Top PDF Information Externality, Bank Structure, and Economy

Information Externality, Bank Structure, and Economy

Information Externality, Bank Structure, and Economy

정보의 외부효과를 도입하여 은행구 조의 상대적 성과를 비교한 연구로는 Cetorelli(1997)와 Cetorelli and Peretto(2000) 가 있다. 이들의 연구에서는 정보의 외부 효과가 완전한(perfect information external- ity) 경제를 가정하였다. 즉, 어떤 은행이 창출한 기업의 신용정보는 생산 즉시 모든 은행에 알려진다고 가정하였다. Cetorelli (1997)는 경쟁은행구조가 대체로 비교우 위를 가지고 있으나 경제 내에 신용이 불 량한 기업의 비중이 많으면, 독점은행구 조가 비교우위를 가질 수도 있다고 결론 지었다. 한편 Cetorelli and Peretto(2000)는 정보의 외부성에 따른 무임승차(free riding) 문제를 해결하기 위해 경쟁은행이 혼합전 략(mixed strategy)을 선호함을 나타내었다. 또한 그들은 은행구조에 따른 경제성장 효과는 자본공급규모와 자원배분의 효율 성 문제의 두 가지 상반되는 요인에 의해 좌우되는데, 각 요인의 경제성장효과가 비선형적(non-monotone)인 특성을 나타내 기 때문에 사회적 후생을 극대화할 수 있 는 최적 은행수는 독점도 완전경쟁도 아 닌 과점은행체제일 수 있음을 시사하였다.
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Information externality, bank structure, and growth

Information externality, bank structure, and growth

The major economic indicators have deteriorated since 1995. The GDP growth rate drops by 5-6% from 7-8% per annum on average. More interestingly, the ratio of dishonored bills and debt ratio in manufacturing sector went up after establishment of credit sharing system. That might be explained partly by the problem of the information externality and because degree of concentration was not enough. As seen in the paper, as information externality grows, banks will not invest the efficient level of screening technology when the number of banks are large enough.. Contrary to the increase in debt ratio, the growth rate of gross fixed capital formation has dropped sharply on average. In the midst of the restructuring process, Korean Government pushed forward some forms to reduce debt ratio below 200 percent and introduce a “Workout” system which makes distressed firms to be exited or funded easily. Those measures have been very effective to recover the economy.
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Land Transfer Strategy and Industrial Structure Upgrading —Analysis Based on Geographical Externality

Land Transfer Strategy and Industrial Structure Upgrading —Analysis Based on Geographical Externality

DOI: 10.4236/me.2019.104077 1141 Modern Economy changing consumer preferences. There is no doubt that the income effect and substitution effect will affect the output of various industries, promote the de- velopment of supported industries, and optimize the industrial structure [24] [25]. The information released by local governments through land transfer strategy can effectively compensate for the incomplete market information, im- prove the effectiveness of resource allocation, reduce the unreasonable fluctua- tion of industry, and promote the rationalization of industrial structure. With the rise of land price, enterprises will improve their rationality by eliminating the fittest according to market rules. However, in reality, the land transfer strategy of local governments still has a negative impact on the rationalization of industrial structure. At the beginning of its establishment, some local governments’land transfer strategies did not fully consider their own location advantages, industri- al development goals, technological development level, and the degree of corre- lation and complementarity between industries. They failed to form a reasonable division of labor from the perspective of regional specialization division of labor, resulting in misallocation of resources and unable to achieve the goal of cooper- ation with each other. Many land transfer strategies of local governments have been established and developed under the external environment of long-term “fragmentation”. The incomplete market mechanism and the imperfect legal system make enterprises lack the sense of cooperation and the relevance is not high [24], which is not conducive to promoting the rationalization of industrial structure. This is largely due to the competition among local governments. In order to achieve various performance goals, the long-term GDP-only idea urges enterprises, whatever they can contribute to GDP and tax revenue, to absorb them. With the transformation and upgrading of the national industrial struc- ture, this phenomenon will change in the future. It can be seen that the role of local government land transfer strategy in rationalization of industrial structure includes two aspects: promotion and restraint, and the final effect depends on the net value of the superposition of these two roles. Based on this, this paper draws the following conclusions:
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Bank Liability Structure

Bank Liability Structure

The literature pertinent to our theory falls under three categories: bank run, bank leverage, and capital structure theory. The bank run literature was pioneered by Di- amond and Dybvig (1984), who construct a model in which bank run emerges as an equilibrium. The literature has subsequently been extended significantly by Allen and Gale (1998) and others. In our model, depositors at uninsured banks can run in order to make their claims risk-free. There is no panic risk in our full-information model as depositors observe asset value and can implement an optimal withdrawal strategy without loss. The model does not have a situation in which a fraction of the depositors withdraw deposits late and suffer losses. Nevertheless, bankruptcy costs arising from a bank run force banks to decide the right amount of deposits and subordinated debt to hold. 30 The FDIC enables the economy to avoid the equilibrium with bank run and
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Capital structure decisions in family firms: empirical evidence from a bank-based economy

Capital structure decisions in family firms: empirical evidence from a bank-based economy

Consequently, further research subsequently enhanced the field of capital structure theory by accounting for several market imperfections. Modigliani and Miller (1963) themselves started to extend their MM-theory by introducing taxes and costs of financial distress. The static “trade-off theory” of capital structure assumes the existence of a target debt ratio where the marginal cost of an additional unit of debt, i.e. the costs of financial distress, equal the marginal benefits of an additional unit of debt, i.e. the tax shield. In other words, according to this theory management aims to establish an optimal capital structure which is determined by a trade-off between the costs and benefits of borrowing debt. In contrast, the second major capital structure theory is based on a dynamic perspective of investment opportunities and information asymmetries (Donaldson 1961, Myers 1984, Myers and Majluf 1984). The “pecking order theory” of capital structure assumes that firms prefer to finance growth opportunities with internal funds, debt, preferred equity and common equity, in that order. Behind the pecking order theory is the rationale that information asymmetries between informed firm insiders and uninformed outside investors lead to a mispricing of equity issues. Hence, the decisions of the management are driven by the desire to minimize transaction costs. Despite the dominance of those two paradigms in the discussion of capital structure theory, several authors have proposed further determinants of capital structure decisions: Among them are signalling aspects (Ross 1977, Leland and Pyle 1977), risk aversion (Fama 1980, Masulis 1988, Berger et al. 1997), corporate control considerations (Harris and Raviv 1988, Stulz 1988 and more recently Ellul 2008), market timing issues (Baker and Wurgler 2002) and firm history (Kayhan and Titman 2007). 2
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Essays in bank capital structure

Essays in bank capital structure

subsidiaries including them filing for bankruptcy or announcing M&A deals. Prior literature shows that BHCs operate internal capital markets where they allocate capital and liquidity to and between subsidiary banks (Houston, James, and Marcus, 1997; Houston and James, 1998). Therefore, this provides an effective mechanism through which subsidiary banks affect the cash flow, capital position, and liquidity of parent holding companies. Substantial costs involved in changes in subsidiaries could have a significant impact on the capital allocations and operational activities for the whole organization. BHCs facing such scarce internal capital problems have incentives to take actions to avoid the further financial constraints. One of the most popular actions BHCs can take in the capital market is to change their financing decisions. To demonstrate these arguments, suppose that one or some of a BHC’s subsidiaries declare bankruptcy in a specific year. Investors holding the debt or equity of these subsidiaries are likely to lose part or all of their investment. As is often the case that subsidiary banks are funded by their parent, subsidiary failure means a costly process because the loss incurred will be majorly covered by the parent and the internal capital market established by the BHC will be hurt to some extent. BHCs facing limited internal funds may be forced to seek external financing to sponsor their various financial activities. Additionally, information asymmetry is severe prior to subsidiary failure. BHC insiders have information advantage over outside investors regarding the status of their subsidiaries. The advantage may be utilized by managers to adjust BHCs’ financing decisions accordingly. Furthermore, following the subsidiary bankruptcy, managers may instead take actions to mitigate the asymmetric information in order to lower the future financing cost. All of these provide motivations for parent banks to heavily adjust their capital structures around the periods when their subsidiaries go bankrupt.
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Ownership Structure and Bank Performance

Ownership Structure and Bank Performance

As for the ownership data, this study uses data of the ultimate owner of the sample banks as stated in their annual report under ‗Ultimate Holding Company‘ title. This is based on findings by [6], [17] and [50], who find that corporate ownership structure in Malaysia are associated with indirect / ultimate ownership. Therefore, data on direct or immediate ownership of Malaysian companies are insufficient or inappropriate for determining control [51]. In identifying the large shareholders, this study examines shareholders that own at least 5 percent of voting rights. This ratio is in accordance with the definition of substantial shareholders under Malaysia Securities Industry Act 1983. [15] contends that the choice of cut-off points should be based on economic or legal frameworks of the given country. The ratio used in this study however, is smaller compared to [14], who uses 10 percent and [17], who focuses on shareholders with 50 percent of direct voting rights. Nevertheless, [52] contends that an ownership position of 5 percent is sufficient to influence corporate outcomes.
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Financial structure and bank profitability

Financial structure and bank profitability

Relative size here is calculated as the ratio of the stock market capitalization to total assets of deposit money banks; relative activity is defined as the total value of stocks traded [r]

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The determinants of bank capital structure

The determinants of bank capital structure

Further, the stability of capital structures over time implies that the factors driving the cross-sectional variation in leverage ratios within the banking sector are stable over long horizons as well. Static pooled OLS regressions appear inadequate for dealing with the unobserved heterogeneity present in banks’ capital structures. The presence of a significant unobserved permanent component requires alternative identification strategies. For non- financial firms, Bertrand and Schoar (2003) and Frank and Goyal (2007) have progressed in this direction using data for non-financial firms. For example, Bertrand and Schoar (2003) construct a data set, in which they are able to differentiate firm fixed effects from manager fixed effects by tracking managers across different firms. In Bertrand and Schoar (2003) the capital structure of firms depends on the managers preferences (for example her risk aversion). In addition, they find that firms with stronger governance structures tend to hire better managers. This suggests that it may be possible to trace differences in capital structure of banks back to differences in the quality of corporate governance in the banks. Frank and
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Corporate ownership structure and bank loan syndicate structure

Corporate ownership structure and bank loan syndicate structure

One potential source of concern for our empirical analysis is the issue of endogeneity. While it is rather unlikely that a borrowing firm determines its ownership structure as a direct function of the syndicate structure of its loan, the borrower might have characteristics unaccounted for in our study that jointly determine the control-ownership divergence and the syndicate structure. The consistent results from the sharper interaction tests on factors that affect the divergence-syndicate structure relation help to alleviate this concern. In the spirit of Rajan and Zingales (1998), one way to overcome some of the endogeneity concerns is to focus on the details of theoretical mechanisms through which corporate ownership structure affects syndicate structure, and document their working. The various interaction term effects discussed above could in effect be viewed as “the ‘smoking gun’ in the debate about causality” (Rajan and Zingales, 1998). Moreover, it is less likely to have an omitted variable correlated with the interactive terms than with the linear term (Raddatz, 2006). Thus, from an econometric perspective, the interactive term approach is also less subject to endogeneity concerns (Claessens and Laeven, 2003). In sum, the various interaction test findings show direct evidence about how corporate ownership structure affects syndicate structure, thus providing a stronger test of causality and alleviating endogeneity concerns.
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Deposits and bank capital structure

Deposits and bank capital structure

We have developed a general equilibrium model of banks and firms to endogenize the equity cost of capital in the economy. The two key assumptions of our model are that deposit and equity markets are segmented and there are bankruptcy costs for banks and firms. We have shown that in equilibrium equity capital has a higher expected return than investing directly in the risky asset. Deposits are a cheaper form of finance as their return is below the return on the risky asset. This implies that equity capital is costly relative to deposits. When banks directly finance risky investments, they hold a positive amount of equity capital as a way to reduce bankruptcy costs and always prefer to diversify if possible. In contrast, when banks provide loans to non-financial firms that invest in risky assets, diversification is not always optimal. Diversification is only relevant when firms are bankrupt otherwise the bank simply receives a fixed return on its loans. There is then a trade-off. In order for the bank to reap the benefits of diversification, it must remain solvent when firms are bankrupt and this requires it to hold positive capital even though this is costly relative to deposits. When bankruptcy costs are significant, banks finance themselves with deposits only and specialize in lending to one sector. Diversification is not worthwhile because very little is received by the banks when bankruptcy costs are high. It is more efficient for firms to hold all the equity capital and minimize their probability of bankruptcy. When bankruptcy costs are low, diversification across different sectors is optimal because banks receive high returns in this case. They also hold positive bank capital to lower their probability of bankruptcy. For intermediate values of bankruptcy costs, both undiversified and diversified banks coexist.
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Problems in the structure of Romania’s economy

Problems in the structure of Romania’s economy

Abstract: The study focused on the early stage of Romania’s transition to the market economy during 1990-1992, based on statistical data available at that time. Because of the inherited structural distortions, the persistence of strong forces of inertia and the incoherence of economic and monetary policies, the transition to the market economy has been delayed in the early 1990’. In the absence of an adequate outline for de-monopolization and privatization of the economy, the liberalization of prices did not lead to an efficient resources allocation; on the contrary, the structural imbalances between demand and supply have deepened. The fall in industrial output and its poor competitiveness, due to the dominant position of this sector, has pushed the whole economy into a severe recession. A more rigorous management of the reform program, based on realistic assessments of opportunities and resources, with the help of more investments, including by the increase in foreign investments, should foster structural adjustments towards improving industrial performances and implicitly smoothing the way to the market economy.
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Information about the bank

Information about the bank

At the end of the year, the bank’s loans, advances and guarantees amounted to DKK 5,280 million, compared to DKK 5,514 million last year. The lower lending activity is due to several circumstances. The continued uncer- tainty about economic trends negatively impacts demand in general. Furthermore, declining interest rates have made it attractive for many homeowners to convert existing mortgages into lower-interest loans. In addition, there are the discussions in the daily newspapers and signals from politicians and economists combined with higher prices on floating-rate loans with annual refinancing (F1) that have also affected the number of conver- sions. A bigger loan is frequently offered in connection with these conversions. In many cases, the proceeds of this have been used to reduce/repay bank loans. Finally, some major credit lines, for instance for financing of youth housing units, have been repaid in connection with completion and prioritisation. Lending consequently declined by DKK 234 million, corresponding to 4%.
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Deposits and Bank Capital Structure

Deposits and Bank Capital Structure

The results so far have focused on the case where banks invest directly in the productive assets, essentially making them the owners of these projects. While useful for understand- ing the role of limited market participation and bankruptcy costs in determining banks’ capital structures, the more common perspective on banks is that they channel funds to firms through the allocation of credit. In this section we analyze two extensions in that direction, each representing an alternative extreme in how a firm in need of financing may be organized. The first case considers public firms that have no inside equity but can attract funds both from banks and outside equity investors. The second case considers instead private firms that have an initial endowment of inside equity capital but can only raise external funds in the form of bank loans and, in particular, are unable to raise out- side equity financing. As we will show, while the main results of the baseline model carry over to both cases — capital earns rents in excess of its outside option, and its equilibrium return is higher than that of deposits — there are substantial and important differences in how the funds of capital suppliers are allocated and thus in the optimal capital structure of both banks and firms.
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ROLE OF HARYANA GRAMIN BANK IN RURAL ECONOMY

ROLE OF HARYANA GRAMIN BANK IN RURAL ECONOMY

Loan issued by Gramin Bank to non-priority sector is to tune of Rs. 8217 lakh in 2005-2006, notifying a mixed trend, reached to the figure of Rs. 8142 lakh during the year 2012-2013. Growth in percentage is also showing fluctuating trend. The value of compound annual growth rate of disbursement of loans to priority sector of Haryana Gramin Bank is - 0.11, which is not significant.

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The Determinants of Bank Capital Ratios in a Developing Economy

The Determinants of Bank Capital Ratios in a Developing Economy

Other studies explain that factors such as government guarantees (the implicit and explicit deposit insurance, the too-big-to fail doctrine and lender of last resort sup- port), earnings or franchise value and expected bankruptcy costs as affecting the level of capital in banking firms. Government guarantees, as in many countries (applies in Malaysia too), reduce the expected costs of bankruptcy as the default risk is transferred from the banks to the government: the world witnessed the effect of this during the year 2008 as central banks and treasuries moved in tandem to stem the bank liquidity problems across the world when so many countries moved to provide that guaran- tee for deposits and then followed up with massive injection of credits to banks to prevent failures (bankruptcies). This in turn reduces the incentives for depositors to monitor banks closely. At the same time, bank shareholders may exploit this reduced scrutiny by increasing bank leverage (that is, decreasing capital) and also earnings volatility because of increasing risk, and so shift the risk to the bank creditors and guarantors (Hovakimian et al. 2003). Hence, the benefits to society from government guarantees depend on how effectively bank regulators can control bank management’s risk-shifting (Hovakimian et al. 2003) behaviour.
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Cashless Economy and Strategic Impact on Bank Marketing

Cashless Economy and Strategic Impact on Bank Marketing

Ahmad (2017) investigated the impact of demonetization on online banking transaction. Author found thatTransactions of banking segment had increased enormously during and after demonetization period compared with before demonetization. The reduction of money in circulation obviously will have a positive influence on various modes of online transactions. Mukhopadhyay (2016) studied cashless payment system in India and presented a theoretical model that evaluates decisions by consumers and sellers to adopt cashless payments. Author finally observed that the most crucial enabler of cashless payments is inflows of funds into the accounts.Bayero (2015)analysed theeffects of Cashless Economy Policy on financial inclusion in Nigeria. Results showed that Awareness, Consumer/User Value Proposition, and Infrastructure were found to have strong significant relationship with Financial Inclusion while Business Model of Financial Service Providers did not show any significant relationship with Financial Inclusion.Shendge, Shelar and Kapase (2017) studied impact and importance of cashless policy in India. Authors stated that impact of cashless policy will be felt in modernization of payment system, reduction in the cost of banking service, reduction in cost of high security and safety risk and also curb banking related corruption.
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Bank Credit and Economic Growth in a Recessed Economy

Bank Credit and Economic Growth in a Recessed Economy

Finance is a major tool for economic growth and its continuous free flow from the savings surplus unit to the saving deficit unit that require such funds for investment purposes facilitates the multipliers effect of money via financial institution in any economy. In every developing economy of the world, efficient credit facility is the engine that drives investment and productivity. In a recessed economy like Nigeria, appropriate credit facility to key sectors of the economy both at small scale and large scale can lubricate and prove the next sweetening curve to economic appreciation. Ademu (2006) posit that the provision of credit with sufficient consideration for the sector’s volume and price system is a way to generate self-employment opportunities. This is because credit helps to create and maintain a reasonable business size as it is used to establish and/or expand the business, to take advantage of economies of scale (Yakubu and Affoi, 2013). Credit is the aggregate amount of funds provided by commercial banks to individuals, business organizations/industries and government for consumption and investment purposes. Timnsina (2014) argued that individuals obtain credit for both consumption and investment purposes, business organizations/industries borrow loans to invest in plant and machinery where as government borrows loans to spend for recurrent as well as capital purposes. Credit can be gotten from two major markets; namely the money market and the capital market. The money market is the market for short term credits and major players in this market are commercial banks, discount houses, insurance e.t.c. while the capital market is the market for medium and long term credit like the stock exchange. For the purpose of this study, emphasis will be placed on short term credits by commercial banks to small scale enterprises and private investment companies and how such credit facilitated economic growth in Nigeria. Hence, the following objective is formulated for the study;
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Impact of Bank Consolidation Strategy on the Nigerian Economy

Impact of Bank Consolidation Strategy on the Nigerian Economy

Lewis and Stein (1997) noted that while the statutory minimum capital requirement largely stabilized during the pre-SAP period, four upward reviews were put in place after SAP to adjust for the inflationary impact of the SAP induced policies. The increase in the number of operators between 1987 and 1990 actual led to the ballooning of loans and advances of banks industry wide and a consequent deterioration in the quality of banks risk assets. The CBN introduced the new famous prudential guidelines, which made it mandatory for banks to recognize early and provide for not performing assets. The effort of those stringent but necessary measures was the erosion of the capital base of quite a sizable number of operators as their accumulated reserves were not sufficient to absorb the huge loses. The almost four time devaluation of Naira exchange rate to the dollar between March 1992 (N 10: $1 to N18: $1) and February 1995 from (N22: $1), dealt a final total blow on the capital base of the banks particularly those that have been pronounced terminally distresses by the CBN. According to Lewis and Stein (1997) the new globally embraced capital adequacy measurement places considerable emphasis on the risk element in the assets of banks. This is to ensure that each bank carries funds that are not only commensurate with its total assets but also cater adequately for the risk-ness of its operation, nationally and internationally.
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Firm Characteristics and Bank Internationalization in an Emerging Economy

Firm Characteristics and Bank Internationalization in an Emerging Economy

However, aggressive internationalization may have significant impacts on bank performance, as has been suggested some studies; although the findings still remain non-conclusive. Sullivan (1994) reviewed 17 studies and reported that 6 showed positive and 5 negative impacts of internationalization on performances while other 6 suggested no association between them. Negative impacts may be the result of several strategic failures, for example, selecting wrong market, strategic gaps, very high risk and competition, and human resources quality gap etc. Banks, doing business in too many international markets, are more likely to be negatively affected (Buch et al., 2013) and may see increased risk (Hejazi and Santor, 2005). Slager (2005) suggested that internationalization brings insignificant benefits to the shareholders. Apart from banks, adverse impacts on financial performance from internationalization is evident for other firm types also (Katrishen and Scordis, 1998; Capar and Kotabe, 2003). However, benefits of internationalization are also documented in several studies, for example, through geographical diversification strategy resulting in better risk-return trade-off (Berger et al., 2000; Buch et al., 2010) and improving local performance using the international experience (Kobrin, 1991).
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