New Economics Papers
on Banking
Issue of 2007‒07‒27
five papers chosen by
Roberto J. Santillán–Salgado, EGADE-ITESM

  1. Financial governance of banking supervision By Donato Masciandaro; María J. Nieto; Henriëtte Prast
  2. Universal Banking, Conficts of Interest and Firm Growth. By Lili Xie
  3. Mergers and Acquisitions in the Colombian Financial Sector (Impact on Efficiency 1990 – 2005) By Sergio Clavijo; Carlos I. Rojas; Camila Salamanca; Germán Montoya
  4. Financial Sector Deepening and Economic Growth: Evidence from Turkey By Ardic, Oya Pinar; Damar, H. Evren
  5. Network Effects in Risk Sharing and Credit Market Access: Evidence from Istanbul By Adaman, Fikret; Ardic, Oya Pinar; Tuzemen, Didem

  1. By: Donato Masciandaro (University of Bocconi - Department of Economics (DEP)); María J. Nieto (Banco de España); Henriëtte Prast (de Nederlandsche Bank (Netherlands Central Bank))
    Abstract: This article analyses the economics of financing banking supervision and attempts to respond to two questions: What are the most common financing practices? Can the differences in current financing practices be explained by country specific factors? We perform an empirical analysis that identifies the determinants of the financing structure of banks´ prudential supervision using a sample of 90 banking supervisors (central banks and financial authorities). We conclude that supervisors in central banks are more likely publicly funded, while financial authorities are more likely funded via a levy on the regulated banks. The financing rule is also explained by the structure of the financial systems. Public funding is more likely in bank oriented structures. Finally, the geographical factor is also significant: European bank supervisors are more oriented towards the private funding regime. In general, we do not find evidence of the role of the political factor, the size of the economy, the level of development and the legal tradition.
    Keywords: banking supervision, budgetary governance, central banks, financial authorities
    JEL: D78 G21 G28 O17 P16
    Date: 2007–07
  2. By: Lili Xie (Department of Economics, Ball State University)
    Abstract: This paper studies the relationship between universal banking and firm performance. With 40 developing and developed countries, I find that the overall effect of universal banking on firm growth is negative. This suggests that the negative effect of conflicts of interest dominates the positive effect of economies of scale and scope in universal banking. However, in countries with stronger protection of creditors' rights and higher information effciency, conflicts of interest are less likely and the negative relationship between universal banking and firm growth is significantly weaker.
    Keywords: Universal Banking, Firm Incentive, Con°icts of Interest, Economies of Scope, Economies of Scale.
    JEL: G21 O16
    Date: 2007–07
  3. By: Sergio Clavijo; Carlos I. Rojas; Camila Salamanca; Germán Montoya
    Abstract: Colombia has witnessed a renewed interest in merging and acquiring financial institutions during 2003-2005. These have been “complementary mergers” that seek to exploit economies scale and scope. This process contrasts favorably with those mergers & acquisitions that occurred during the mid-1990s, which involved mainly “twin institutions” that lacked potential for gaining multiproduct efficiency. This document analyzes the need to remove some of the regulatory constraints that obstruct further exploitation of such economies of scale-scope and quantifies the “cost efficiencies” shown by the Colombian banking sector (1994-2005). At the aggregate level, we found (absolute) banking efficiency to be around 63%, a similar value to those found in related studies post-crisis. This implies that banks operating in Colombia have been able to recover their efficiency levels during postcrisis 2003-2005, except for mortgage institutions. We highlight regulatory barriers that could be removed to help the banking system move closer to the optimal production frontier.
    Date: 2006–07–31
  4. By: Ardic, Oya Pinar; Damar, H. Evren
    Abstract: This paper analyzes the effects of financial sector deepening on economic growth using a province-level data set for 1996-2001 on Turkey. This period is associated with a weakly regulated and relatively unsupervised expansion of the banking sector which led to the 2001 financial crisis. Contrary to findings in the previous literature, our results indicate a strong negative relationship between financial deepening-both public and private-and economic growth. In light of the developments in the period of analysis, this result is not surprising, as the main function of the banking sector at that time was to provide financing for the Turkish Treasury, which channeled these funds to the government-albeit mainly for rent distribution purposes. However, it is important to note that the growth of private banking sector needs yet to be examined separately, as government ownership of banks may distort the development of the banking sector as a whole. Yet, it is possible to conclude that financial development may not always contribute to economic growth, and the conditions under which such a contribution takes place should be investigated further.
    Keywords: Financial sector; Economic growth; Panel data; GMM; Turkey
    JEL: G21 O16 O4
    Date: 2006–11
  5. By: Adaman, Fikret; Ardic, Oya Pinar; Tuzemen, Didem
    Abstract: It is a truism that households in developing countries that face idiosyncratic income/expenditure shocks may face difficulties in smoothing consumption through formal credit institutions, and hence rely, at least partially, on informal ties. While this issue has been explored extensively in the literature for rural areas, the picture reflecting the urban setting remains relatively uninvestigated. This paper aims to fill this gap by presenting an exclusively designed survey implemented in Istanbul. The results of a multi-stage logit estimation of the survey data indicate that monetary transfers from social networks and formal loans are complements, while general usage of network help implies an increased likelihood of asking for network help for easy and/or favorable access to credit. In addition, material security emerges as the key determinant of both eligibility for and use of a formal loan, and of having network help available in easing the loan approval process by banks.
    Keywords: Social networks; risk sharing; credit market access; Turkey; household survey.
    JEL: C35 O18 Z13 D12 C42
    Date: 2006–12–01

This issue is ©2007 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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