International Journal of Banking, Accounting and Finance (4 papers in press)

Special Issue on: Bank Behaviour, Performance and Stability – In Memory of Philip Molyneux

• Banking in the era of artificial intelligence: a survey of the economic, social and strategic implications  
  by Santiago Carbó-Valverde, Francisco Rodríguez-Fernández 
  Abstract: Integrating artificial intelligence (AI) into banking platforms represents a transformative shift in the financial services industry, driven by the need for enhanced efficiency, improved customer experience, and robust security measures. This article analyses the economic, social, and strategic implications of AI adoption in banking. Through a comprehensive literature review, the study examines the impact of AI on operational efficiency, customer experience, security, and financial inclusion. It also addresses the ethical and regulatory challenges associated with AI, including algorithmic bias, transparency, and compliance. The findings underscore the importance of developing ethical guidelines and regulatory frameworks to ensure the responsible use of AI in banking. Strategic recommendations for banks include investing in AI talent, fostering collaborations, adopting a customer-centric approach, and ensuring ethical AI deployment. Future research directions are also suggested to explore further the potential of AI in enhancing banking services and promoting financial inclusion.
  Keywords: artificial intelligence; banking; digital transformation; financial inclusion; operational efficiency; regulatory compliance; ethical considerations.
  
  
• Does size matter? Pay gaps, non-CEO executives, and bank stability  
  by Fatima Cardias Williams, Jonathan Williams 
  Abstract: We examine the effect of pay gaps between CEOs and non-CEO executives on bank stability for a sample of large, mostly international banks. Our primary result is that larger pay gaps are associated with an increase in bank stability and a decrease in portfolio risk and leverage risk. This result is robust to mandated changes in compensation arrangements and differences in national cultures. We find that the effect of pay gaps on stability and risk is sensitive to the power of bank CEOs. It suggests that powerful CEOs and senior non-CEOs exhibit a level of conservatism which both counters the effect of tournament incentives for junior non-CEOs to take risks and protects the pay and status of senior executives.
  Keywords: banks; compensation; pay gap; tournaments; bank stability; executive directors.
  
  
• Tax authority attention and financial reporting  
  by Iftekhar Hasan, Tahseen Hasan, Kose John 
  Abstract: We study the effects of Tax Authority (IRS) attention on a firm’s financial reporting. We explore whether firms institute a higher degree of accounting conservatism in response to IRS monitoring. Using data on IRS acquisition of public firms’ 10-K financial disclosures to proxy for IRS attention, we find that when firms are under IRS attention, they tend to initiate higher levels of unconditional and, to some extent, conditional accounting conservatism. We alleviate some of the endogeneity concerns by using pre- and post-IRS attention environments between the treated group (firms with IRS attention) and a propensity score that matches the control group of firms (no IRS attention). These results withstand several robustness tests and subsample analyses.
  Keywords: IRS attention; tax; tax monitoring; tax enforcement; accounting conservatism; financial disclosure; financial reporting.
  
  
• Gender, ethnicity and SMEs’ access to finance: a systematic literature review of global empirical evidence  
  by Alper Kara, Jiafan Li 
  Abstract: We systematically survey the global empirical evidence on gender and ethnicity implications of small and medium enterprises’ (SMEs) access to finance in the last two decades. We find overwhelming evidence that women-owned SMEs encounter greater financial constraints, and seek less financing, in comparison to men-owned SMEs. Borrowing discouragement and fear of being rejected by creditors are identified as leading causes of women’s non-participation in external borrowing. We find scarce evidence of systematic gender-based discrimination by lenders. However, there is evidence that women face higher interest and rejection rates and stringent lending criteria compared to men. We find that ethnic-minority-owned SMEs experience greater financial constraints. In the USA, evidence of ethnicity-based-discrimination is found; however, it is not common across the world. Our findings also show that ethnic-minority-owned SMEs demand for and ability to obtain external finance decreases further during and after economic crisis periods. We provide avenues for further research.
  Keywords: small and medium enterprises; SMEs; gender; women; ethnicity; minority; access to credit; systematic review; financial inclusion; financial exclusion.