New Economics Papers
on Banking
Issue of 2006‒11‒12
seven papers chosen by
Roberto J. Santillán–Salgado, EGADE-ITESM

  1. The financing of innovative activities by banking institutions: policy issues and regulatory options By Ughetto, Elisa
  2. Adoption and Usage of Online Services in the Presence of Complementary Offline Services: Retail Banking By Anja Lambrecht; Katja Seim
  3. Microeconomic determinants of acquisitions of Eastern European banks by Western European banks By G. LANINE; R. VANDER VENNET
  4. Foreign ownership in Mexican Banking: A Self- Correcting Phenomenon By Tschoegl, Adrian
  5. Rationalising Inefficiency: A Study of Canadian Bank Branches By Mette Asmild; Peter Bogetoft; Jens Leth Hougaard
  6. Bidding in mandatory bankruptcy auctions: Theory and evidence By Eckbo, B. Espen; Thorburn, Karin S.
  7. Regional and Global Financial Integration in East Asia By Kim, Soyoung; Lee, Jong-Wha; Shin, Kwanho

  1. By: Ughetto, Elisa
    Abstract: The paper investigates to what extent the convergence of banks over risk-adjusted capital standards set by the new Basel Capital Accord may affect the way in which they screen innovative firms. It also gives an overview of the existing forms of credit support to R&D activities. The study is built upon a survey conducted in January and February 2006 on 12 main Italian banking groups. The survey provides interesting insights on the use of non-financial parameters to assess the creditworthiness of potential borrowers and on the architecture of internal rating systems in the light of Basel II requirements. Results suggest that the majority of banks does not consider intangibles as meaningful determinants in credit risk assessment. This could imply that the sole implementation of the Accord might not lead to reduce informational asymmetries between lenders and borrowers as it could be expected. However, such an effect could be compensated by specific measures provided by single financial intermediaries.
    Keywords: internal rating systems; innovation financing; Basel II
    JEL: G21
    Date: 2006–05–15
  2. By: Anja Lambrecht (UCLA Anderson School of Management); Katja Seim (The Wharton School, University of Pennsylvania)
    Abstract: The availability and variety of online services has increased dramatically in recent years. Many questions remain, however, regarding patterns of online service use, consumer preferences when using online services, and how consumers substitute between equivalent online and offline services. Using an extensive data set of consumer adoption and usage of the online banking service of a major German bank, this paper analyzes consumers’ adoption and usage of online banking over the period August 2001 to July 2003, including the effect of demographics and branch banking on usage of online banking. We also examine the relationship between Internet availability and channel choice as well as usage. Finally, we analyze the effect of channel usage on customer level and product-specific revenues earned by the bank and derive revenue implications of online banking.
    Date: 2006–10
    Abstract: A considerable number of Western European banks have acquired banks in Central and Eastern Europe from the mid-1990s onwards. The question is whether or not this will improve the efficiency and profitability of the Central and Eastern European banking sectors. We test the relative strength of the efficiency versus the market power hypotheses by investigating the bank-specific characteristics of the banks involved in the cross-border acquisitions. We also examine the determinants of the post-acquisition target banks’ performance. Our results indicate that large Western European banks have targeted relatively large and efficient CEEC banks with an established presence in their local retail banking markets. We find no evidence that cross-border bank acquisitions in the CEEC are driven by efficiency motivations. The evidence supports the market power hypothesis, raising concerns about the optimal balance between foreign ownership and competition.
    Keywords: Mergers and acquisitions, cross-border acquisitions, bank efficiency, transition economies, Central and Eastern Europe
    JEL: C30 E44 F21 G21
    Date: 2006–09
  4. By: Tschoegl, Adrian
    Abstract: Currently, foreign banks own the banks that hold about 80 percent of the assets in Mexican banks. The paper argues that this is the third instance in which foreign-owned banks have initially comprised a large part of the Mexican banking system, and that in the first two cases (1865-1910 and 1920-1935), the degree of foreign ownership will recede. The argument is that reform and competition among the banks will cause the conditions that attracted the foreign banks to erode and the domestic banks to be able to grow more rapidly. Therefore, in subsequent decades many foreigner owners are likely to sell their subsidiaries to local banks and investors. Thus over time the ratio of assets in foreign-owned banks to total banking system assets should decline, even in the absence of government policies that aim for that result.
    Keywords: Mexico; foreign banks; ecological succession; banking history
    JEL: N26 G21
    Date: 2006
  5. By: Mette Asmild (Nottingham University Business School); Peter Bogetoft (Department of Economics, Royal Agricultural University); Jens Leth Hougaard (Institute of Economics, University of Copenhagen)
    Abstract: Many studies have attempted to explain estimated inefficiency, for instance by bounded rationality, ignorance, lack of incentives or motivation etc. However, the presence of inefficiency remains in conflict with the neo-classical idea of economic rationality. This paper suggests ways in which the outcomes of Data Envelopment Analysis-type efficiency models can be rationalised. To illustrate the concepts we consider a data set of Canadian bank branches. The empirical results are encouraging since what appears to be inefficiency in some branches can be argued to be the outcome of rational decisions regarding resource allocation.
    Keywords: Banking, Data Envelopment Analysis (DEA), Rationalising Inefficiency, Resource utilization, Allocation
    Date: 2006–01–11
  6. By: Eckbo, B. Espen (Tuck School of Business, Dartmouth College); Thorburn, Karin S. (Tuck School of Business, Dartmouth College)
    Abstract: We analyze bidding incentives and present evidence on takeover premiums in mandatory Swedish bankruptcy auctions, where three-quarters of the firms are sold as going concerns. The bankrupt firms’ main creditors (banks) cannot bid in the auction and thus cannot directly influence the winning price. However, we find that the banks often finance bidders. We show that the optimal bid strategy for a bank-bidder coalition mimics a monopolist sales price, in effect getting around the institutional constraint on direct bank bidding. The final auction premium increases with a measure of the bank’s debt impairness observed at the beginning of the auction. Cross-sectional regressions with the auction premium as dependent variable support this prediction. There is no empirical support for the proposition that the auctions lead to fire-sale prices, where we use the number of bidders, the degree of industry-wide financial distress, and the business cycle as proxies for auction demand. Moreover, premiums in transactions where insiders repurchase the firm (salebacks) are on average indistinguishable from premiums in sales to company outsiders, which fails to support self-dealing arguments.
    Keywords: Bankruptcy auctions; Optimal bid strategy
    JEL: D44
    Date: 2004–12–17
  7. By: Kim, Soyoung; Lee, Jong-Wha; Shin, Kwanho
    Abstract: We examine the degree of regional vs. global financial integration of East Asian countries in three ways; (1) comparing the size of cross-border assets such as securities and bank claims, (2) estimating the gravity model of bilateral financial asset holdings, and (3) estimating consumption risk sharing model. The results suggest that East Asian financial markets, particularly compared to the European ones, are relatively less integrated with each other than to global markets. We also find relatively more evidence of regional financial integration in bank claim markets than portfolio asset markets. The low financial integration within East Asia is attributed to the low incentives for portfolio diversification within the region, the low degree of development and deregulation of financial markets, and the instability in monetary and exchange rate regime.
    Keywords: Regional financial integration; Global financial integration; East Asia
    JEL: F36
    Date: 2006–05

This issue is ©2006 by Roberto J. Santillán–Salgado. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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