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on Banking |
| By: | F. Gulcin Ozkan; Ahmet Kipici; Mustafa Ismihan |
| Abstract: | This paper develops an analytical framework to explore how financial sector characteristics shape domestic debt dynamics in emerging market economies. Our analysis suggests that the more competitive the banking sector and the more liquid and deeper the deposit market, the better would be the conditions in the public securities market. Our results also reveal that the lower the financial depth, the greater the scale of private sector credits that are crowded-out by public borrowing. To the extent that credit availability is associated with improved productivity and better output performance, the lack of financial depth in emerging market countries implies that extensive domestic borrowing in these countries may have consequences far beyond the concern with fiscal sustainability. As such, our results higlight the importance of developing domestic debt markets for financial and macroeconomic stability. |
| Keywords: | Financial sector; public debt; cost of borrowing. |
| JEL: | E52 E63 H63 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:08/11&r=ban |
| By: | Enrique G. Mendoza; Marco E. Terrones |
| Abstract: | This paper proposes a methodology for measuring credit booms and uses it to identify credit booms in emerging and industrial economies over the past four decades. In addition, we use event study methods to identify the key empirical regularities of credit booms in macroeconomic aggregates and micro-level data. Macro data show a systematic relationship between credit booms and economic expansions, rising asset prices, real appreciations, widening external deficits and managed exchange rates. Micro data show a strong association between credit booms and firm-level measures of leverage, firm values, and external financing, and bank-level indicators of banking fragility. Credit booms in industrial and emerging economies show three major differences: (1) credit booms and the macro and micro fluctuations associated with them are larger in emerging economies, particularly in the nontradables sector; (2) not all credit booms end in financial crises, but most emerging markets crises were associated with credit booms; and (3) credit booms in emerging economies are often preceded by large capital inflows but not by financial reforms or productivity gains. |
| JEL: | E32 E44 E51 F3 G21 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14049&r=ban |
| By: | Marc Pröpper; Iman van Lelyveld; Ronald Heijmans |
| Abstract: | We present the application of network theory to the Dutch payment system with specific attention to systemic stability. The network nodes comprise of domestic banks, large international banks and TARGET countries, the links are established by payments between the nodes. Traditional measures (transactions, values) first show payments are relatively well behaved through time and that the system does not contain a group of significant structural net receivers or payers among the participant institutions. Structural circular flows do, however, exist in the system, most prominently a large circular net flow between TARGET countries. Analysis of the properties of prominent network measures over time shows that fast network development takes place in the early phase of network formation of about one hour and slower development afterwards. The payment network is small (in actual nodes and links), compact (in path length and eccentricity) and sparse (in connectivity) for all time periods. In the long run, a mere 12% of the possible number of interbank connections is ever used and banks are on average only 2 steps apart. Relations in the network tend to be reciprocal. Our results also indicate that the network is susceptible to directed attacks. In a final section we show that the recent sub prime' turmoil in credit markets has not materially affected the network structure. |
| Keywords: | network; topology; interbank; payment; systemic risk; financial stability |
| JEL: | G1 E5 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:177&r=ban |
| By: | Shin-ichi Fukuda (Faculty of Economics, University of Tokyo); Munehisa Kasuya (esearch and Statistics Department, Bank of Japan); Kentaro Akashi (Graduate School of Economics, University of Tokyo) |
| Abstract: | Empirical studies in corporate finance have long been focused on the role of banks in reducing the costs of financial distress. The environment and events in Japan provide a "natural experiment" that allows such empirical studies. The number of bankruptcies steadily increased throughout the 1990s, and peaked in 2000. During this period, Japan's banking sector, in contrast, faced considerable problems regarding the disposal of their bad loans. The purpose of this paper is to investigate how various measures of bank health and how defaults of major trading partners affected the probability of bankruptcy among medium-size firms in Japan. Using probit models, we examine the causes of bankruptcy for unlisted Japanese companies in the late 1990s and early 2000s. We find that several measures of bank-specific financial health have had significant impacts on a borrower's probability of bankruptcy, even when observable characteristics relating to these borrower's financial variables are controlled. In particular, a close bank-firm relationship-which usually reduces the probability of bankruptcy-exacerbates the impacts of a financial crisis, which substantially damages other bank health measures as well. |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2008cf564&r=ban |
| By: | Rodrigo Canales (MIT Sloan School of Management); Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit) |
| Abstract: | Using loan-level data from Mexico, we study the relationship between the organizational structure of banks and the terms of lending to small businesses. We find that banks with decentralized lending structures - where branch managers have autonomy over the terms of lending - give larger loans to small firms and those with more "soft information" - particularly in states with weak legal enforcement of financial contracts. However, decentralized banks are also more responsive to the competitive environment when setting loan terms. They are more likely to restrict credit and to charge higher interests rates when they have market power, more so to smaller firms that have fewer outside options for external finance. These findings highlight a 'darker side' to decentralized banks and suggest that the relative benefit of a decentralized bank structure for small business lending depends critically on the nature of the competitive environment in which banks are located. |
| Keywords: | Banks, Institutions, Entrepreneurship |
| JEL: | F22 L14 L26 L86 O17 O19 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:08-101&r=ban |
| By: | Bandyopadhyay, Arindam; Saha, Asish |
| Abstract: | Through RAROC and EVA tools, Banks can establish a good risk management culture that can create competitive advantage and improve shareholder value |
| Keywords: | RAROC; EVA; Integrated Risk Management; Banking |
| JEL: | L25 G31 G21 M21 |
| Date: | 2007–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8920&r=ban |
| By: | Giannetti, C. (Tilburg University, Center for Economic Research) |
| Abstract: | The paper proposes the use of panel data unit root tests to assess market share instability in order to have (preliminary) indications of the industry dynamic. The idea is to consider the movements in market shares not only as element of the market structure but rather reflecting conduct that arise from that market. If shares are mean-reverting, the firm actions only have a temporary effect on shares. On the other hand, if they are evolving, as signaled by the presence of unit roots, the gain in shares respect with the competitors could be long-term. To illustrate the potential of unit roots tests, I consider an application to the Italian retail banking industry. |
| Keywords: | Turbulence;cross-section dependence. |
| JEL: | C23 D40 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200844&r=ban |