nep-ban New Economics Papers
on Banking
Issue of 2015‒12‒12
eight papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. The influence of risk-taking on bank efficiency: evidence from Colombia By Miguel Sarmiento; Jorge E. Galán
  2. Backtesting Systemic Risk Measures During Historical Bank Runs By Brownlees, Christian; Chabot, Benjamin; Ghysels, Eric; Kurz, Christopher J.
  3. Social Capital and Debt Contracting: Evidence from Bank Loans and Public Bonds By Hasan, Iftekhar; Hoi, Chun-Keung (Stan); Wu, Qiang; Zhang , Hao
  4. Is it Worth Being Transparent? Evidence from the Russian Banking System By Irina Andrievskaya; Mikhail Raschupkin
  5. Lending Standards, Credit Booms, and Monetary Policy By Elena Afanasyeva; Jochen Guntner
  6. Banking Crises in Emerging Economies: Can Credit Variables Work as Early Warnings? By Martina Jasova
  7. Information Asymmetry and Financial Development Dynamics in Africa By Asongu, Simplice; Nwachukwu, Jacinta; Tchamyou, Vanessa
  8. Mobile Money Adoption and Financial Inclusion Objectives: A Macroeconomic Approach through a Cluster Analysis By Maëlle Della Peruta

  1. By: Miguel Sarmiento (Banco de la República, Colombia and Tilburg University); Jorge E. Galán (Banco de España)
    Abstract: This paper presents a stochastic frontier model with random inefficiency parameters which captures the influence of risk-taking on bank efficiency and distinguishes the effects among banks with different characteristics. The model is fitted to a 10-year sample of Colombian banks. Cost and profit efficiency are found to be over and underestimated, respectively, when risk measures are omitted or are not accurately modelled. Moreover, the magnitudes at which similar levels of risk affect bank efficiency vary with size and affiliation. In particular, domestic and small Colombian banks benefit more from being highly capitalised, while large and foreign banks benefit from higher exposure to credit and market risk. Holding more liquid assets is found to affect efficiency only at domestic banks. Lastly, we identify some channels that can explain these differences and provide insights for prudential regulation.
    Keywords: bank efficiency, Bayesian inference, heterogeneity, random parameters, risktaking, stochastic frontier models
    JEL: C11 C23 C51 D24 G21 G32
    Date: 2015–12
  2. By: Brownlees, Christian (Universitat Pompeu Fabra); Chabot, Benjamin (Federal Reserve Bank of Chicago); Ghysels, Eric (University of North Carolina); Kurz, Christopher J. (Board of the Governors of the Federal Reserve System)
    Abstract: The measurement of systemic risk is at the forefront of economists and policymakers concerns in the wake of the 2008 financial crisis. What exactly are we measuring and do any of the proposed measures perform well outside the context of the recent financial crisis? One way to address these questions is to take backtesting seriously and evaluate how useful the recently proposed measures are when applied to historical crises. Ideally, one would like to look at the pre-FDIC era for a broad enough sample of financial panics to confidently assess the robustness of systemic risk measures but pre-FDIC era balance sheet and bank stock price data were heretofore unavailable. We rectify this data shortcoming by employing a recently collected financial dataset spanning the 60 years before the introduction of deposit insurance. Our data includes many of the most severe financial panics in U.S. history. Overall we find CoVaR and SRisk to be remarkably useful in alerting regulators of systemically risky financial institutions.
    Keywords: Financial crisis; Systemic risk; Stress testing; credit risk; High-frequency data
    JEL: C13 G14 G21 G28
    Date: 2015–07–02
  3. By: Hasan, Iftekhar (Fordham University and Bank of Finland); Hoi, Chun-Keung (Stan) (Saunders College of Business, Rochester Institute of Technology); Wu, Qiang (Lally School of Management, Rensselaer Polytechnic Institute); Zhang , Hao (Saunders College of Business, Rochester Institute of Technology)
    Abstract: We find that firms headquartered in U.S. counties with higher levels of social capital incur lower bank loan spreads. This finding is robust to using organ donation as an alternative social-capital measure and incremental to the effects of religiosity, corporate social responsibility, and tax avoidance. We identify the causal relation using companies with a social-capital-changing headquarter relocation. We also find that high-social-capital firms face loosened nonprice loan terms, incur lower at-issue bond spreads, and prefer bonds over loans. We conclude that debt holders perceive social capital as providing environmental pressure constraining opportunistic firm behaviors in debt contracting.
    Keywords: social capital; cooperative norm; moral hazard; cost of bank loans; public bonds
    JEL: G21 G32 Z13
    Date: 2015–11–20
  4. By: Irina Andrievskaya (National Research University Higher School); Mikhail Raschupkin (National Research University Higher School)
    Abstract: Information disclosure is considered as an important prerequisite for the efficient functioning of a financial system. Costs and benefits of information disclosure in the banking system have been extensively theoretically and empirically investigated. However, the effect of voluntary transparency on bank market power and market share is still empirically unexplored. Our paper fills this gap in the literature, examining two hundred of the largest Russian banks in the period 2004-2013. The findings confirm that voluntary transparency – absolute and relative - affects a bank’s market power and market shares. Moreover, this relation depends on the bank’s asset quality
    Keywords: banking system, voluntary information disclosure, market power, Lerner index
    JEL: G21 D22 D80
    Date: 2015
  5. By: Elena Afanasyeva; Jochen Guntner
    Abstract: This paper investigates the risk channel of monetary policy on the asset side of banks’ balance sheets. We use a factor-augmented vector autoregression (FAVAR) model to show that aggregate lending standards of U.S. banks, such as their collateral requirements for firms, are significantly loosened in response to an unexpected decrease in the Federal Funds rate. Motivated by this evidence, we reformulate the costly state verification (CSV) contract to allow for an active financial intermediary, embed the partial equilibrium contract in a New Keynesian DSGE model, and show that – consistent with our empirical findings – an expansionary monetary policy shock implies a temporary increase in bank lending relative to borrower collateral. In the model, this is accompanied by a higher default rate of borrowers.
    JEL: D53 E44 E52
    Date: 2015–12–08
  6. By: Martina Jasova (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper explores the role of private credit variables as early warning indicators (EWIs) of banking crises in context of emerging economies. The performance is evaluated by using receiver operating characteristics (ROC) curve and area under the curve (AUC) on long series on credit to the private non-financial sector. The results suggest that credit-to-GDP gap as proposed by Basel III may not be the best performing indicator to signal future banking distress in case of emerging economies. Credit growth outperforms credit-to-GDP gap in all time horizon. These findings are particularly important as they challenge the literature published on EWIs in emerged economies and highlight the need to use complementary indicators and multivariate analysis especially in the environment of emerging economies.
    Keywords: Early warning indicators, credit-to-GDP, countercyclical capital buffer, emerging markets, ROC, area under the curve
    JEL: C33 G01 G28
    Date: 2015–11
  7. By: Asongu, Simplice; Nwachukwu, Jacinta; Tchamyou, Vanessa
    Abstract: We examine policy thresholds of information sharing for financial development in 53 African countries for the period 2004-2011. Public credit registries (PCR) and private credit bureaus (PCB) are used as proxies for reducing information asymmetry whereas financial development includes all financial dimensions identified by the Financial Development and Structure Database (FDSD) of the World Bank, namely: depth, efficiency, activity and size. The empirical evidence is based on interactive Generalised Methods of Moments with forward orthogonal deviations. The following findings are established. First, PCR and PCB have negative effects on financial depth, with the magnitude of the former higher. Second, contrary to PCR which have insignificant effects, PCB has a negative impact on banking system efficiency. Third, PCR and PCB have negative impacts on financial activity, with the magnitude of the latter higher. Moreover, their marginal effects are negative. Fourth, PCR and PCB have positive effects on financial size, with the effect of the former higher. While marginal effects are positive, corresponding thresholds are not within range. Policy implications are discussed.
    Keywords: Information Asymmetry; Financial Development
    JEL: G20 G29 O16 O55
    Date: 2015–06
  8. By: Maëlle Della Peruta (University of Nice Sophia Antipolis, France; GREDEG CNRS)
    Abstract: This paper investigates the adoption patterns of Mobile Money in emerging and developing countries. Starting from macroeconomic comparative and case studies realised by practitioners experts, this paper proposes a wider macroeconomic approach based on cluster analysis as an alternative strategy for assessing similarity in adoption levels. By anchoring observations from previous studies in innovation adoption and diffusion theories, this article evaluates dissimilarity between groups of countries sharing the same adoption levels. Since the results matches with hypotheses from the innovation adoption and diffusion literature, this analysis nuances the potential of Mobile Money as an inclusive financial tool fighting banking exclusion.
    Keywords: Complementary currencies, scar effect, employability, mutual credit
    JEL: G00 O33
    Date: 2015–12

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