nep-cfn New Economics Papers
on Corporate Finance
Issue of 2016‒03‒10
ten papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Management Board Composition of Banking Institutions and Bank Risk-Taking: The Case of the Czech Republic By Diana Zigraiova
  2. Bank Lending Technologies and SME Credit Rationing in Europe in the 2009 Crisis By Giovanni Ferri; Pierluigi Murro; Zeno Rotondi
  3. A simple model for cash flow management in nonprofits By Malki, Elli
  4. Effects of internationalization, privatisation and demutualization of the financial sector on supply of finance and stability By Alfred Janc; Pawel Marszalek
  6. Competition and corporate control in partial ownership acquisitions By Stühmeier, Torben
  7. Where the Wild Things Are: Measuring Systemic Risk through Investor Sentiment By Ergungor, O. Emre
  8. Estimating Cost Efficiency of Turkish Commercial Banks under Unobserved Heterogeneity with Stochastic Frontier Models By Hakan Güneş; Dilem Yıldırım
  9. Who gains from credit granted between firms? Evidence from inter-corporate loan announcements made in China By He, Qing; Lu, Liping; Ongena, Steven
  10. Valuation and parities for exchange options By Constantinos Kardaras

  1. By: Diana Zigraiova
    Abstract: The paper investigates how the management board composition of banking institutions affects their risk-taking behavior in the Czech Republic. More specifically, we examine the effect of average director age, the proportion of female directors, the proportion of non-national directors, and director education level on four different bank risk proxies. We build a unique data set comprising selected biographical information on the management board members of Czech financial institutions holding a banking license over the 2001-2012 period. Our most robust finding is that higher proportions of non-national directors increase bank risk as measured by profit volatility and reduce bank stability as captured by the Z-score for the Czech banking sector overall and for the segments of general commercial banks, small and mid-sized banks and adequately capitalized banks. Moreover, we also detect risk-increasing implications of board size for the segments of building societies and small and mid-sized banks. As for average board tenure, its effect on risk-taking varies depending on bank characteristics. We find mixed evidence on the effect of female directors and do not find any strong effect of directors' age on risk in the Czech banking sector. All in all, the results of our analysis are subject to the proxy of bank risk used. The reader should keep in mind that higher absolute level of bank risk is not necessarily unfavorable as it does not capture if risk-taking behavior is excessive for a given return.
    Keywords: Banks, management board composition, panel data, risk-taking
    JEL: C33 G21 G34 J16
    Date: 2015–12
  2. By: Giovanni Ferri (LUMSA University); Pierluigi Murro (LUMSA University); Zeno Rotondi (UniCredit Bank)
    Abstract: The first wave of the global financial crisis hit Europe in the last part of 2008 and through 2009. With banks in a tailspin, credit rationing intensified – as measured in various different ways – particularly for the small and medium sized enterprises (SMEs). The extent of such retrenchment in the supply of credit could reflect not only the worsened general condition of the European banks but also vary at the micro level depending on the lending technologies being used in the SME-main bank rapport. Using the EFIGE database, we examine SME credit rationing in seven EU countries (Austria, France, Germany, Hungary, Italy, Spain and the UK) and try to assess the extent to which differences in the lending technologies and in the status of the firm-main bank relationship contributed to the phenomenon. We find that a firm matching with a bank using the transactional lending technology was more likely to end up rationed for credit during the first part of the financial crisis.
    Keywords: Bank-Firm Relationships, Asymmetric Information, Credit Rationing.
    JEL: G21 D82 G30
    Date: 2016–02
  3. By: Malki, Elli
    Abstract: Cash flow management is one of the most significant challenges that face nonprofit organizations. A shortage is cash, even if it's temporary, is a major risk factor for the organization. Nevertheless the standard method for cash flow management – a cash flow projection - does not produce satisfactory results for nonprofits. The weak point of the cash flow projection method is that it ignores the inherent unpredictability of the income stream. This is a typical characteristic of the nonprofits sector, due to its reliance on income stream from donations and grants. In this article I present a simple simulation model that overcomes this problem. The simulation model connects between the cash flow and the accounting data. It enables the organization to assess its cash flow risk, and to analyze different scenarios that can eliminate the risk. The model was tested in several nonprofit organizations, and the article presents its implementation in one of them.
    Keywords: Nonprofits, financial management, cash flow, NGO
    JEL: G32 L30 L31 M41
    Date: 2016–02–23
  4. By: Alfred Janc (The Poznan University of Economics, Department of Money and Banking); Pawel Marszalek (The Poznan University of Economics, Department of Money and Banking)
    Abstract: The last fifty years brought along rapid changes in the conditions of functioning financial and monetary systems. They were connected, among others, with such factors as globalization and internationalization of the financial markets and institutions, liberalization and deregulation, disintermediation, demutualization, technological progress or, last but not least, financialization. Those processes have contributed to changes in creation and regulation of money, in functioning of financial intermediaries (as well as changes of those institutions themselves), processes and savings and investments, as well as to changes in ownership and structure of the domestic financial systems and economies. The aimof the paper is to characterize, also in the context of the Global Financial Crisis of 2007, features and consequences of three among mentioned processes, namely financial systems internationalization, demutualization of financial institutions and privatization of them, and to draw some insights on their potential influence on stability of financial systems and economic performance. First, we present internationalization processes and its different aspects. Then, we describe demutualization and its impact. After that we present survey of studies on privatization in the financial sector
    Keywords: internationalization, privatisation, de-mutualization, financial sector, financialization
    JEL: G21 G28
    Date: 2015–09–01
  5. By: Cenk Gokce ADAS (Istanbul University, Faculty of Economics); Bibigul Tussupova (Ministry of National Economy,)
    Abstract: This study set out to examine impact of the global financial crisis on the stock markets returns of China, Japan, India, and USA through E-GARCH model and further it investigates the nature of volatility spillovers between stock indices during the global financial meltdown using Granger Causality test. Daily stock prices are used for the period from 6th of January, 2006 to 22nd of April 2011. The main findings are as follows; in all stock markets high volatility and setback on the daily returns exist due to the financial crisis. Further the global financial crisis less affected China’s stock exchange than the other stock markets whereas it influenced USA stock markets in large extent. Also stock returns volatility get moderated in the major Asian Countries stock markets after post crisis period but it has been remained in USA stock exchanges. Granger causality test shows that after the onset of the financial crisis, the USA stock markets have bidirectional influences on each other, but didn’t receive any volatility spillover from major Asian Countries stock markets. Indian stock market receives volatility spillover from all the stock markets. Japanese stock market receives volatility spillover only from USA stock markets. Chinese stock exchange doesn’t receive any volatility spillover from stock exchanges which examined in this paper.
    Keywords: Volatility Spillover; Financial crisis; China, Japan, India and USA Stock Markets; E-GARCH; Granger Causality.
    JEL: C58 G01
  6. By: Stühmeier, Torben
    Abstract: Competition authorities have a growing interest in assessing the effects of partial ownership arrangements. We show that the effects of such agreements on competition and welfare depend on the intensity of competition in the market and on the firms' governance structure. When assessing the effects of partial ownership, competition policy has to consider both the financial interest and level of control of the acquiring firm in the target firm.
    Keywords: corporate control,merger,partial acquisition
    JEL: L11 L13 L41
    Date: 2016
  7. By: Ergungor, O. Emre (Federal Reserve Bank of Cleveland)
    Abstract: In this paper, I develop a systemic risk measure derived from investor sentiment that has predictive power over future economic activity and market returns. Unlike existing measures, it is not focused on flagging investors’ heightened awareness of risk at the end of a boom episode but rather on capturing shifts in their trading behavior at the beginning of the episode. The method allows investors and regulators to observe industries in which risks could be building and provides regulators some lead time in deploying their macroprudential tools.
    Keywords: Financial stability; Systemic risk; Investor sentiment; Risk management;
    JEL: G01 G11 G12 G18 G28
    Date: 2016–02–19
  8. By: Hakan Güneş (Department of Economics, METU); Dilem Yıldırım (Department of Economics, METU)
    Abstract: This study aims to investigate the cost efficiency of Turkish commercial banks over the restructuring period of the Turkish banking system, which coincides with the 2008 financial global crisis and the 2010 European sovereign debt crisis. To this end, within the stochastic frontier framework, we employ a modified version of the true fixed effect model of Greene (2005), where the unobserved bank heterogeneity is integrated in the inefficiency distribution at a mean level. To select the cost function with the most appropriate inefficiency correlates, we first adopt a search algorithm and then utilize the model averaging approach of Huang and Lai (2012) to verify that our results are not exposed to model selection bias. Overall, our empirical results reveal that cost efficiencies of Turkish banks have improved over time, with the effects of the 2008 and 2010 crises remaining rather limited. Furthermore, not only the cost efficiency scores but also impacts of the crises on those scores appear to vary with regard to bank size and ownership structure, in accordance with much of the existing literature.
    Keywords: Stochastic Frontier, Cost Efficiency, Turkish commercial banks, Panel Data
    JEL: C23 C24 D21 G21 G28
    Date: 2016–03
  9. By: He, Qing; Lu, Liping; Ongena, Steven
    Abstract: Who gains from inter-corporate credit? To answer this question we measure the impact of the announcements of inter-corporate loans in China on the stock prices of the firms involved. We find that the average abnormal return for the issuers of inter-corporate loans is significantly negative, whereas it is positive for the receivers. Issuing firms may be perceived by investors to have run out of worthwhile projects to finance, while receiving firms are being certified as creditworthy. Subsequent firm performance and investment confirms these valuations as overall accurate.
    Keywords: entrusted loan,inter-corporate loan,credit misallocation,certification
    JEL: G30 G14 G21
    Date: 2016
  10. By: Constantinos Kardaras
    Abstract: Valuation and parities for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, the possibility of default, and “bubbles” in asset prices. The formulas are given via expectations of auxiliary probabilities using the change-of-numéraire technique. Extensive discussion is provided regarding the way that folklore results such as Merton's no-early-exercise theorem and traditional parities have to be altered in this more versatile framework.
    Keywords: exchange options; parities; change of numeraire
    JEL: F3 G3
    Date: 2015

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