Public sector borrowing requirement: A plain man's guide

With the implementation of an internal market in the UK National Health Service (NHS), interest in marketing NHS services is growing. Yet marketing practice in other sectors of the economy, and the experience of other markets in health care, raise doubts and objections as to whether marketing should be introduced in the NHS at all. Some of these objections have force, and there are important structural differences between the NHS internal market and conventional markets. Simply copying conventional marketing methods is therefore unlikely to be an effective, or even a desirable, approach to marketing in the NHS. Specific forms of marketing are required for the NHS and these forms differ for purchasing organizations, for commercialized health care providers (including NHS trusts), and for directly‐managed NHS services. Differences between these variants can be illustrated by considering the different ways in which a generic model of marketing would have to be amended for each case. The differences also suggest some policy and managerial parameters for the future development of NHS marketing.     

欧洲高收益债券市场违约风险监管研究

多年以来,欧洲一直是仅次于美国的世界第二大高收益债券市场。除了债券自身信用评级水平之外,欧洲高收益债券违约率的高低与市场监管力度以及宏观金融经济运行状况密切相关。欧洲监管当局把对高收益债券市场的监管重点放在:规范市场信息披露及信用评级标准和行为、保护投资者权益、保持交易行为的规范性和跨国界市场交易衔接处理等方面,这些监管策略的实施对控制市场违约风险起到了积极的作用。欧洲的监管经验对于今后我国高收益债券市场的尝试性推出也极具借鉴意义。     

The effect of internal control and risk management regulation on earnings quality: Evidence from Germany

We investigate the impact of mandatory internal control and risk management (ICRM) reform on earnings-based attributes of accounting quality in Germany. Although prior studies examine changes in accounting quality under SOX Sections 302 and 404, there is scant evidence of the accounting quality effects of ICRM reform in foreign jurisdictions. Such evidence is warranted given the ongoing global policy debate of ICRM reform in the post-SOX era. We extend existing research by examining changes in earnings quality following the 1998 German legislation on control and transparency (KTG). The KTG regime provides a unique setting in which the regulatory scope extends beyond internal control over financial reporting (ICFR) to include broad business and enterprise risk control. Using both a differences and difference-in-differences research design, we find that German firms experience an increase in timely loss recognition and a decrease in earnings smoothing after KTG. We also find some evidence of a decrease in loss avoidance behavior. Additional analyses show that the sensitivity of capital investment efficiency to earnings quality increases in the German market after KTG, suggesting that earnings quality effects of mandatory ICRM reform has positive consequences for capital resource allocation. Together, our results are consistent with the achievement of one of the intended outcomes of ICRM regulation—increased accounting quality through effective ICRM systems.     

中美资本市场财富效应比较研究

本文从股利支付和资本利得的角度对比分析了中美资本市场财富效应水平,并对其影响因素展开分析。研究发现,我国资本市场财富效应不够显著,A股上市公司虽然具有较高的股利支付倾向,但股利支付率和资本利得属性较弱;股利支付行为迎合监管动机较强,融资分红特征明显,股票股利支付行为具有高送转特征;资本市场估值中枢下移,指数波动性较高,资本利得属性较差。美股上市公司虽然股利支付意愿不及A股,但股利支付率和资本利得属性较强,且上市公司不存在明显的融资分红倾向。基于此,本文从控股股东属性、企业生命周期、管理层侵占行为、宏观经济和资本市场环境四个维度对A股市场财富效应水平展开深入探讨,并从提升公司质量、改善盈利能力、调整投资者结构、加强市场建设、优化股利监管制度五方面提出了改善我国资本市场财富效应的政策建议。     

The Interaction of the IFRS 9 Expected Loss Approach with Supervisory Rules and Implications for Financial Stability

This paper examines the interaction of the International Financial Reporting Standard (IFRS) 9 expected credit loss (ECL) model with supervisory rules and discusses potential implications for financial stability in the European Union. Compared to the incurred loss approach of IAS 39, the IFRS 9 ECL model incorporates earlier and larger impairment allowances and is more closely aligned with regulatory expected loss. The earlier recognition of credit losses will reduce the build-up of loss overhangs and the overstatement of regulatory capital. In addition, extended disclosure requirements are likely to contribute to more effective market discipline. Through these channels IFRS 9 might enhance financial stability. However, due to the reliance on point-in-time estimates of the main input parameters (probability of default and loss given default) IFRS 9 ECLs will increase the volatility of regulatory capital for some banks. Furthermore, the ECL model provides significant room for managerial discretion. Bank supervisors might play an important role in the implementation of IFRS 9, but too much supervisory intervention bears the risk of introducing a prudential bias into loan loss accounting that compromises the integrity of financial reporting. Overall, the potential benefits of the standard will crucially depend on its proper and consistent application across jurisdictions.     

An examination of the relative economic efficiency of mutual vs. stock savings institutions

This article employs a nonlinear system of Cobb-Douglas profit and input demand equations to analyze price and technical efficiency in a sample of presumably not-for-profit mutual and presumably profit-maximizing stock savings institutions. Theories of property rights and agency are reviewed to provide predictions of price efficiency (i.e., profit maximization and cost minimization behavior), and technical efficiency. The study makes several contributions to the literature. First, it examines the effect of ownership form on both price and technical efficiency. Second, it separately examines the effect of regulatory form on both price and technical efficiency. The model enables us to analyze the separate effects of ownership and regulatory form across a heterogeneous sample of firms. We also analyze the effects of risk in the form of two separate regulatory variables and the effect of market share on economic efficiency.     

Optimal investment and risk control for an insurer with partial information in an anticipating environment

Abstract

This paper considers an optimal investment and risk control problem under the criterion of logarithm utility maximization. The risky asset process and the insurance risk process are described by stochastic differential equations with jumps and anticipating coefficients. The insurer invests in the financial assets and controls the number of policies based on some partial information about the financial market and the insurance claims. The forward integral and Malliavin calculus for Lévy processes are used to obtain a characterization of the optimal strategy. Some special cases are discussed and the closed-form expressions for the optimal strategies are derived.     

Management Earnings Forecasts,Earnings Announcements,and Institutional Trading in China

Abstract:

In this study, we investigate the trading behavior of institutional investors in China according to management earnings forecasts (MEFs) and earnings announcements (EAs). MEFs are mandatory under the stringent regulatory framework in China. We find evidence that both MEFs and EAs have an effect on the market. However, MEFs have a bigger effect on the market than do EAs. According to a sample of semiannual observations of firms from 2003 to 2008, we find that changes in the stock ownership of institutions are positively associated with EAs but not significantly associated with MEFs. When we further examine the relations between institutional characteristics and trading strategies, we find that growth funds exploit the arbitrage opportunity of MEFs.     

Modelling the emergence of the interbank networks

Interbank contagion has become a buzzword in the aftermath of the financial crisis that led to a series of shocks to the interbank market and to periods of pronounced market disruptions. However, little is known about how interbank networks are formed and about their sensitivity to changes in key bank parameters (for example, induced by common exogenous shocks or by regulatory initiatives). This paper aims to shed light on these issues by modelling endogenously the formation of interbank networks, which in turn allows for checking the sensitivity of interbank network structures and hence, their underlying contagion risk to changes in market-driven parameters as well as to changes in regulatory measures such as large exposures limits. The sequential network formation mechanism presented in the paper is based on a portfolio optimization model, whereby banks allocate their interbank exposures while balancing the return and risk of counterparty default risk and the placements are accepted taking into account funding diversification benefits. The model offers some interesting insights into how key parameters may affect interbank network structures and can be a valuable tool for analysing the impact of various regulatory policy measures relating to banks’ incentives to operate in the interbank market.     

Myopic loss aversion,reference point,and money illusion

We use the portfolio selection model presented in He and Zhou [Manage. Sci., 2011, 57, 315–331] and the NYSE equity and US treasury bond returns for the period 1926–1990 to revisit Benartzi and Thaler’s myopic loss aversion theory. Through an extensive empirical study, we find that in addition to the agent’s loss aversion and evaluation period, his reference point also has a significant effect on optimal asset allocation. We demonstrate that the agent’s optimal allocation to equities is consistent with market observation when he has reasonable values of degree of loss aversion, evaluation period and reference point. We also find that the optimal allocation to equities is sensitive to these parameters. We then examine the implications of money illusion for asset allocation. Finally, we extend the model to a dynamic setting.     

CECL: Timely Loan Loss Provisioning and Bank Regulation

We investigate how provisioning models interact with bank regulation to affect banks' risk-taking behavior. We study an accuracy versus timeliness trade-off between an incurred loss model (IL) and an expected loss model (EL) such as current expected credit loss model or International Financial Reporting Standards 9. Relative to IL, even though EL improves efficiency by prompting earlier corrective action in bad times, it induces banks to originate either safer or riskier loans. Trading off ex post benefits versus ex ante real effects, we show that more timely information under EL enhances efficiency either when banks are insufficiently capitalized or when regulatory intervention is likely to be effective. Conversely, when banks are moderately capitalized and regulatory intervention is sufficiently costly, switching to EL impairs efficiency. From a policy perspective, our analysis highlights the roles that regulatory capital and the effectiveness of regulatory intervention play in determining the economic consequences of provisioning models. EL spurs credit supply and improves financial stability in economies where intervening in banks' operations is relatively frictionless and/or regulators can tailor regulatory capital to incorporate information about credit losses.     

企业的现金持有决策与公司治理分析

本文从公司治理的视角出发,以中国上市公司为研究样本探寻了企业现金持有量的经验决定因素。结果表明,在治理规则日渐完善的中国证券市场上,大股东侵蚀中小股东利益而中小股东仍无法有效保护自身利益的问题不容忽视。本文系统完整地回顾了企业现金持有量的经验文献;开辟了从企业决策行为角度来研究公司治理问题的新途径;结合中国证券市场的特有背景,提出了若干有关企业现金持有行为的理论假说,并用平行数据采用固定效应模型技术进行了证实或证伪;对经验分析结果的政策含义进行了相应的理论解释。     

How Does Information Disclosure Affect Bank Systemic Risk in the Presence of a Deposit Insurance System?

ABSTRACT

This article establishes a dynamic game with incomplete information to theoretically analyze the influence mechanism of information disclosure on systemic risk in the presence of a deposit insurance system. To verify the mechanism, we use panel data on 247 global banks in 41 countries during the period 2006 to 2015 in an empirical analysis. Our article finds that a high degree of information disclosure can reduce deposit insurance premiums and weaken the negative incentive from a bailout by regulatory authorities. Moreover, the effect of deposit insurance on financial stability is not apparent, but the synergistic effect of deposit insurance and information disclosure reduces bank systemic risk. Furthermore, different deposit insurance designs affect bank behavior, so it is crucial for bank supervisors to create proper deposit insurance systems, which are helpful in strengthening market discipline and preventing moral hazard thus contributing to a stable financial environment. Therefore, under the deposit insurance system, regulatory authorities should strive to improve the standard of information disclosure to ensure systemic stability.     

Domestic and multinational determinants of foreign bank profits: The case of Greek banks operating abroad

This paper examines the determinants of profits of Greek banks operating abroad by developing an integrated model that includes a set of determinants informed by the literature on the profitability of both multinational and domestic banks. The basis for our econometric analysis is provided by an unbalanced panel dataset for 19 Greek bank subsidiaries operating in 11 nations, covering the period from 1995 to 2001. The results show that the profitability of the parent bank and the operating experience of its host nation subsidiaries have a robust and positive impact on the profits of Greek banks abroad, whereas subsidiary bank size has a negative effect. Domestic financial factors reflecting stock market developments, bank-specific factors such as liquidity, loan loss provisions or cost efficiency, and market specific factors like concentration or market share in the host nations, are all insignificant in explaining Greek subsidiary banks’ profits.     

BAD taxation: Disintermediation and illiquidity in a bank account debits tax model

This paper uses a dynamic general equilibrium model to study the economic effects of bank account debits (BAD) taxation. Australia and various Latin American countries have levied or levy BAD taxes. Aspects such as financial disintermediation, market illiquidity, and impacts on dividend and interest rates are considered. Part of the BAD tax revenue may be fictitious, due to increased interest payments on government debt. The Brazilian BAD tax (CPMF) experience is evaluated. The empirical analysis confirms some theoretical predictions. Incidence base over GDP appears to be sensitive to the tax rate, possibly engendering a Laffer curve. The tax may also cause real interest rates to increase. Furthermore, the deadweight losses are relatively large, even if revenues are small. The theoretical and empirical results suggest that the BAD tax is not adequate for revenue collection. JEL Code E62 · H20     

Stock Market Crashes and the Performance of Circuit Breakers: Empirical Evidence

This study examines the behavior of a small stock market with circuit breakers and with a one-hour preauction order imbalance disclosure, during the October 1987 crash. The crash and its aftershocks lasted for a week and selling pressure was concentrated in higher beta, larger capitalization, and lower leverage firm stocks. Circuit breakers when implemented reduced the next-day opening order imbalance and the initial price loss; however, they had no effect on the long-run response. Some price overreaction and reversal phenomena also are documented.     

Disparities in Mortgage Lending,Bank Performance,Economic Influence,and Regulatory Oversight

This study investigates factors affecting changes in the disparity of home mortgage denial rates between white and minority loan applicants in the U.S. during the period 1991–1997. We develop a two-stage least-squares regression model that incorporates applicant-level characteristics, neighborhood characteristics, regional economic data, and bank-specific data as explanatory variables. Some have argued that mortgage lenders were under increasing pressure from industry regulators to extend additional credit to minorities and low-income groups during the period under study. The model includes each institution's periodic CRA rating as a proxy for regulatory influence. An alternative explanation is that market forces, such as improvements in economic conditions and in bank financial condition and performance, affected default loss estimates and credit standards in a way that disproportionally benefited minority and low-income applicants. The empirical findings are consistent with the latter hypothesis. We conclude that policy makers should consider the impact of market factors when assessing the allocation of mortgage credit in a particular demographic market. The findings also underscore the importance of controlling for lender assessments of credit risk when evaluating compliance with CRA and fair lending statutes.     

Market and Political/Regulatory Perspectives on the Recent Accounting Scandals

Not surprisingly, the recent accounting scandals look different when viewed from the perspectives of the political/regulatory process and of the market for corporate governance and financial reporting. We do not have the opportunity to observe a world in which either market or political/regulatory processes operate independently, and the events are recent and not well researched, so untangling their separate effects is somewhat conjectural. This paper offers conjectures on issues such as: What caused the scandalous behavior? Why was there such a rash of accounting scandals at one time? Who killed Arthur Andersen—the Securities and Exchange Commission, or the market? Did fraudulent accounting kill Enron, or just keep it alive for too long? What is the social cost of financial reporting fraud? Does the United States in fact operate a “principles‐based” or a “rules‐based” accounting system? Was there market failure? Or was there regulatory failure? Or both? Was the Sarbanes‐Oxley Act a political and regulatory overreaction? Does the United States follow an ineffective regulatory model?     

金融监管信号传递与金融市场有效运行

金融市场是金融监管当局与金融市场参与者之间动态博弈、合作共生的信息不对称系统。通过把信号博弈和重复博弈思想引入金融监管理论研究,构建以金融市场有效运行为反馈信号的金融监管当局与金融市场参与者之间的监管信号传递模型,分析金融市场治理中有效监管信号的传递机制。结果表明：金融监管力度与金融市场有效运行水平之间存在分离、混同两种均衡关系;在金融监管声誉效应的驱动下,金融监管当局倾向于选择混同均衡策略,而不是分离均衡。因而只有建立通畅的金融监管信号传递及反馈机制,强化并放大金融监管信号显示,增大监管乘数效应,形成良性的监管声誉效应,才能保障金融市场的有效运行。