent and the question of the age at which an individual can take up leadership is of concern. In ECE, a high number of young professionals are increasingly joining leadership, more so with the increase in the number of institutions and the consequent demand for managers and principals. Whether these individuals, some who are fresh from college have the required skills and capabilities is what makes it challenging for them to pursue their careers. This is more so where there the individual needs to manage older staff who may not appreciate their position as leaders.
A significant issue in early education is that individuals in leadership are not as adequately remunerated as their counterparts in other sectors. Given the significantly low pay among early childhood education professionals, taking up a position of leadership is not as motivating as it would be in other sectors where it would come with attractive perks. As a result, individuals are more likely to be adamant to take up leadership positions because the amount of work involved may not be adequately compensated.
Early childhood education for a considerable portion of its history mostly constituted of a female workforce. According to Siraj and Hallett (2014), early education workforce could comprise up to 98-99% women. This can be attributed to the fact that women were considered more caring and motherly to children, and as playing the nurturing role which they did best (Kelleher, 2011). Mistry and Sood (2013) also note that stereotyping of men who work in early childhood education as either paedophiles or homosexuals has led to slow growth in the number of men in the sector.
This feminisation has an impact on leadership in that men who have since joined early childhood education still find it difficult to settle into the female dominated career. As a result, leadership roles among men tend to be few in the sector. According to Mistry and Sood (2013), the gendered perception about men in the early education profession may lead to leadership prejudice because men still tend to be treated with suspicion when handling children. This could deny men an equal chance at being in leadership positions despite being qualified.
Leadership remains a challenging undertaking and some individuals tend to shy away from such responsibility. This means that despite their qualifications, they may be reluctant to lead. According to Mistry and Sood (2012), early years leaders tend to be reluctant on taking on the leadership of whole schools because they believe that it is not given adequate significance.
In addition, some leaders are reluctant to take on management roles because they feel that such responsibilities divert their attention from their preferred role as child developers and educators. Mistry and Sood (2012) add that reluctance could also be based on lack of confidence in their level of training on leadership such as adult management and budgeting among others. Reluctance may also be observed among males, mostly due to the desire to remain inconspicuous based on the feminisation issue discussed above.
A major issue is the existence of the hierarchical leadership mentality in some institutions. Some early childhood schools are still run using the traditional leadership approaches, such that it becomes difficult for an inclusive workplace to be maintained. This may impact leadership effectiveness and consequent leadership outcomes.
The effectiveness of pedagogical leadership in ECE can be measured against the learning outcomes of children, such that the key role played by school principals can be recognised based on the performance of their schools. However, leadership issues discussed above must be addressed in order to ensure that leadership is enhanced for better outcomes.
An important aspect to consider is the defeminisation of the profession. Currently, the profession still remains a female dominated field and encouraging men to participate would play a relevant role in enhancing leadership efficiency. To succeed in this, there is need to eliminate the stereotypes surrounding men as early childhood educators and instead advocate for male participation in ECE leadership.
Achieving high level motivation as far as leadership is concerned is a challenging task for this sector, given the low motivation to lead. To achieve this, authorities in ECE must recognise that leadership in ECE is just like leadership in other professions and that there is need to motivate leaders through improved pay and providing opportunities for skill development (Jor’dan, et al, 2013). Mentorship would work effectively in promoting performance of upcoming leaders and ensuring that they remain focused.
It is apparent that individuals in ECE are increasingly taking up leadership positions at a young age, which implies that their leadership skills may not be well developed. In this relation, leadership should be incorporated into graduate programs to ensure that leadership in an ingrained skill among ECE graduates. By preparing graduates for leadership as part of their learning objectives, it is easier for them to fit into leadership positions.
It is important to recognise that children are emotionally bonded to their parents. The workforce in early year education is most comprises of female. The Daycare Trust reports that 97.5% of the workforce for childcare comprises of females. This gender discrimination in child care needs to end. Men should be actively involved in this workforce. Other than this, research also tells that there is a strong need for collaborative leadership training for pedagogical leaders for better future of early childhood education (Siraj-Blatchford & Manni, 2007).
Bring the educators and parents together with the photos of children with observations of children behaviour when engaged in focused activity. Start the conversation by asking questions like: What appearance can be noticed from child’s face when focused in any activity? What interests him the most? How much child tries to give effort to area of his interest? How child’s point of view can be considered a factor of influence for the thinking of educator?
Importance of Home Learning
Other than preschool learning at early age, EPPE study has found out that children’s intellectual and social development is more influenced through Home Learning Environment (HLE) then by their parent’s education, occupation, and income. Due to this, the study also concludes that children’s learning by their parent’s support is far more important than who the parents are.
The study clearly suggests that the parents should opt for giving more time and affection to their children. Children need a healthy environment to get morally stronger. In this fast-moving world, people have generally less time for their children due to work load and professional responsibilities. That is why there is preschool where children are taught in a proper systematic way to nourish their skills and to provide them with the environment which they couldn’t get at home (Siraj-Blatchford & Manni, 2006).
Leadership in the context of early childhood education has recently been illuminated as an important aspect in determining the quality of outcomes among children. Evidently, effective leadership in ECE is directly related to the performance of early years institutions and the need to develop such skills is necessary. This paper discussed the concept of pedagogical leadership as it applies to early childhood education, with specific attention to the nature and facets of leadership, the application of leadership styles, qualities of good leadership and the challenges facing effective pedagogical leadership in ECE.
It can be established that pedagogical leadership in ECE has not effectively matured and that there are certain issues that still require to be addressed in order for institutions to function effectively. However, training and application of effective leadership styles could play an important role in enhancing leadership outcomes in ECE settings.
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Bank runs remain one of the major problems affecting banking development due to their impact on bank liquidity, which could lead to bankruptcy. Kaufman (1987) suggests that when a bank faces a credit decline and rumours of bankruptcy, people are afraid that banks cannot repay their deposits on time, such that a significant number of depositors withdraw cash at the same time in what is known as a bank run. This may lead a bank into a liquidity crisis, and eventually insolvency. According to the House of Commons Treasury Committee (2008) in 2007, the US subprime mortgage crisis led to the global financial crisis, and many financial markets around the world faced a decline in liquidity, a sharp reduction in interbank lending market, and a large volatility in money market interest rates. Many international financial institutions during the financial crisis went into bankruptcy, including Northern Rock Bank in the United Kingdom, which has more than 150 years of history (Shin, 2008). On the 14th of September 2007, Northern Rock faced liquidity shortages and rumors of the acquisition, which caused a large number of depositors to withdraw their cash and ultimately led to Northern Rock nationalization to prevent the bank run (Shin, 2008). A run on Northern Rock Bank became the iconic event of the US subprime mortgage crisis affecting the European financial industry.
Although in the current financial environment China’s banking system is relatively stable, because of the large share of government ownership, bank runs have also occurred. In June 1998, due to a run on the Hainan Development Bank, it was unable to repay its debts, the bank declared bankruptcy. Later on 23rd April 2014, there was a run on Jiangsu Sheyang local commercial bank, the local governments had to take urgent action to calm depositors’ panic on April 23, 2014 (Simon, 2014, ft.com). This incident also spread to the other local commercial banks. To prevent bank runs on March 31, 2015, China officially announced the “deposit insurance regulations.” The program, which officially took effect on May 1st, 2015, applies to all commercial banks, rural credit cooperatives and rural cooperative banks and other deposit taking institutions; except branches of Chinese banks overseas and foreign bank branches (Desai, 2016). The Bank of China is responsible for the implementation of the deposit insurance system (eDaily, 2015). However, China deposit insurance system is still in the preliminary stage and needs further development.
The characteristics of China’s financial institutions are similar to the Northern Rock Bank before the incident. In China, there is a rapid growth of real estate market, and therefore bank mortgage lending is growing very fast (Nanto, 2009). If the bank runs crisis occurs, a liquidity crisis could occur if there is no timely rescue from the Central Bank and the government.
Based on the case of the Northern Rock Bank run and the recent financial crisis resulting in the lack of liquidity, many countries (such as the UK, the US and China) implemented the deposit insurance system to avoid bank runs, which has important practical significance on the development of banking and the financial system stability in China.
This study focuses on analysing the overall deposit level of the banking sector in China and attempts to establish the impact of the deposit insurance system on commercial banks’ stability. The research will analyse the possible caused of a bank run in China, determine changes in risk-taking behaviour among banks and provide recommendations on the effective use of deposit insurance system to prevent bank runs.
On March 31, 2015, China officially announced the deposit insurance regulation, 20 years after the Chinese authorities first undertook the discussions (Desai, 2016). This was considered an imperative step towards stabilizing banks by making them more resilient to financial crises and preventing related occurrences such as bank runs and insolvency. The deposit insurance regulation would cover all deposit-taking institutions, from commercial banks to rural cooperative banks (Desai, 2016). It has been slightly over two years since the introduction of the deposit insurance requirement among banks in China, and the need to evaluate the impact of the regulation on banks’ performance is of the essence. Different perspectives have been put forward regarding the possibility of bank runs and how the use of deposit insurance could affect bank performance. Having delayed the adoption of DIS as other major economies adopted it following the 2007-08 economic crisis, China is finally in a position to deal with bank failures (Zhou, 2016). In this regard, the deposit insurance system is expected to have significant implications for China. These implications have not yet been studied since the introduction of deposit insurance regulations. Existing researches have only sought to determine the implications of deposit insurance but have not sought to compare bank performance in China following the regulation of deposit insurance. Therefore, there is need to examine the relationship between the deposit insurance system and the performance of banks in China, including their risk-taking behaviour following the introduction of deposit insurance. This research examines how deposit insurance has impacted the Chinese banking sector, by studying the implications of deposit insurance on the financial performance of banks and the occurrence of bank runs. It also studies the implications of deposit insurance on the risk-taking behaviour of banks in China with an objective of establishing whether deposit insurance has had an impact on China’s banking sector and the economy at large.
Deposit insurance became an important aspect of bank management following the financial crisis of 2007/2008. As a result, the deposit insurance system was introduced in order to avoid public panic and bank runs (Anginer, Demirguc-Kunt, & Zhu, 2014). Despite the perceived importance of deposit insurance, it is often argued that it could lead to moral hazard behaviour and contribute to risk-taking, thus fuelling another crisis altogether (Calomiris & Jaremski, 2016). Since its introduction, the issue of deposit insurance has been studied extensively. Mikajkova (2013) studied the role of deposit insurance in financial crisis establishing that it is instrumental in contributing to financial stability in countries. However, Chu (2011) examines banking stability in relation to banking insurance and argues that deposit insurance is not necessarily an optimal policy in eradicating bank runs. He suggests that this could be due to the moral hazard effect associated with deposit insurance and the fact that bank runs could be effective in creating elevated stability in the banking sector over time. Maysami & Sakellariou (2008) analyse deposit insurance and determine that despite the associated moral hazard, deposit insurance is highly effective in enhancing banking stability. Allen, Carletti, and Leonello (2011) and Ioannidou and Penas (2010) also study the impact of deposit insurance on risk-taking behaviours among banks, with an indication that deposit insurance automatically increases the risk-taking behaviour of banks. However, these studies and generally most of the literature largely focus on the developed economies, such as the US, the UK, and Europe. This can be due to the recent financial crisis and the resulting shortage of liquidity that led to a run on Northern Rock Bank. Literature in the developing countries is less common, and thus a significant gap in literature exists. Given that Deposit Insurance Scheme in China was introduced relatively recently, in March 2015, this makes this topic especially current and relevant to investigate. This study, therefore, will provide an important contribution to the literature by examining the deposit insurance scheme and reasons for bank runs in China over the most recent years from 2012 up until the first quarter of 2017. It will also contribute to literature through an assessment of the impact of deposit insurance on banks’ financial performance and risk-taking behaviour. These are important study aspects, and by conducting a research on major banks in China, it will be possible to relate the deposit insurance system with performance and risk-taking bahaviour, and compare the findings of this study with the previous literature on deposit insurance and its impact on the banking system.
This dissertation is divided into five chapters as follows:
The introductory chapter provides a background to the research, introducing the main objectives of the research and the rationale for the research. It establishes the gap that exists in research and the contribution of this study to the existing knowledge.
This chapter examines the findings of the previous literature to establish the existing knowledge regarding bank runs and the impact of deposit insurance on bank stability and risk-taking behaviour.
The methodology chapter informs the research design and approach used in obtaining data for the research. It provides information on the sources of data and discusses the data analysis method utilized to conduct the research
Results and analysis
This chapter consists of the findings of the research and thus provides the results of the study and answers to the research questions. This is achieved through analysis of the data collected and comparison with the findings from the previous studies.
The concluding chapter provides a summary of the dissertation, including the final findings from the research.
This chapter consists of a review of previous literature on the subject of bank runs. It includes research done on how bank runs occur, their implications and solutions that have been put forth to address the issue of bank runs. The chapter also includes a review of the literature on the use of deposit insurance as a means of curbing bank runs. The literature review chapter will not only provide background information about the subject of study, but it will also contribute to data analysis by providing a basis for comparison between the current research and previous researches.
Liquidity problems play a considerable role in driving financial crisis and is thus considered a one of the major causes of bank runs (Gertler & Kiyotaki, 2013). This explains why liquidity is an important factor in the banking sector and why liquidity mismatches could be detrimental to a bank’s survival (Gertler and Nobuhiro Kiyotaki, 2012). Liquidity and maturity transformation consists of the major business focus of banks, where longer-term assets (loans) are funded with short-term liabilities (deposits) (Gertler and Nobuhiro Kiyotaki, 2012). Maturity transformation, which is considered a primary cause of liquidity problems among banks, refers to the practice at which banks borrow money on shorter time frames than they give when lending out (Freixas, & Rochet, 2008). Banks may borrow on a short-term basis through short-term deposit certificates and demand deposits and lend on long-term such as through mortgages and other loans. This way, they transform short-term maturity debts into long-term maturity credits, thus gaining profit from the difference in interest rates. While this is profitable for banks, maturity transformation also poses considerable risks, such as the rise of short-term funding costs at a faster rate than the bank can recoup its gains from lending (Freixas, & Rochet, 2008). When there is an imbalance between asset maturity such as loans and liabilities maturity on a bank’s balance sheet, this may lead to liquidity issues, thus contributing to a bank’s financial stability in the event of a financial crisis (Gertler and Nobuhiro Kiyotaki, 2012). Choi and Zhou (2014) discuss liquidity mismatch as a result of liquidity transformation and explain that this was a major cause of the 2008 financial crisis. Liquidity mismatch could lead to reduced liquidity among banks and eventually low liquidity in the market (Brunnermeier & Pedersen, 2008). This explains why liquidity regulation has become an important measure in maintaining bank stability. Under Basel III for example, banks are required to maintain Tier 1 Capital of not less than 6% of risk weighted assets and Common Equity Tier 1 Capital of not less than 4.5% of risk weighted assets at any given time in order to enhance liquidity (Bank for International Settlements, 2010). While there is a consensus that liquidity is a major cause of concern which requires regulation, there seems to be no unanimity on how liquidity should be measured when establishing regulations (Bai, 2014).
Liquidity risk, therefore, becomes a widely studied aspect in the study of bank runs. Farag (2013) defines liquidity risk as the inability of a bank to meet its short-term financial obligations. This is most evident when the bank cannot effectively meet its obligations without having to convert its assets or without sacrificing its income or capital to pay debts. (Farag, 2013) As banks aim at leveraging the maturity mismatch between assets and liabilities, liquidity risk is inevitable when the bank is unable to pay its obligations. Liquidity risk may emerge as a result of excessive lending, such that in the event of default payments, the bank may not effectively manage its finances. When bank runs occur, liquidity risk is imminent because the withdrawal of deposits means that banks do not have adequate time to recover profits from loans in time to pay depositors, thus leading to bankruptcy.
A bank run is one of the traditional problems of commercial banks. Based on the harm of bank runs on deposits, banks and financial stability, scholars from various countries have put forward the measures, such as maintaining a reliable capital base, seeking alternative sources of liquidity, improvement of the information disclosure system, and the establishment of the risk early warning mechanism to prevent the run crisis and deposit insurance systems to prevent and deal with liquidity problems.
Diamond and Dybvig (1983) suggest that a bank run is a spontaneous and random phenomenon, bank runs can happen due to the inherent characteristics of banks, such as high asset-to-liability ratio, liquidity and maturity mismatches and following service principles. Diamond-Dybvig model was built based on the various bank runs affecting the world in the 1980s. Allen and Gale (1998) use the hypothesis of preference and technology in the D-D model to link the uncertainty of the return of bank assets with the industrial cycle. They believe that the industry cycle is the cause of bank panic. Chari and Jagannathan (1988) postulate that the bank run began due to depositors’ fears of bank insolvency. Jacklin and Bhattacharya (1988) suggest that due to the asymmetric information theory the bank cannot observe the real liquidity needs of depositors, and depositors do not know the quality of the bank’s assets, so the withdrawal of depositors depends on the choice of the bank’s return on risk assets.
Schumacher (2000) pointed out that Argentina’s bank run in 1994 was caused by deterioration in the fundamentals of the economy, and many banks in the economic crisis were more prone to bank runs. Ennis (2003) discusses a standard banking model that often appears in a variety of economic literature. Ennis (2003) assumes that the investment returns are stochastic. On this basis, he establishes a bank run model that is similar to the D-D model. Goldstein and Pauzner (2005) believe that asymmetry of information under the macroeconomic deterioration led to bank runs.
Macey (2006) points out those banks are susceptible to a run due to the bank’s inherent characteristics. He believes that banks tend to be unstable because depositors tend to rush to withdraw money under the “first come, first served” rule. If a big number of depositors require a large amount of cash urgently, they might attempt to withdraw their cash all at the same time, which can lead to a bank run.
A bank run can be a random or unpredictable characteristic, and therefore, it is necessary to establish a prevention mechanism in financial supervision. There are various measures to prevent bank runs, which include: the incorporation of the protection of the deposit insurance system, improvement of the information disclosure system, and the establishment of the risk early warning mechanism to prevent the run crisis.
The establishment of the deposit insurance system is an important part of the financial safety net (Pidm, 2017). Bryant (1980) argues that the deposit insurance system in the entire financial system has an irreplaceable role and that financial stability is pegged on effective deposit insurance mechanisms. Diamond and Dybvig (1983) using the D-D model of bank runs indicates that deposit insurance system provided by the government can prevent bank runs. Deposit insurance system establishes a firewall to protect the economy from the financial crisis by enhancing depositors’ security. This can also allow for an effective supervision of the financial institutions and protect the national economy from the financial crisis. Laeven (2004) indicates that the deposit insurance system not only protects the interests of depositors but also preserves the forces that can cause significant market volatility. However, a study by Anginer, Demirguc-Kunt, Zhu (2014) also finds that while deposit insurance can promote stability in financially turbulent times, it can also lead to the increased risk-taking behaviour of banks in normal times, known as the ‘moral hazard effect’ of deposit insurance. Their sample covers the publicly listed banks in 96 countries and the period that includes the recent financial crisis from 2004 to 2009.
Another measure to prevent a bank run is the establishment of a sound information disclosure system and early warning mechanism. Park (1991) pointed out that the lack of information is the main factor that can lead to a run on the bank. Therefore, to prevent the bank run, information is crucial for depositors to fully understand the condition of the banks, which can reduce the probability of bank runs. Yorulmazer (2003) pointed out that high-interest rate of the central banks may exacerbate banks liquidity problems, and therefore, the central bank should provide interest-free loans to bailout the banks in times of financial difficulties.
The deposit insurance system was first introduced in the United States in 1933, and the Federal Reserve Insurance Corporation (FDIC) was created by the United States under the Glass-Steagall Act of 1933 to provide deposit insurance for banks and non-bank financial institutions. After nearly 80 years of operation, FDIC effectively catered for deposit insurance maintaining the public confidence in the banking system. Since then, many countries, such as United Kingdom, Germany, Asia and China have established a deposit insurance system. However, while this system can enhance financial stability, it also has aspects to improve. The next sections discuss the advantages and disadvantages of a deposit insurance system.
Deposit insurance has been defined by Demirguc-Kunt, Kane & Laeven (2014)as the measures that are put in place by banks in many countries with the objective of protecting their depositors from any consequential losses that may arise from the bank’s inability to fulfill its financial obligations like paying the debt. This insurance is a component of financial system safety net that aims at promoting and enhancing financial stability (We, 2015).
Financial risks are a major concern for most banks, and therefore, these financial institutions are encouraged to invest most of the money in their deposit accounts as opposed to just safe-keeping the full amounts. Such investment risks include the failure of borrowers to repay, financial crisis, and over-reliance on customer deposits which can be withdrawn quickly in the event of possible insolvency (Mishkin, 2007). It is for these concerns that banks must develop and implement economic and monetary policies to increase the public confidence in the security of their finances. Deposit insurance institutions are principally run by the government in full or in partnership with the private sector. Many of these institutions are members of the International Association of Deposit Insurers (IADI). This is an umbrella organization that was established to ensure financial systems stability through contribution to and promotion of cooperation on the international level on matters relating to deposit insurer and related parties (Muhlnickel& Weib, 2015).
According to Anginer, Demirguc-Kunt & Zhu (2014), one implication that deposit insurance has on bank’s risk taking is the unintended consequence of a reduction in depositor incentive to monitor banks. This consequently leads to excessive risk taking and systemic fragility. This is usually the prevailing situation in the years that subsequently lead to global financial crisis. However, in the case of the global financial crisis, the countries, which had deposit insurance measure in place experienced, lower bank risk and more systemic stability than countries, which did not have such policies, implemented (Nanto, 2009). The overall effect of this insurance system on bank risk is negative, however, since the destabilization effect during the regular times is more magnified as opposed to the stabilization effect of economic turbulence (Anginer, Demirguc-Kunt & Zhu, 2014).
The net effect of deposit insurance on bank risk is dependent on whether its benefits to the bank, depositors and the economy at large, can outweigh its costs and negative impacts (Nanto, 2009). Positive impacts of these policies can be compounded by increased bank supervision by depositors and economic monitors. Proper and effective bank monitoring and evaluation can help to ensure and promote deposit insurance benefits during difficult economic periods and help mitigate its negative effects when normal economic periods are prevailing. By offering protection to the interests of the majority inexperienced depositors and correspondingly helping in the prevention of bank runs, deposit insurance policies can lead to enhanced social welfare and therefore reduced financial and bank risks. According to economic studies carried out, adopting deposit insurance is directly linked to decreased bank risk in the European Union (Gros & Schoenmaker, 2014). The positive impact of the insurance policy however can be overshadowed by the fact that banks can undertake excessive risks because they rely on the financial security it provides.
The uniqueness of debt management in the banking sector determines the inherent vulnerability of the banking system. In the game model of Diamond and Dybvig (1983), depositors have potential liquidity demands for bank deposits due to different risks. Also, bank runs are only made by an external factor or the result of irrelevant factors. In this respect, the government should be through the final lender mechanism for the timely shortage of liquidity in the bank to provide loans and should be through the establishment of deposit insurance system to prevent the information asymmetry caused by a bank run.
Chari and Jagannathan (1988) argue that bank runs are not entirely random events, but that the depositors are based on the rationality of negative information on bank solvency. When the depositors saw people standing in front of the bank waiting for a long team to withdraw money, they found that the bank had operational difficulties. In response to this phenomenon, strengthening the regulation of non-liquidity demand depositors, strengthening the confidence to continue to hold deposits, can effectively prevent a bank run. In 1992 Argentina abolished the deposit insurance system, but soon after that when Mexican financial crisis broke out in Argentina in 1995 they had to re-introduce the deposit insurance system (Miller, 1996). This example effectively demonstrates the importance of deposit insurance in maintaining economic stability through enhancing the performance of banks.
Cull et al. (2002), through empirical analysis of the data provided by the World Bank in more than a dozen countries, found that deposit insurance reduced the systemic risk of banks, and the explicit deposit insurance was superior to implicit deposit insurance in protecting a country’s financial Stability more effectively. When a financial institution is in crisis, the state can provide emergency relief. As Barth (1990) found, the Federal Deposit Insurance Corporation, with sufficient authority, was able to correct in the early years of a bad situation in a financial institution and could keep its troubled bank before it could endanger its national banking liquidity shut down.
Although the deposit insurance can help to improve the bank’s anti-risk ability, it also has disadvantages. The most important drawback of deposit insurance is that it can lead to moral hazard: the existence of deposit insurance makes bankers more inclined to pursue high-risk, high-yield, but do not have to bear the additional costs, but these costs passed on to the deposit insurance institutions, thus leading to the moral hazard (Zhou, 2016). This is particularly common where implicit insurance is provided by the government, such that the banks take advantage of the fact that any losses would be covered by insurance and not them, thus engaging in risky undertakings without caution (Kauko, 2014). Such moral hazard makes deposit insurance disadvantageous, and it could be potentially harmful to the economy if not well monitored (Kim, Kim & Han, 2014).
Financial institutions that pursue high-risk investments tend to pay higher interest rates to attract money. In the case of Iceland, which had a financial crisis in 2008, the Icelandic Savings Bank provided a dividend of up to 5.25 per cent for depositors, but the Dutch Cooperative Bank for the same period provided only a 3.4 per cent interest rate (Faure and Hu, 2013). This shows that deposit insurance by banks provides increased investor confidence because they are assured that insurance will cushion the financial risk. Accordingly, this encourages banks to pursue high- risk activities, which has a negative impact on the solvency of banks.
The second drawback of the deposit insurance system is that when its coverage is too broad, it will have a negative impact on the financial environment of a country (Calomiris & Jaremski, 2016). In times of financial crisis, deposit insurance is considered important in restoring depositor confidence, thus safeguarding liquidity and preventing bank runs (Zang, Cai, Dickinson & Kutan, 2015). However, when banks take advantage of this provision to increase their risk-taking behaviour, this could potentially lead to a crisis (OECD, 2017). Keeley (1990), found that deposit insurance, while increasing banking competition, also led to a decline in the concession value which led to an increase in bank defaults. Increasing and the decreasing capital adequacy ratio of deposit insurance arising from risky assets further increased the risk of bank management.
A third disadvantage is the deposit insurance system is the reduced likelihood of depositors being in a position to assess financial institutions at risk. Kaufman (1996) argues that due to the information hindrance deposit insurance places on depositors, banks should be subject to a system of regulated deposit insurance, which is not insured by a deposit above the quota and thus encourages large depositors to exercise effective supervision of financial institutions. This way, depositors can monitor banks and make decisions that ensure that their deposits are safe.
However, White (1996) argues that deposit insurance is not suitable for developing countries and countries with economies in transition because deposit insurance will bring negative incentives to depositors. When banks adopt deposit insurance, this creates an illusion of bank stability and depositors may be perceive a bank as being safer for their deposits as opposed to a bank with no insurance (White, 1996).
Vletter van Dort (2009), a corporate law expert, argues that the deposit insurance system provides financial consumers with a false signal that financial products are mistaken for money when they buy deposits as financial products. It can be seen that the idea of questioning the deposit insurance system has always existed, but it has rarely been put forward, but it is hoped that the defects and problems in the system will be found and perfected to promote the stable development of the banking industry.
In the practice of global banking regulation, the Basel Committee concluded that the financial safety net includes three major tools: administrative prudential regulation, the central bank lender of last resort, and the deposit insurance system (IADI, 2012). As one of the “three magic sins” of the financial safety net, the deposit insurance system played an important role in maintaining financial stability and protecting the interests of depositors (Schumacher, 2000). The deposit insurance system became more and more popular in the world, with only 20 countries established in 1980 and rapidly increasing to 87 countries by the year 2003 (Demirgüc-Kunt et al., 2008). According to the International Deposit Insurance Association (IADI), 113 countries and territories have established the deposit insurance scheme by the end of January 2014, and 41 countries (including China) were preparing to establish deposit insurance system. China implemented its deposit insurance regulations on March 31, 2015, and on May 1, the program took effect.
Before the deposit insurance system, China used the implicit deposit insurance system, where the Central Bank and the People’s Bank of China would implement the mandate of ‘lender of last resort,’ thus paying out consumer funds and debts for the failing institutions. This method while playing a role in maintaining financial stability was not reliable because depositors would not be certain as to how, when and whether they would be reimbursed, such that any rumour on bank failure would automatically lead to a bank run and thereby accelerated insolvency among affected banks (Zhou, 2016). Furthermore, this system only catered for big banks, and therefore smaller banks were at a disadvantage. With the explicit deposit insurance system, all banks have an opportunity to be competitive because they are also protected under the deposit insurance system (Wei, 2016).
There are many similarities with the Chinese deposit insurance and that of other countries regarding objective and design. However, the country’s specifics differ. Regarding membership, the program in China applies to all deposit issuing financial institutions, which include commercial banks, rural credit cooperatives, and cooperative banks. However, an exception exists which are foreign banks and Chinese banks overseas. This is in contrast to other countries like Korea and the Philippines, which extend the coverage of deposit insurance to foreign banks, and domestic countries with foreign branches (Demirguc-Kunt, Kane, & Laeven, 2015)
Another contrast between China and other countries exists in the covered deposits. In China, deposits denominated in RMB and foreign currencies are insured. Inter-bank deposits by financial institutions and deposits by senior managers in their institutions are exempted (Desai, 2016). It is not yet clear if structured deposits are insured in the country. All deposit insurance authorities in Asia except Singapore, Japan Thailand, and Vietnam cover foreign currency deposits. The coverage level for Chinese depositors is limited to a maximum of US$ 76,000 pay-out amount. This coverage level differs considerably among different countries. The payout amount ranges from US$ 1,472 in India to US$ 146,789 in Indonesia as a result of historical and circumstantial differences. Contrast also exists in the mode of governance in that the China’s Financial Stability Bureau of the People’s Bank of China is tasked with managing the deposit insurance. Hong Kong and Singapore have privately administered deposit insurance authorities. China is different from other countries in Asia since its deposit insurance systems are independent of the country’s Central bank. Other contrasting differences exist in the mandate and insurance premium of different countries.
Even though there are differences in the adoption of the deposit insurance scheme between the countries, China as one the late adopters of the scheme might face similar problems as other countries in the way that banks might take on excessive risk which can potentially harm their financial stability. It therefore makes China an important case to investigate whether banks risk and other financial characteristics differ before and after the implementation of the deposit insurance scheme. This study aims to examine the differences in bank performance and risk-taking behaviour before and after deposit insurance system.
Deposit insurance has been considered an effective measure in enhancing bank performance, and this can be explained by their ability to cushion banks from negative effects of low liquidity that accompany financial downturns (Yang, Chun & Xie, 2016). Deposit insurance helps banks to effectively engage in their activities without worrying about possible losses, thus making them more productive. However, deposit insurance is not always associated with positive outcomes, and it has been known to increase the risk-taking behaviour among banks, thus increasing their financial risk in the event of a financial crisis. According to Schich (2008), the Deposit Insurance System (DIS) is a financial safety net that will play an important role in protecting China’s financial infrastructure through preventing bank runs and enhancing depositor confidence. Deposit insurance also leads to moral hazard, which according to Zhou (2016) is catalysed by the fact that insurance gives banks liberty to chase higher risk investments in a bid to gain higher yields, knowing that insurance will cover them in case of failure. This chapter provides valuable literature review that will be useful in guiding the research.
Appropriate methodology can ensure that greater accuracy and reliability of results is achieved. This research utilizes quantitative research to conclude the impact of deposit insurance on bank performance, based on comprehensive analysis of data. To collect data for the research, financial information from the selected banks is utilized, which is then analysed using a paired-samples t-test to determine possible changes in financial performance following the introduction of deposit insurance. This chapter justifies the approach adopted by the researcher and thus discusses the methodological approach, the research sample, data collection, variable definitions and data analysis method.
There are two broad approaches to research, which include qualitative and quantitative analysis (Saunders, Lewis, and Thornhill, 2012). Qualitative research aims at understanding phenomena through explorative studies that seek to understand experiences, behaviour, opinions, attitudes, and beliefs of the targeted population (Saunders, Lewis, and Thornhill, 2012). This data is then used to interpret various meanings and understand issues associated with the target population. Therefore, the qualitative research investigates social meanings, processes, interpretations, relations, and symbols. Data collection methods in qualitative research are unstructured, and questions are mostly open-ended (Yin, 2012). Responses are thus varied and vast due to different views and opinions. Quantitative data, on the contrary, involves the use of statistics in understanding the subject under study, where data collected is analysed through the use of statistical tests to make conclusions about the study (Yin, 2012). In quantitative research, research is utilized in testing a theory, which can then be supported or rejected (Quimby, 2012). Data collection in quantitative research is more structured, and there is the tendency of utilizing closed-ended questions, thus generating patterned responses (Yin, 2013). Alternatively, secondary data may be collected through secondary sources such as books, journal articles, periodicals, reports, government publications and organizational records among others. In this study, data is collected from the banks’ financial reports. This study is based on the quantitative research methodology to examine the financial characteristics of banks before and after the introduction of the deposit insurance scheme in China. Quantitative research design is selected because of its ability to provide precise findings through statistical analysis, which will ensure that effective comparison can be conducted for the two periods (Yin, 2013).
There are two main reasoning in research: deduction and induction (Saunders, Lewis, and Thornhill, 2012). While the deductive technique moves from general to more specific hypotheses that can be tested, inductively begins with specific observations that lead to broader theories and generalizations. This study uses a deductive approach, whereby a theory is used to develop a hypothesis, and secondary data is used to test this hypothesis; ultimately confirming the original theory.
To obtain results from the research that can be generalized to other banks in the population, the sample for this study consists of the ten largest banks in China. The sample consists of the largest banks that are systematically important in China’s economy. These were selected based on their size, and the fact that the failure of these banks can estabilise the whole financial system in the country. It is therefore important to include these banks in the sample. The banks in the sample include three systemically important banks (SIBs) namely: Industrial and Commercial Bank of China, Agricultural Bank of China and Bank of China. Other banks include China Construction Bank, Bank of Communications, Shanghai Pudong Development Bank, China Minsheng Banking, China CITIC Bank, China Everbright Bank and China Merchants Bank.
The data for this study is collected from the financial reports of the banks included in the sample. This data consists of financial characteristics from the year 2012 to the first quarter of 2017. These years include the recent introduction of the deposit insurance system in March 2015 (Desai, 2016). To examine whether there is a difference in financial characteristics of banks before and after the introduction of Deposit Insurance, the study period is divided into two sub-periods: Before: 2012-2014 and After: 2015-2017. All data is collected for the year end, while data for 2017 includes data for the first quarter of 2017.
In examining the impact of deposit insurance on bank stability, there are a number of variables that demonstrate a bank’s financial characteristics including liquidity, asset quality, capital and profitability. Among these, capital and liquidity are considered among the most important characteristics due to their centrality to bank stability and solvency (Farag, 2013). According to Farag, banks are in a better position to sustain losses and prevent insolvency when they maintain a higher capital and a favourable liquidity position.
To effectively measure the financial position of banks, various variables are examined as follows.
In this research, liquidity ratio is represented by the loan-to-deposit ratio, which is considered a highly relevant measure of bank liquidity.
Loan/deposit ratio – This is a liquidity ratio that denotes the percentage of loans in a bank against total deposits. As a measure of the funding profile of banks, a high ratio of loans to deposits could be an indication of a risky funding profile (Farag, 2013). As the loan-deposit ratio increases, a bank’s risk of insolvency is increased due to its worsened liquidity position. The percentage of loans to deposits is calculated by dividing the number of loans with the total deposits held over the year as follows:
LDR = Total loans x 100
Asset Quality Ratio
The quality of bank loans to a great extent influence bank risk and the type of loans given by a bank are therefore an important bank stability indicator. In the process of lending, the risk of default is always eminent and this explains why the quality of bank loans is of great significance. While banks may charge a higher interest for loans that are riskier, it is also notable that borrower riskiness may change over time and this makes it difficult to predict the performance of loans (Farag, 2013). One way to measure loan quality is the ratio of nonperforming loans held by a bank, which is also an indicator of a bank’s risk-taking profile.
Nonperforming loan (NPL) – This refers to a loan that is either in default or almost by default. Non-performing loans may comprise of loans whose principal repayment is overdue beyond three months, loans whose instalments payments are overdue beyond six months, loans where the debtor has been prosecuted as a result of non-payment or loans whose interest repayment has been overdue beyond six months (cbc.gov). A high number of nonperforming loans could indicate poor performance and could potentially lead to bankruptcy (Sophastienphong & Kulathunga, 2010). However, it is notable that this figure may represent loans given before the deposit insurance was introduced, hence an indication of prior risk-taking behaviour. To calculate the ratio of non-performing loans, the amount of non-performing loans is expressed as a fraction of the total loans as follows:
NPL ratio = Non-performing loans
Capital plays a significant role in any bank by acting as a financial cushion against unexpected losses (Farag, 2013). The higher the capital a bank maintains, the more it can effectively absorb any losses the bank incurs. This means that capital has a direct influence on the bank’s stability or insolvency (Farag, 2013). It is however notable that by holding a large proportion of capital, banks may restrict their lending capability and thus reduce profitability (Kosmidou, 2008). In this research, capital is given significant consideration as a measure of bank performance and three measures of capital are incorporated as follows.
Tier 1 Capital (T1 Cap) – This measures the financial strength of banks and is considered a core measure of financial power. Tier 1 capital may consist of common stock, retained earnings and nonredeemable preferred stock among other core capital (Barth, Chen & Wihlborg, 2012). According To Basel III, Tier 1 Capital must not be less than 6% of risk weighted assets at any given time. Tier 1 Capital is calculated by adding Common Equity Tier 1 to additional Tier I (Bank for International Settlements, 2010). Additional Tier 1 capital may comprise of bank-issued instruments, stock surplus, instruments issued by consolidated subsidiaries of the bank and other regulatory adjustments (Bank of International Settlements, 2010). The formula for Tier 1 capital is given as follows:
T1 Cap = Common Equity Tier 1 + Additional capital.
Common Equity Tier 1 is defined below.
Common Equity Tier 1 (CET1) – This refers to the common stock that a bank holds. Introduced in 2014, the capital measure is a precautionary measure for protecting the economy by requiring banks to meet a specific CET1 ratio. (EBA, 2015). This is considered the highest quality capital and the ratio is similar to leverage ratio (Bank of England, 2014). According To Basel III, Tier 1 Capital must not be less than 4.5% of risk weighted assets at any given time (Bank for International Settlements, 2010). Common Equity Tier 1 is calculated as follows:
CET1 = common shares + stock surplus + retained earnings + other comprehensive
income and disclosed reserves + common shares issued by the bank’s consolidated subsidiaries + any regulatory adjustment in CET1 calculation.
Capital Adequacy Ratio (CAR) – This ratio is a measure of capital in a bank and is conveyed as a risk weighted credit exposure percentage (Sophastienphong & Kulathunga, 2010). To calculate the capital adequacy ratio, the formula is given as follows:
Capital adequacy ratio = Tier 1 Capital + Tier 2 Capital
The Risk-weighted exposures refer to the weighted total of a bank’s credit exposures, such that high risk-weight exposure could be detrimental to the capital adequacy ratio, thus influencing the bank’s financial position (Bank for International Settlements, 2010).
The CAR seeks to ensure financial systems’ stability and efficiency and thus protect depositors. It measures tier 1 and tier 2 capital provided under Basel III to establish the degree to which the bank can withstand economic turmoil.
Profitability remains an important indicator of bank performance. According to the risk-return trade-off hypothesis, higher risk may be linked to higher profitability (Kosmidou, 2008). Accordingly, this variable is considered highly significant in this study. Among the most commonly used profitability measures is return on equity which is discussed below.
Return on Equity (ROE) – This is considered an important profitability ratio and is used in measuring the proportion of income returned as equity for shareholders (Barth, Chen & Wihlborg, 2012). This ratio indicates how effectively a corporation can generate profit from what shareholders have invested. The formula for ROE is give as follows:
Return on Equity (ROE) = Net Income
Average total equity
The higher the ROE, the more effective a company is said to be in terms of using equity financing for net income generation (Barth, Chen & Wihlborg, 2012). An ROE of 1 for example would mean that one dollar is generated in net income for every dollar invested by stockholders. Based on the risk-return trade-off hypothesis, banks would gain higher profitability through increased risk. On the contrary, an increase in non-performing loans could affect income and thus reduce profitability (Kosmidou, 2008). In this respect, the relationship between risk taking behaviour and profitability may not always be straightforward.
The bank financial characteristics described above are used in examining whether there is a difference in bank risk profile before and after the introduction of deposit insurance scheme in China in March, 2015.
Data for this research is analysed using SPSS using Paired (Dependent) Samples T test. The dependent samples t-test is used in the comparison of means (e.g. financial characteristics) between two groups that are related (such as same entities at different time points) (Laerd Statistics 2017). In this research, the aim is to determine the influence of deposit insurance on bank stability in China. Accordingly, the samples are split into two sub-samples in a bid to compare bank performance between two economic periods, before and after the introduction of the deposit insurance scheme. The t-test is used in analysing the data between 2012 and 2014, and comparing it to data between 2015 and 2017; given that March 2015 is when the deposit insurance system was put in place.
This chapter describes the research methodology adopted for the research. A quantitative approach is adopted in conducting the research, where financial data from banks is used in the analysis. The 10 largest banks in China are selected for the collection of data. Information from their financial records including loan-to-deposit ratio, nonperforming loan ratios, Tier 1 Capital, Capital Adequacy Ratio, Return on Equity. To compare the periods before and after the deposit insurance, the dependent samples t-test is utilised. The research methodology attempts to ensure that accuracy of research is achieved and that the conclusions are reliable. In the next chapter, the results and data analysis are presented.
In this chapter, the results of the research and data analysis are presented. The analysis aimed to determine the impact of deposits insurance on banks’ performance and risk-taking behaviour, as indicated in the initial objectives of the research. The analysis first shows the descriptive statistics of the two related samples (bank characteristics before and after the DIS introduction). The following step is to conduct a paired samples t-test that attempts to compare the financial data of banks (liquidity, asset quality, capital and profit) before and after the deposits insurance was introduced.
Data from the 10 banks indicate a change in bank financial performance before and after the introduction of deposit insurance system in China. The results are illustrated through the various financial ratios as follows.
Loan-to deposit ratio
The loan-to-deposit ratio among all the banks increased considerably from the year 2012 to 2017. This means that there was an upward trend both before and after the deposit insurance system. While the average loan to deposits in the year 2012 for all banks was at 70%, this increased to 78.46% in 2016 before dropping slightly to 78.4% in 2017. A time series showing the changes on liquidity before and after the introduction of deposit insurance in China is shown below.
Overall, there was an increase in the number of non-performing loans, both before and after the introduction of deposit insurance system. It is however notable that the increase in non-performing loans was higher before the deposit insurance system, having increased by 47% between 2012 and 2014. On the contrary, the increase following the deposit insurance system between 2015 and 2017 was 3.09%. ABC had the highest value of non-performing loans in 2017, the last year of evaluation at 2.33% while BOC had the lowest value at 1.45%. The changes on non-performing loans before and after deposit insurance is illustrated below.
Capital is considered an important aspect in assessing bank performance. As illustrated in the graph below, Tier 1 Capital increased both before and after the deposit insurance system. The Tier 1 Capital increased by 5.6% while it increased by 1.53% after 2015 when the deposit insurance system was introduced. In calculating the Tier 1 Capital before the deposit insurance system, the comparison was done between 2013 and 2014 because data for Tier 1 Capital in 2012 was only available for one bank. Common Equity Tier 1, a significant measure of capital for banks increased gradually in the entire period of study. Before introduction of the deposit insurance CET1 increased by 12.02%. On the other hand, the capital measure in increased by 0.43%. Notably, the CET1 declined in 2016 from 6.96% in 2015 to 6.78%, before increasing again to 6.99%. The third capital ratio, Capital Adequacy Ratio showed an oscillating trend, with figures dropping in 2013 and 2016 while increasing in the other years. The percentage increase recorded in 2014 from 2012 was 1.03% while the increase recorded in 2017 from 2015 when the deposit insurance system was introduced was 1.39%.
Profit ratio was represented by return on equity (ROE), with the results indicating that the ratio fell following the introduction of the deposit insurance system. While the ROE was 21.82% in 2012, this fell considerably to 16.22% in 2017. The ROE fell by 14.52% between 2012 and 2014. Following the introduction of the deposit insurance system, in 2015, there was a 10% decrease in ROE in 2016 before the value returned to the 2015 figure.
The net profit for all the banks included in the research improved between 2015 and 2016, except for BOC whose profit dropped in 2016. The increase in profitability is an indication of better performance. In the graph shown below, the net profitability trend for each bank is shown, including the profit figures for each year.
Minimum and maximum statistics
The tables below represent the minimum and maximum statistics for the difference in the two samples including skewness and kurtosis. The paired sample t-test relies on the means determine the difference in the two time periods.
Table 1: Minimum and maximum statistics _before and after
Table 2: Minimum and maximum statistics differences
4.3 Impact of deposit insurance on China banks’ risk-taking behaviour
The results from the paired samples t-test show that Chinese banks have undergone changes from the introduction of deposit insurance as evidenced by the change in their risk-taking behaviour. Based on the data collected from the 10 banks, the variables change considerably over the years, and this can be interpreted as follows.
Loans to deposits ratio
Loan to deposits ratio is a measure of liquidity and the funding profile of banks, where the higher ratio indicates a riskier funding profile (Farag, 2013). The results show that the average figure increased significantly following the deposit insurance. While the average loan to deposits in the year 2012 was at 70%, this increased to 78.46% in 2016 before dropping slightly to 78.4% in 2017. The p value based on the paired t-test 0.00, a figure less than 0.05 and which shows a significant difference in the conditions before and after the deposit insurance. When the loans to deposits ratio are high, it is a manifestation of a risky funding profile (Farag, 2013). This insinuates that following the deposits insurance, the ratio of loans to deposits has increased, which indicates that banks’ risk propensity increased to a considerable level. According to Tan (2016), there is a lower risk of loss when insurance is present, and this reduces cautionary measures taken by banks such as limiting credit facilities and offering risky loans. This could be the case in China where the loans to deposits ratio have continued to increase following the introduction of deposit insurance. In a similar research, Calomitis & Jaremski (2016) established that in the presence of deposit insurance, firms were more risk-taking and used more of the deposits received to expand their lending. In this relation, the study associates such risk-taking behaviour with a possible increase in losses in the future.
Non-performing loans increased from 0.83% in 2012 to 1.7% in 2017. The p value resulting from the paired t-test to compare the period before and after the introduction of deposit insurance in China is valued at 0.001. This can be directly related to the introduction of deposit insurance, which leads to higher risk-taking behaviour among banks. In a research by Ioannidou and Penas (2008), it was established that in the presence of deposit insurance, banks were more likely to engage in riskier lending, initiating loans to more risky borrowers. This group of borrowers has a higher chance of failing to pay back their loans and as banks lend more without paying attention to repayment risks, the probability of having increased non-performing loans is higher. Accordingly, it can be established that banks in China had a higher risk-taking behaviour in the period following the deposit insurance regulations. This corresponds with the findings by Ioannidou and Penas (2008) who establish that deposit insurance increased the risk appetite among banks, demonstrated in this research by the high number of non-performing loans recorded by the banks under study. When banks are assured of a back-up to protect their liquidity in the event of an economic downturn, they tend to exercise lesser caution in their lending activities, which can explain the high number of non-performing loans witnessed among banks in China. To a significant extent, however, it may be difficult to determine, based on the data whether all losses from non-performing loans were from loans taken after the introduction of the deposit insurance system. It is however difficult to establish whether the non-performing loans recorded are the result of riskier lending behaviour among banks because it is possible that some loans may have been given before the introduction of deposit insurance.
Capital Adequacy Ratio
CAR rose slightly over the years, from an average of 11.73% in 2013 to 13.17% in 2017. This would generally indicate availability of more capital for banks to cover their losses such as those resulting from non-performing loans, hence more resilience to risks. This is contrary to the expectation that deposit insurance introduction would lower capital ratios since banks would adopt riskier behaviour (Kim, Kim & Han, 2014). However, this can also be explained by the fact that banks are now required to maintain a higher Tier 1 capital to improve economic resilience. In China, the ratio for top banks is currently set at 11.1% and is expected to increase to 11.5% by 2018 to meet the Basel III requirements (cbrs.gov). Results from the t-test indicated that there was a significant difference in capital adequacy ratio after the introduction of the deposit insurance system (p value = 0.000). Capital adequacy ratio determines how well a bank can survive economic downturns and it is therefore evident that Chinese banks are in a better position to maintain their operations in case of economic crisis. A rising trend is an indication of enhanced financial stability, and as noted by Hull (2015), the capital adequacy ratio can indicate a bank’s financial strength based on the fact that the bank can handle its obligations more effectively in the event of financial difficulties.
Tier 1 Capital and Common Equity Tier 1
On average, the Tier 1 Capital increased from 9.29% to 10.60% in 2017 while Common Equity Tier 1 increased from 5.99% to 6.99% during the same period. The paired t-test results indicated a significant difference in Tier 1 Capital and Common Equity Tier 1 before and after the introduction of deposit insurance system. While the p-value for T1 Cap was 0.007, CET 1 was valued at 0.000. Both of these values are less than 0.05 and therefore an indication of a significant difference between the variables before the introduction of insurance deposit and after. This insinuates that deposit insurance could have improved the performance of banks in China based on their capital structure following the regulation. The values of T1 Capital of CET 1 increased considerably following the deposit insurance introduction. The increase may be associated with China’s requirements, which aims at reaching a Tier 1 capital adequacy ratio of 9.5% and a Common Equity Tier 1 capital ratio of 8.5% by 2018 (cbrc.gov). This is in order to meet Basel III requirements and also increase the resilience of banks against financial crisis. An implication of this for commercial banks in China is that they are in a better position to cushion them from insolvency in the event of a bank run. Hull (2015) notes that the increased requirements of Tier 1 Capital and Common Equity Tier 1 was aimed at increasing banks’ resilience to ensure that they can effectively go through financial challenges. Tier 1 Capital measures the financial strength of banks and is considered a core measure of financial power. This includes capital from a common stock, retained earnings and nonredeemable preferred stock among other core capital that may be used in redeeming a bank during financial turmoil (Bank of International Settlements, 2010, 2010). Common Equity Tier 1, on the other hand, is also an indication of financial strength and does the bank hold a capital measure that represents the common stock. Such capital may shield a bank from unexpected losses and insolvency and is thus considered a major capital strength for any bank. This means that banks may successfully avoid a bank run by using the capital and common equity, thus maintaining its financial position. The increase in Tier 1 Capital and Common Equity Tier 1 capital among Chinese banks may explain the absence of bank runs following the deposit insurance system in China.
Return on Equity
Return on equity is seen to decrease following the deposits insurance, an indication that bank performance may be deteriorating. While the average ROE for all banks as at 2012 and 2013 was 21.82% and 20.64 respectively, this dropped gradually to 14.57% in 2016 before improving to 16.22% in 2017. It is however notable that the net profits for all the ten banks increased during this period as shown in Appendix 1. The result of this study show that nonperforming loans increased over this time period and thus could have an impact on bank profitability. Therefore, increase in nonperforming loans and the requirement to maintain a higher Tier 1 Capital and Common Equity Tier 1, could have influenced the drop in ROE. The risk-return trade-off hypothesis suggests that as banks take higher risk, they are likely to record an increase in profitability (Kosmidou, 2008). On the contrary, Kosmidou (2008) notes that if nonperforming loans increase as a result of the risk-taking, a negative effect on bank income and thus reduce profitability to a considerable extent. This may explain the decrease in ROE following the introduction of the deposit insurance system. In addition, profitability may not be immediate due to time lag, such that a reduction in ROE is observed when it would be expected to be rising.
A further analysis of the ratio change patterns is done using the paired sample t-test. The test compares the bank ratios before and after the introduction of deposits insurance. Results in table 3 indicate a p-value of less than 0.05 for all the six pairs tested as shown in the figure below (sig. (2-tailed). When the p-value is less than 0.05, it is an indication that the existence of a certain condition could have led to changes in the results. In this case, there is evidence that the means of the variables of the two samples (before and after) are different, suggesting that the introduction of deposit insurance had an impact on the six variables included in the research. This means that all the variables changed following the deposit insurance requirement. It is however notable that the changes observed may not entirely be as a result of deposit insurance introduction, given that there are many factors influencing the variables. Higher requirement of capital for example could lead to a change in capital ratios rather than deposit insurance, hence the caution in data interpretation.
Table 3: Paired sample test before and after
Paired Samples Test
Loan_Before – Loan_After
NPL_Before – NPL_After
CAR_Before – CAR_After
T1Cap_Before – T1Cap_After
CET1_Before – CET1_After
ROE_Before – ROE_After
Paired Samples Test
Loan_Before – Loan_After
NPL_Before – NPL_After
CAR_Before – CAR_After
T1Cap_Before – T1Cap_After
CET1_Before – CET1_After
ROE_Before – ROE_After
Year-by-year comparison of means
One of the assumptions of the paired samples t test is that observations are independently and identically distributed (https://www.spss-tutorials.com/spss-paired-samples-t-test/). Since our sample includes same banks in different years, this assumption might not hold. Therefore other tests were performed but using two years only:
A year before (2014) and at the end of the year when DIS was introduced (2015);
A year before (2014) and one year after the event (2016).
A similar trend is observed in the paired test comparing 2014 and 2015, where the p-value from the paired sample test is less than 0.05. This means that there is evidence that the deposit insurance requirement had an impact on all the variables studied during the period.
Table 4: Paired sample test 2014-2015
Paired Samples Test
Loan_2014 – Loan_2015
NPLs_2014 – NPLs_2015
CAR_2014 – CAR_2015
T1Cap_2014 – T1Cap_2015
CET_2014 – CET_2015
ROE_2014 – ROE_2015
In the 2014/2016 pair, however, the p-values are greater than 0.05 for capital adequacy ratio, Tier 1 capital and common equity tier 1 as indicated in the table below. This indicates that no significant difference was observed during these years as a result of the deposit insurance requirement. A further investigation into the variables reveals that there was a drop in the three variables in the year 2016 from the figure recorded in 2015, hence explaining the differences in t-test results. The difference in results between the 2014/2015 and 2014/2016 paired tests could be an indication that changes in the banking sector may not be consistent; implying that there are other forces in the economy which may have influenced bank performance besides deposit insurance.
Overall, the results from the tests show that the financial performance of banks was affected by the introduction of the deposit insurance system. The results indicate that there is a significant difference between variables before and after the introduction of the deposit insurance system in China. These are discussed in relation to literature as follows.
Liquidity is considered one of the main features that deposit insurance attempts to safeguard. The results of this research indicate that there was an increase in loans-to deposit ratio which represents liquidity following the introduction of deposit insurance system. This can be explained by an increase in risk-taking behaviour among banks as a result of deposit insurance introduction. Deposit insurance increases banks’ confidence to lend because they are assured of a back-up in the event of financial difficulties or a bank run (Allen, Carletti & Leonello, 2011). Similar studies have also established that the loan-to-deposit ratio is likely to increase after deposit insurance introduction. According to Kim, Kim & Han (2014), deposit insurance leads to advancement of more loans by banks due to the higher risk-taking behaviour. Banks are more confident in issuing loans because they are assured of support from insurance in the event of a bank run. This is also associated with moral hazard, where banks take risks knowing that insurance will shield them against risk (Allen, Carletti & Leonello, 2011). The higher the risk taken, the more profitability is expected through increased lending, which could explain banks’ behaviour following the introduction of deposit insurance system (Calomiris & Jaremski, 2016).
The results of this study show that the nonperforming loans increased following the introduction of the deposit insurance system. This could be an indication of increased risk-taking among banks due to the security offered by deposit insurance. According to Ioannidou, VP & Penas (2010) and Anginer, D., Demirguc-Kunt & Zhu (2014), banks take greater risks when their deposits are insured more than when they are not. However, a major implication of enhanced risk-taking is an increase in non-performing loans, which impacts the quality of a bank’s assets. The higher the number of nonperforming loans, the higher the risk of dissolution in the event of financial crisis (Barth, JR., Chen, L & Wihlborg, 2012).
The results of the research show that capital among banks increased following the deposit insurance introduction. The expectation after the introduction of deposit insurance is that banks would take higher risk and thus advance more loans; thus decreasing the level of capital among banks (Bonfim & Kim, 2013). The explanation for such a change according to Barth, JR., Chen, L & Wihlborg (2012) is that when banks lend more, less capital is left to cater for any financial risks that may be anticipated, which generally puts banks at a greater risk. In this regard, deposit insurance is seen as a threat for bank capital if regulatory measures are not undertaken. The rising level of capital in this research can be explained by the regulatory measures put in place to protect bank capital under Basel III; including the Tier 1 Capital and Common Equity Tier 1 Capital (Bank of International Settlements, 2010). These two capitals are aimed at protecting banks from financial crisis by ensuring that banks can effectively cushion losses resulting from difficult economic times (Gomes, T & Khan, 2011). While there was an increase in capital, this may be more as a result of the regulations as opposed to the deposit insurance.
The introduction of deposit insurance may influence profitability through the risk trade-off hypothesis as suggested by Kosmidou (2008), where banks increase their risk-taking, advance more loans and hence obtain increased profit. The results of this research however indicate that the return on equity, which represents profitability in the research reduced during the period of study. There are two explanations for this, with the first lying in the risk trade-off hypothesis, such that if the bank’s increased risk leads to higher nonperforming loans, the bank may end up making more losses. This could be the case for Chinese banks given the rising value of nonperforming loans. The second explanation could be a lag in profitability increase. Grant (2016) notes that introduction of a new strategy within an organization may not always yield immediate profitability and may take time to adjust. In this case, the deposit insurance system was introduced in 2015 and profitability adjustments may still be taking place.
This chapter describes the results of the research, thus answering the research questions that it sought to answer. The analysis is done using SPSS, specifically the use of paired t-test in answering three questions as follows: Has deposit insurance reduced the number of bank runs in China? How deposit insurance enhanced the financial stability of Chinese banks? The results determine that during the period of research, none of the ten banks included in the research had a bank run. Also, there was only one potential bank run that did not materialize, which was as a result of false rumors, an indication that deposit insurance regulation is effective in reducing the possibility of bank runs in China. The results also indicate that bank performance has increased and that the risk-taking behavior among banks has also increased. These results are based on the paired t-test, which indicates that there is a significant difference between the study variables in the period before and after the introduction of deposit insurance. The analysis chapter is the basis for the research conclusion, and the findings demonstrate the outcome of the research.
Bank runs are considered among the various impacts of financial crises, and which have the potential to lead to bank insolvency as customers rush to withdraw their savings within a short period. Following the financial crisis of 2007/08, a significant number of countries adopted the deposit insurance system as a means of safeguarding banks in the event of financial crisis. This research sough to determine the impact of deposit insurance introduction on banks in China, by comparing the period before and after introduction of the deposit insurance system. To achieve this, data from top 10 banks in China was collected and analysed based on various variables namely liquidity, asset quality, capital and profitability. Under each variable, different indicators were used to determine whether there was a difference in the variables before and after the introduction of the insurance deposit system. The results were analysed using SPSS software, through the paired sample t-test.
This research establishes that deposit insurance plays a role in influencing the risk-taking behaviour of banks. This was observed through an increase in loan-to-deposit ratio, higher non-performing loans and lower return on equity. As evident in existing literature, deposit insurance leads to an increase in risk-taking among banks, which in return leads to increased lending with higher risk. As the number of nonperforming loans increase, the company has to sustain more losses and this means that their profitability is likely to reduce. The ratio of loans to deposits has increased over time, and this is a demonstration for increased risk appetite among banks. This can be associated with the assurance that deposit insurance offers, such that banks are more likely to engage in high-risk lending without fear of failure. A high loans to deposits ratio indicates a risky position for banks and this could potentially lead to insolvency. The increase in some non-performing loans is also an indication of the heightened risk-taking behaviour among banks in China following the deposit insurance system introduction. When banks increasingly lend to risky borrowers, they risk the possibility of high default rates, and this could compromise their financial position.
The level of capital held by banks has also increased considerably, and this increases their resilience in the event of a financial downturn. This means that banks in China are in a better position to survive and avoid bank runs. The deposit insurance system however may not be directly related to the increase in capital, which is considered to be the result of Basel III regulations which require banks to increase their capital level in order to effectively survive economic crises. The results of this study resonate with previous researches such as Allen, Carletti & Leonello (2011), Zang, Cai, Dickinson & Kutan Zhou (2016), Otgonshar & Otgonshar (2013) and Ioannidou & Penas (2010) who study the impact of deposit insurance and determine various implications including enhanced financial performance of banks, reduced likelihood of bank runs and increased risk taking behaviour among banks. The findings are not only true in other regions, but this research also establishes that these are some of the implications of deposit insurance in China.
This research has significant implications on banks in China, the China government and other countries seeking to adopt the deposit insurance system. The results of the study provide imperative conclusions about the effect of deposit insurance system among banks in China. These can be used by featured banks to keep track of the changes in their indicators in order to ensure that they moderate their risk-taking. A comparison of the variables with other banks can provide valuable information for banks to determine their competitive position. The government can use the results of the study to determine the impact of the deposit insurance system and thus determine whether it is yielding the intended results. This would help in developing measures to prevent any adverse effects. An example is the high risk taking behaviour of banks and consequent moral hazard, which could potentially lead to increased financial risk among banks through nonperforming loans. This could be addressed by setting a minimum lending rate to prevent high risk loans. Other governments could learn from significantly from this research through understanding the implications of the deposit insurance system and how it can help in promoting bank stability.
This research makes use of the top 10 banks in China and while they provide adequate information to answer the research questions, they are a relatively small sample and may not be a representative of the entire population. This is mostly so because there are no small banks included in the research. The recommendation for future studies is to increase the sample size and also include banks of various sizes.
The paired sample t-test determines that there is a difference in the means of financial characteristics of the banks included in the research. It is however notable that the ratios analysed are subject to influence by other factors within the economic environment. This means that some variables may have been influenced by other factors other than deposit insurance system; which makes it difficult to determine whether the results were an effect of deposit insurance introduction or other factors. An example is the Basel III regulations in capital, which could be responsible for an increase in capital between the two time periods. To counter this, future researches could implement more advanced techniques such as regression analysis where dependent variable could be probability to default. The researched could also include other ratios such as liquidity coverage ratio in measuring risk-taking behaviour.
In conclusion, the deposit insurance in China has had a considerable impact on banks regarding performance, bank run avoidance and risk taking. The research effectively establishes that banks have improved their performance as indicated by the increased profitability. Regarding bank runs, China has not experienced any major bank run in the recent past and the absence of bank runs following the introduction of deposit insurance is an indication that banks are maintaining a sustainable financial position. It could insinuate that banks have benefited from deposit insurance over the years, which has prevented them from undergoing financial difficulties. About risk taking, the higher propensity for risky lending among banks is apparent as indicated by the increase in the ratio of loans to deposits and the high number of non-performing loans possessed by the banks. The research, however, establishes that while deposit insurance may have influenced changes in the variables studied, other factors in the business environment including market changes, increased costs, changes in demand for loan facilities and other regulations may have impacted some of the changes witnessed. The increase in reserve capital, for example, is also influenced by the government’s requirement for banks to maintain a standard Tier 1 capital and common equity tier 1 capital. Overall, the introduction of the deposit insurance system has played a key role in enhancing the financial stability of banks in China and could be highly effective in preventing bank runs. On the contrary, an increased propensity for risk-taking based on the existence of insurance may result in instability in the banking sector and thus lead to potential bank runs in the future if not effectively checked.
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Barriers and Facilitators to Veterans’ Transition to Civilian Work Force in Lawton, Oklahoma
More than 200,000 Armed Forces veterans retire annually because of harsh battleground experiences in places such as Afghanistan and Iraq (Robertson, 2013). However, a majority of veterans find it considerably difficult to transition into society and live effectively with the rest of the civilian community. According to Baert and Balcaen (2013), 66% of veterans leaving the military report having a challenging time transitioning to the civilian work force. Furthermore, Worthen and Ahern (2014) establish that approximately two-thirds of armed forces veterans are faced with numerous challenges.
These challenges make some individuals give up on integrating successfully into the society moreso the civilian work force. Empirical literature demonstrating disconnects between military experience and the civilian labor market exists. This indicates that their transition is limited by various factors including veteran stereotyping that associates veterans with post-traumatic disorder, mental illness and addictions, inability to translate job experiences from the military to the civilian environment and civilian work force and limited knowledge of human resource professionals on hiring and retaining veterans (Iran and Afghanistan Veterans of America, 2011; Lampka & Kowalewski, 2017).
In addition, veterans’ skewed view of the civilian work force makes it difficult for them to effectively transition. According to Lampka and Kowalewski (2017), veterans often lack adequate preparation for a transition to new jobs, suffer from culture shock due to changes in the environment, are incapable of transferring their skills to the new job, and lack knowledge in the search for civilian jobs. This calls for the development of strategies that will ensure that veterans can effectively reintegrate into the civilian work force and contribute to nation building as civilians.
Transition to civilian work force
This study will explore how Army veterans can effectively transition into the civilian work force in Lawton, Oklahoma, and effectively live with the rest of the civilian community. This chapter will provide an introduction to the topic and hence set the pace for the research. Secondly, it will provide an overview of the literature concerning the transition of Army veterans into the civilian work force. It will also determine the scope of study by identifying the population of study, what will be studied and the expected outcomes of the research.
The ever-rising number of the population of service men and women leaving the military and rejoining the community results in an increase in the number of veterans in our society (Andrew, 2017). In 2015, the Veteran Administration reported that 21 million adults in the U.S population were veterans. This number translates to about 7% of the civilian population in the U.S that is non-institutional (Chalabi, 2015).
Additionally, Chalabi also asserts that more veterans have been employed since 2014 shown by the reduced number of unemployed veterans. Most civilians do not understand the magnitude of the challenge that civilians face in the transition back into civilian life. A transition is an event that results in a change which affects a person’s routines, habits, and relationships (Anderson & Goodman, 2014). One of the most famous transitions in the America society is the transition of military veterans to civilian life (Anderson & Goodman, 2014). Transition, just like all forms of change, causes anxiety or stress to the veterans (Anderson & Goodman, 2014).
Anderson & Goodman (2014) noted that the biggest source of frustration for veterans during their transition is the adaptation from the structured military atmosphere to the less structured civilian atmosphere. This is because the change calls for a change in attitude and mentality which create a wide range of emotional demands for the veteran. It is evident that to join the civilian workforce after a military career can be both stressful and exciting time.
The operations and the culture of the civilian work force may significantly differ from military career experiences. Therefore, it is essential for the retired military personnel to be patient as they adjust in new civilian positions, co-workers and work environment. The everyday workplace stressors include the feeling of disconnected. Retired military personnel may occasionally feel disconnected when working with people who never had military experience
Anderson, M., Goodman, J., (2014). From military to civilian life: Applications of Schlossberg model for veterans in transitions. Career planning and adult development journal
Chalabi, M. (2015). What percentage of Americans have served in the military. FiveThirtyEight. com.
Contreras, C. G. (2011). What is occupational therapy’s role in the transition of returning veterans from the wars in Iraq and Afghanistan? Master’s and Doctoral Projects, Paper 155. Retrieved from http://utdr.utoledo.edu/graduate-projects/155[Accessed on March 22, 2016].