nep-cfn New Economics Papers
on Corporate Finance
Issue of 2017‒01‒15
seven papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Real Effects of Securitization By Tobias Berg; Daniel Streitz; Michael Wedow
  2. Empirical Evidence on "Systemic as a Herd": The Case of Japanese Regional Banks By Naohisa Hirakata; Yosuke Kido; Jie Liang Thum
  3. Sectoral Loan Concentration and Bank Performance (2001-2014) By Regehr, Kristen; Sengupta, Rajdeep
  5. Assessing the Overall Performance of Microfinance Institutions By Chrysovalantis Gaganis
  6. Creditor rights, culture and dividend payout policy By Thomas O'Connor; Julie Byrne
  7. Determinants of Bank Lending in Europe and the US. Evidence from Crisis and Post Crisis Years By Brunella Bruno; Alexandra D’Onofrio; Immacolata Marino

  1. By: Tobias Berg; Daniel Streitz; Michael Wedow
    Abstract: We assess the impact of securitization on corporate credit supply and real effects such as investment, sales, and employment. Exploiting the staggered entry of banks in the CLO markets, we document that firms are able to borrow larger amounts after their bank becomes securitization active. The increased use of debt financing increases investment in cash acquisitions as well as firms’ asset, sales, and employment growth. Consistent with a causal effect of securitization, all effects are concentrated in the set of BB/B-rated firms, i.e., firms whose loans are purchased by CLO vehicles. Overall, our results suggest that increased loan supply through securitization can affect real firm outcomes.
    Keywords: Securitization, Credit Supply, Real Effects, Collateralized loan obligations (CLOs), Institutional Investors, Syndicated loans
    JEL: G21 G23 G31 G32
    Date: 2015
  2. By: Naohisa Hirakata (Bank of Japan); Yosuke Kido (Bank of Japan); Jie Liang Thum (Monetary Authority of Singapore)
    Abstract: We examine a sample of Japanese regional banks and explore whether exposure to market risk factors affects systemic risk through a banks' portfolio composition or revenue source, using Adrian and Brunnermeier's (2016) CoVaR to proxy for systemic risk. We find evidence of "systemic as a herd" behavior among Japanese regional banks, as portfolio and revenue components associated with market activities exert positive and significant impacts on systemic risk by generating higher comovement among banks, even though they reduce standalone bank risk through portfolio diversification. Further, the marginal effect of an increase in a given banks' market-related components on systemic risk is larger when the share of the corresponding components is already high among other banks. Our results have important implications from the macro-prudential perspective.
    Keywords: Systemic risk; Herd behavior; Market risk factors; CoVaR
    JEL: D21 G28 G32 G38
    Date: 2017–01–12
  3. By: Regehr, Kristen (Federal Reserve Bank of Kansas City); Sengupta, Rajdeep (Federal Reserve Bank of Kansas City)
    Abstract: Sectoral loan concentration can influence the size-profitability relationship for banks and the likelihood of bank survival. Switching specializations increases the hazard of failure but decreases the odds of being acquired.
    Keywords: Commercial banks; Loan concentration; Bank failures; Acquisitions
    JEL: G21 G33 G34
    Date: 2016–11–01
  4. By: Malgorzata Olszak (Department of Banking and Money Markets, Faculty of Management, University of Warsaw, Poland); Iwona Kowalska (Department of Mathematics and Statistical Methods, Faculty of Management, University of Warsaw, Poland); Sylwia Roszkowska (Faculty of Economic and Social Sciences, University of £ódŸ, National Bank of Poland, Poland)
    Abstract: In this paper we ask about the capacity of macroprudential policies to reduce the positive association between loans growth and the capital ratio. We focus on aggregated macroprudential policy measures and on individual instruments and test whether their effect on the association between lending and capital depends on bank size, the economic development of a country as well as on the extent of capital account openness. Applying the GMM 2-step Blundell and Bond approach to a sample covering over 60 countries, we find that macroprudential policy instruments reduce the impact of capital on bank lending during both crisis and non-crisis times. This result is stronger in large banks than in other banks. Of individual macroprudential instruments, only borrower-targeted LTV caps and DTI ratio weaken the association between lending and capital. Our results also show that the effect of macroprudential policies on the association between lending and the capital ratio in non-crisis periods is stronger in advanced countries than in emerging countries. Additionally, differentiating by the level of capital account openness, we find that macroprudential policies are more effective in increasing the resilience of banks and thus weakening the association between loan supply and capital ratio for relatively closed economies but less effective for relatively open economies. Generally, with our study we are able to support the view that macroprudential policy has the potential to curb the procyclical impact of bank capital on lending and therefore, the introduction of more restrictive international capital standards included in Basel III and of macroprudential policies are fully justified.
    Keywords: loan supply, capital ratio, procyclicality, macroprudential policy
    JEL: E32 G21 G28 G32
    Date: 2016–08
  5. By: Chrysovalantis Gaganis (Department of Economics, University of Crete, Greece)
    Abstract: Microfinance institutions which specialize on the provision of financial services to low-income clients and micro-entrepreneurs have grown significantly in recent years. Lützenkirchen and Weistroffer (2012) highlight that MFIs had extended loans to more than 200 million clients by the end of 2010, whereas through various socio-economic ties of the borrowers and their families, microfinance has influenced the lives of around 1 billion people in emerging and developing countries. Another particular characteristic of the MFIs’ borrowers is that they usually lack credit history and collateral which limits their access to financing from traditional commercial banks (Banerjee and Duflo, 2007). Therefore, it is not surprising that MFIs have attracted considerable attention by academics and policy makers, with recent studies focusing on a variety of topics like the impact of microfinance on poverty or child health outcomes (Imai et al., 2012; DeLoach and Lamanna, 2011), competition between microfinance non-governmental organizations (Ly and Mason, 2012), microfinance and female empowerment (Ngo and Wahhaj, 2012), the use of credit scoring models from MFIs (Blanco et al., 2013; Cubiles-De-La-Vega et al., 2013), the diversification benefits from adding microfinance funds to a portfolio of risky international assets (Galema et al., 2011), the drivers of buffer capital (Tchuigoua, 2016), and the determinants of governance quality (Tchuigoua, 2015). The aim of the present study is twofold. The first aim is to provide an overall measure of the performance of MFIs. As discussed in Devinney et al. (2010), the performance of firms is of central interest to managers, researchers and policy makers; however, there is little convergence of opinion on how performance should be measured. To this end, Devinney et al. (2010) argue in favour of an overall measure of performance. This becomes even more crucial in the case of MFIs, due to the double challenge that they face. More detailed, MFIs not only have to provide financial services to the poor (outreach), but they also have to cover their costs to avoid bankruptcy (sustainability). Furthermore, as mentioned in von Stauffenberg et al. (2003) all performance indicators tend to be of limited value when examined in isolation and this is particularly the case for the profitability indicators of MFIs. They also highlight that to understand how an institution achieves its profits the analysis must also take into account other indicators that influence the operational performance of the institution, such as operational efficiency and portfolio quality. Finally, the profitability analysis is further complicated by the fact that a significant number of MFIs receive grants and subsidized loans. Therefore, ideally various dimensions should be taken simultaneously into account in the assessment of their performance. Nonetheless, as discussed in Weber and Luzzi (2007) very few attempts have been made to aggregate the numerous indicators of MFI’s performance into a single measure and most of the studies simply compare the financial condition of MFIs on the basis of univariate tests of individual ratios such as the return on assets (e.g. Bi and Pandey, 2011; Agarwal and Sinha, 2010). Zeller et al. (2003) propose the construction of an overall measure; however, their suggestions are limited to the assignment of arbitrary weights to the indicators or the derivation of weights through principal components analysis (e.g. Weber and Luzzi, 2007). A few recent papers also estimate the efficiency and/or productivity of MFIs using frontier techniques (e.g. Servin et al., 2012; Wijesiri et al., 2015; Wijesiri and Meoli, 2015), which provide an overall score. However, the majority of these studies tend to measure how efficient the MFIs are in transforming inputs (e.g. number of credit officers, total assets) to outputs (e.g. financial revenue), while ignoring other aspects like portfolio risk and capital strength.[1] In this paper, I follow a different approach, and I propose the use of the PROMETHEE II multicriteria method that summarizes both the financial and social performance of MFIs in a single score of relative performance on the basis of pairwise comparisons across a set of often conflicting criteria.[2] The second aim of the present study is to explain differences in the overall performance indicator, obtained from the PROMETHEE II method, on the basis of firm-specific and country-specific attributes. The investigation of the determinants of performance has attracted the interest of researchers from the fields of international business, strategic management, and finance (e.g. McGahan and Porter, 2002; Joh, 2003; Short et al., 2007; McGahan and Victer, 2010). However, MFIs are considerably under-research compared to non-financial firms and traditional banking institutions. The few existing studies examine the impact of firm-level attributes such as corporate governance and legal status (Hartarska, 2005; Mersland and Strøm, 2009; Tchakoute-Tchuigoua, 2010) or country-level characteristics such as regulations, macroeconomics, and institutional development (Cull et al., 2011; Ahlin et al., 2011) on single indicators of the profitability and growth of MFIs.
    Keywords: microfinance, performance, Promethee II
    JEL: G21 G10
    Date: 2016–09–22
  6. By: Thomas O'Connor (Department of Economics, Finance and Accounting, Maynooth University.); Julie Byrne (UCD Smurfit Graduate Business School,University College Dublin)
    Abstract: We study how creditor rights and culture interact with one another to influence corporate dividend payout policy. Where creditor rights are strong, creditors accept the status quo, which are large dividends in individualist and small dividends in collectivist traditions, respectively. Culture influences dividend payout where creditor rights are weak. In collectivist countries where group cohesion among corporate stakeholders results in perceived lower agency costs of debt and equity, creditors place few if any restrictions on dividend payout given weak creditor rights. In contrast, in individualist traditions, creditors continue to restrict dividend payouts under weak creditor rights. Our findings emphasize the importance of accounting for the interactions between creditor rights and culture in determining dividend policy. Classification-G30; G35
    Keywords: National culture; creditor rights; dividend policy
    Date: 2017
  7. By: Brunella Bruno (Università Bocconi); Alexandra D’Onofrio (Assonime); Immacolata Marino (Università di Napoli Federico II and CSEF)
    Abstract: We investigate bank lending patterns and their determinants in Europe and the US over 2008-2014. Precisely, we relate bank characteristics prior to the financial crisis to their lending behaviour during and after the crisis period. Our analyis confirms the existence of a bank lending channel, that is stronger in Europe than in the US and especially if we look at corporate loans rather than at the whole loan portfolio.
    Keywords: bank loans, corporate loans, bank lending channel, crisis.
    JEL: G21 G18 G01
    Date: 2017–01–09

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