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on Corporate Finance |
| By: | Degryse, Hans (BOFIT); Lu, Liping (BOFIT); Ongena, Steven (BOFIT) |
| Abstract: | The recent financial crisis has reopened the debate on the impact of informal and formal finance on firm growth in developing countries. Using unique survey data, we find that informal finance is associated with higher sales growth for small firms and lower sales growth for large firms. We identify a complementary effect between informal and formal finance for the sales growth of small firms, but not for large firms. Informal finance offers informational and monitoring advantages, while formal finance offers relatively inexpensive funds. Co-funding, i.e. the simultaneous use of formal and informal finance, is the optimal choice for small firms. |
| Keywords: | informal finance; formal finance; co-funding; growth |
| JEL: | G21 G32 P29 |
| Date: | 2013–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2013_014&r=cfn |
| By: | Horvath, Roman (BOFIT); Seidler, Jakub (BOFIT); Weill, Laurent (BOFIT) |
| Abstract: | This paper evaluates the effect of bank competition on liquidity creation by banks. Thus, we contribute to the literature on both bank competition and the determinants of liquidity creation by banks. To explore this relationship, we conduct dynamic GMM panel estimations on a dataset of Czech banks from 2002 to 2010. We find that enhanced competition reduces liquidity creation, a finding we observe under different specifications, including alternative measures of liquidity creation. We explain this finding in terms of the impact of increased bank competition on the financial fragility of banks, which leads banks to reduce their lending and deposit activities. The evidence suggests that pro-competitive policies in the banking industry can reduce liquidity provision by banks. |
| Keywords: | bank competition; liquidity creation |
| JEL: | G21 |
| Date: | 2013–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2013_016&r=cfn |
| By: | Hasan, Iftekhar (Fordham University and Bank of Finland); Marinc , Matej (University of Ljubljana and ACLE) |
| Abstract: | This article investigates the nexus of competition and stability in European banking. It analyzes the European legal framework for competition policy in banking and several cases that pertain to anti-cartel policy, merger policy, and state-aid control. It discusses whether and how competition policy should be amended in order to preserve the stability of the banking system during crises. The article argues for increased cooperation between prudential regulators and competition authorities, as well as an enhanced framework for bank regulation, supervision, and resolution that could mitigate the need to change competition policy in crisis times. |
| Keywords: | banking; competition policy; financial crisis |
| JEL: | G21 G28 K21 L40 |
| Date: | 2013–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2013_007&r=cfn |
| By: | Francis, Bill (Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland); Wu, Qiang (Rensselaer Polytechnic Institute) |
| Abstract: | Using the recent financial crisis as a natural quasi-experiment, we test whether and to what extent conservative accounting affects shareholder value. We find that there is significantly positive and economically meaningful relation between conservatism and firm stock performance during the current crisis. The result holds for alternative measures of conservatism and is validated in a series of robustness checks. We further find that the relation between conservatism and firm value is more pronounced for firms with weaker corporate governance or higher information asymmetry. Overall, our paper complements LaFond and Watts (2008) by providing empirical evidence to their argument that conservatism is an efficient governance mechanism to mitigate information risk and control for agency problems, and that shareholders benefit from it. |
| Keywords: | accounting conservatism; shareholder value; financial crisis |
| JEL: | G01 M41 M48 |
| Date: | 2013–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2013_008&r=cfn |
| By: | Andersson, Fredrik N. G. (Department of Economics, Lund University); Burzynska, Katarzyna (Department of Economics, Lund University); Opper, Sonja (Department of Economics, Lund University) |
| Abstract: | This paper provides the first comparative analysis of different types of publicly owned banks operating in China between 1997 and 2008. Using principal component analysis and Granger-causality tests, this study shows that China’s state-owned commercial banks and rural credit cooperatives did not promote GDP growth during the observation period. State-owned commercial banks even had a negative effect on growth in the manufacturing sector. By contrast, state policy banks and joint stock commercial banks did promote domestic growth. China’s experience presents a more nuanced picture of state banking that goes beyond the role of ownership to consider functional and institutional differences. |
| Keywords: | China; Banking sector; Economic growth |
| JEL: | G21 O16 P30 |
| Date: | 2013–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2013_019&r=cfn |
| By: | Hearn, Bruce |
| Abstract: | This study estimates liquidity premiums using the recently developed Liu (2006) measure within a multifactor capital asset pricing model (CAPM) including size premiums and a time varying parameter model for the West African emerging market of Nigeria. The evidence suggests that liquidity factors are relevant only for financial and basic materials sector stocks while size factor is more generally relevant in explaining the cross section of stock returns in the Nigerian domestic equity market. Costs of equity estimates are high further underlining the limitations of this market as a capital-raising venue in contrast to the dominant banking sector. |
| Keywords: | Liquidity, Asset Pricing, CAPM, Africa, Nigeria |
| JEL: | G11 G12 G15 G20 O55 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47975&r=cfn |
| By: | KiHoon Jimmy Hong (Finance Discipline Group, UTS Business School, University of Technology, Sydney) |
| Abstract: | This paper investigates the sensitivity of asset and portfolio price volatility with respect to the minimum available trading interval that the price is quoted. The objective of the study is to find the theoretical impact of high frequency trading on asset and portfolio volatilities, using a simple stochastic model. The paper finds that if high frequency trading is available, both asset and portfolio price volatility tend to decrease. The result suggests that the regulators who are concerned with the volatility induced by high frequency trading should concentrate the regulatory effort on the behavioral aspect of the high frequency traders rather than on how frequent they trade. |
| Keywords: | High Frequency Trading; Volatility; Technical Analysis; Time Series Momentum |
| JEL: | G10 G18 |
| Date: | 2013–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:332&r=cfn |