Unintended costs of a dual regulatory environment: Evidence from state-level cannabis legalization and bank audit fees

Since 2014, a number of U.S. states have legalized business activities related to the production, distribution, and use of recreational cannabis. These activities remain illegal at the U.S. federal level, creating a dual regulatory environment. The uncertainty related to the enforcement of federal cannabis laws affects businesses located in legalizing states, particularly federally-insured banks. Applying a difference-in-differences approach to a matched sample of banks in legalizing and non-legalizing states, we document an increase in audit fees incurred by banks located in legalizing states after cannabis legalization. This finding is consistent with increased auditor effort and engagement risk being an unintended consequence of state-level recreational cannabis legalization. In supplemental analysis, we find that the relation between banks’ audit fees and cannabis legalization was greater for banks having larger increases in banking activity, suggesting that audit fees increased primarily for banks that may be engaging in relationships with cannabis-related businesses.     

商业银行法律风险防控体系优化建设对策研究

法律风险是商业银行经营管理过程中面临的重要风险之一.作者在分析了我国商业银行的法律风险具有多元化、国际化、复杂化、影响扩大化和风险责任个人化特征的基础上,介绍了国际知名银行的法律风险防控相关实践经验,并就进一步健全和完善我国商业银行法律风险防控体系建设问题提出了具体的对策建议,主要包括明确法律风险防控体系的基本架构、完善内部法律工作体制和机制、妥善处理上市银行法律风险问题、进一步提升法律咨询审查工作质量和效率、建立健全被诉案件风险防控机制、进一步加强法律专业队伍建设以及合理发挥外部律师与内部法律人员的互补作用等.     

On the economics of the longevity risk transfer market

We present a model of a longevity risk transfer market with different market players (primary insurers, reinsurers, and capital market investors) and investigate how market dynamics and the market players' roles evolve with progressing market saturation. We find that reinsurers' appetite for longevity risk is the key driver in the early stage of market development. Since diversification benefits with other businesses decrease with every transaction, the reinsurance market is intrinsically antimonopolistic. With the increasing saturation of the reinsurance sector as a whole, its competitiveness shrinks leading to rising expected risk-adjusted returns for capital market investors. We show that in a saturated market, reinsurers should assume the entire longevity risk from primary insurers, diversify it within their business mix, and subsequently pass on only specific (nondiversifiable) components of the longevity risk to the capital markets. Our findings provide valuable suggestions on how to make the best use of the market's limited risk absorption capacity.     

Political Risk and Foreigners' Trading: Evidence from an Emerging Stock Market

This paper analyzes the impact of political risk on foreign investors' trading in emerging stock markets, market-wide and for industry portfolios, using quantified political risk ratings reported in the International Country Risk Guide and foreign flows data compiled by the Istanbul Stock Exchange. We also track the differential effect of political risk upgrades and downgrades. Political risk is shown to affect stock returns, net foreign flows, and macroeconomic variables. Foreigners' reaction to upgrades (downgrades) is slow (immediate) and smaller in magnitude. Foreigners' reaction to political risk varies with industry's sensitivity to market risk, except for the tourism sector, where their response is particularly salient. Local investors appear to provide liquidity to foreigners, who respond to information.     

The effect of industry consolidation and deposit insurance reform on the resiliency of the U.S. bank insurance fund

We examine the effects of structural change in the U.S. banking industry, as well as key regulatory changes, including recently enacted deposit insurance reform legislation, on the resiliency of the FDIC-administered bank insurance fund (BIF) by estimating and comparing the probability of BIF insolvency over time. We do this using a Markov-switching model that relies on historical patterns of BIF disbursements to define the probability of switching among three “states” of the banking industry's financial health. Monte Carlo simulations are then performed to project the financial condition of the BIF over a 50-year period. Our results indicate that the insolvency risk to the bank insurance fund has increased significantly due to industry consolidation, and is mainly due to the concentration of deposits in the 10 largest U.S. banking companies. We also find that recent deposit insurance reforms will cause only a marginal reduction in the risk of BIF insolvency. The increased risk associated with a more concentrated industry structure simply dominates the reform effect.     

金融行业对实体行业的尾部风险传导研究——基于实体企业金融化视角

本文基于我国金融资本超额回报率的事实,在市场套利分析框架下实证检验了实 体企业金融化是抑制还是加剧了尾部金融风险溢出。数值模拟结果表明：从杠杆率来看,实体 企业金融化对杠杆率具有“双刃剑”效应,然而,实证结果发现,从长期经济后果来看,实体 企业金融化却显著提高了杠杆率,基于Altman-Z值的风险分析进一步发现企业破产风险显著 上升,从而加剧了尾部金融风险溢出。文章的研究结论有利于全面观察实体企业金融化带来的 的实际效果,也揭示了金融行业对实体行业的风险传导过程中的一个风险源,对于实体经济和 金融领域关于企业金融化效应的研究具有参考价值。     

论商业银行集团化经营的法律风险及其防控机制

集团化是现代银行最突出的特征之一。银行的集团化发展,可达到协同经营的目标,打破传统金融机构的竞争格局,使集团获得经营一体化带来的好处。但另一方面,复杂的股权关系、组织结构、内部往来、业务合作,也使得银行集团暴露于特殊的法律风险当中。在金融危机后,金融监管的严格化和法律环境的快速变化,使得银行集团面临的法律风险更为严峻。     

Green property finance and CO2 emissions in the building industry

Contributing about 40% of the world's annual greenhouse gas (GHG) emissions, the building industry is tasked with reducing its energy consumption and its carbon footprint in accordance with the Paris Agreement. This study investigates the relationship between green property finance and the building industry's CO₂ emissions across 98 high-income and developing economies for the period 2012–2018. Our results show that although green property finance expansions are significantly and negatively related to the industry's CO₂ emissions in the full sample, this result is more evident for developing nations. This is a significant outcome for these countries since many of them are experiencing rapid but unchecked population growth and strong oil consumption. Policies to maintain this development during the COVID-19 pandemic are crucial because this crisis has curtailed the availability of green finance facilities, which has either slowed down or reversed any progress made.     

Political–security risk in the oil and gas industry: the impact of terrorism on risk management and mitigation

Oil and gas companies are experiencing an increase in terrorist attacks. The industry became a legitimate target for terrorist groups in the 1990s and the number of attacks have increased yearly, with a spike after the 9/11 attacks. In today’s interconnected world, political risk is not only about the relationship between the host government and the company. Oil and gas companies may experience risks on a transnational, national and human security level. The success of new investments often depends on the successful utilization of risk management strategies. This study focuses on the importance of political–security risk in the oil and gas industry. In January 2013, the oil and gas industry experienced one of its deadliest attacks at the In Amenas gas facility in Algeria, forcing firms to reconsider its focus on security management. Statoil undertook a thorough analysis of security at the site as well as of the company′s corporate security risk management. The report revealed a lack of focus on political–security risk. This study argues that political–security risk has not been used to its full potential in the oil and gas industry. The oil and gas industry has always focused on site security, but a broader more holistic approach to risk management has been lacking. As a result of the In Amenas incident, the industry has become more willing to have a new discussion on security and this has resulted in changes in the way companies operate.     

私人银行业务发展的法律障碍及对策

私人银行业务在发展过程中,遇到了内部、社会、法律等多个方面的障碍。中国私人银行业务的发展需要监管部门的严格监督、立法部门的法律完善以及相关金融机构的大力协助,在外汇、反洗钱、境外投资等领域取得更大的进步。同时,私人银行也应当关注这种新兴服务方式带来的法律风险,采取合理有效的措施加以防范和化解,包括:建立和完善法律风险管理系统、技术系统与人员支持系统,通过特别机制鼓励银行积极承担反洗钱义务,实行混业经营、统一监管,放松外汇管制,规范境外投资,制定专门法律规范。     

内地银行赴港上市后面临的法律风险及其防范措施

内地银行到香港上市将面临新的法律风险。包括商业银行及其员工的违法行为、商业银行经营管理不善以及内地法律政策变化带来的风险。商业银行作为第一责任者应深入学习香港法律和内地法律,提高法律意识;完善公司治理机制和内控机制,强化董事会职能,合法合规经营,防止内幕交易和违规关联交易,防止出现大案要案;制定详细的信息披露制度并严格执行;高度重视投资者关系管理工作等。国家也有责任为商业银行防范法律风险提供环境和政策支持,包括主要以法律手段管理经济;以规范、统一的方式发布政策;提供相应的政策支持,如减轻税负、开展综合经营试点、实施员工激励计划等。     

内地银行赴港上市后面临的法律风险及其防范措施

内地银行到香港上市将面临新的法律风险。包括商业银行及其员工的违法行为、商业银行经营管理不善以及内地法律政策变化带来的风险。商业银行作为第一责任者应深入学习香港法律和内地法律，提高法律意识；完善公司治理机制和内控机制，强化董事会职能，合法合规经营，防止内幕交易和违规关联交易，防止出现大案要案；制定详细的信息披露制度并严格执行；高度重视投资者关系管理工作等。国家也有责任为商业银行防范法律风险提供环境和政策支持，包括主要以法律手段管理经济；以规范、统一的方式发布政策；提供相应的政策支持，如减轻税负、开展综合经营试点、实施员工激励计划等。     

我国巨灾风险可保性的理性思考

巨灾保险虽然一直未能真正踏上破冰之旅,但近年频发加剧的巨灾,使巨灾保险再次成为保险业的聚焦领域。巨灾风险可保性争论不休,业界徘徊不前,厘清巨灾风险的保险属性,可否引导市场参与巨灾风险的有效管理,特别是金融市场、保险市场和资本市场的联动推进,更是尚需解决的问题。基于巨灾风险管理的理论分析认为,我国巨灾风险具备可保性有其理...     

Executive compensation and non-financial risk: An empirical examination

Executives face potentially severe (non-financial) personal risks if firm environmental performance is below industry best practice. We examine the relation between CEO compensation and the non-financial risk associated with environmental exposure, and how use of environmental performance as an explicit determinant of compensation affects this relation. We find evidence that CEOs are compensated for exposure to environmental risk, even after controlling for financial risk. We also find that this premium is reduced when the CEO has greater opportunities to improve the firm’s environmental performance.     

Signaling in the Internet craze of initial public offerings

We explain the clustering of underpricing in initial public offerings (IPOs). The model features an industry with aggregate demand uncertainty and asymmetric information about firms' quality. In the IPO market, firms can signal quality by underpricing or under-issuing new shares. Expected aggregate demand for the industry's products increases with the publicity that the industry creates through IPO underpricing. We show that asymmetric information and expectations on aggregate product demand interact with each other to generate multiple equilibria. Underpriced IPOs cluster in one equilibrium but not in the other. We use these results to explain why the clustering often occurs in particular industries, is short-lived, and is sensitive to economic conditions.     

Should the insurance industry be banking on risk escalation for solvency II?

Basel II introduced a three pillar approach which concentrated upon new capital ratios (Pillar I), new supervisory procedures (Pillar II) and demanded better overall disclosure to ensure effective market discipline and transparency. Importantly, it introduced operational risk as a standalone area of the bank which for the first time was required to be measured, managed and capital allocated to calculated operational risks. Concurrently, Solvency II regulation in the insurance industry was also re-imagining regulations within the insurance industry and also developing operational risk measures. Given that Basel II was first published in 2004 and Solvency II was set to go live in January 2014. This paper analyses the strategic challenges of Basel II in the UK banking sector and then uses the results to inform a survey of a major UK insurance provider. We report that the effectiveness of Basel II was based around: the reliance upon people for effective decision making; the importance of good training for empowerment of staff; the importance of Board level engagement; and an individual's own world view and perceptions influenced the adoption of an organizational risk culture. We then take the findings to inform a survey utilizing structural equation modelling to analyze risk reporting and escalation in a large UK insurance company. The results indicate that attitude and uncertainty significantly affect individual's intention to escalate operational risk and that if not recognized by insurance companies and regulators will hinder the effectiveness of Solvency II implementation.     

Earnings management of target firms and deal premiums: The role of industry relatedness

This paper contributes to the merger and acquisitions (M&A) literature by providing evidence for the role of industry relatedness in the association between target firms' earnings management (EM) before the deal and the premium offered by the acquirer. We argue that familiarity with the industry's policies and practices is a crucial factor that helps acquirers to see through targets' EM. Our evidence supports this prediction in relation to accounting manipulation as we observe that the income increasing accrual manipulation of the target results in significantly higher premiums offered by acquirers in interindustry deals, which is not the case when targets and acquirers belong to the same industry.     

Are there diversification benefits of increasing noninterest income in the Chinese banking industry?

This paper assesses the potential diversification benefits of the increasing reliance on nontraditional business activities based on data from the Chinese banking industry in 1986–2008. At the aggregate level, there are diversification benefits of the increase in noninterest income. However, noninterest income has higher volatility and cyclicality than net interest income, and the marginal benefit of diversification decreases with the increase in noninterest income. At the bank level, the correlation coefficients of the growth rates of net interest income and noninterest income are mostly negative, which also suggests that there are diversification benefits of increasing the noninterest income. However, further model analysis indicates that the effect of the noninterest income share on the Chinese banking industry's revenue and risk is not significant. Overall, our findings suggest that noninterest income diversifies bank revenue, but increased reliance on noninterest income may worsen the risk/return trade-off for the Chinese banking industry.     

VaR模型及其在寿险公司风险管理中的应用

随着保险产品的创新、竞争的加剧及金融市场的发展,我国寿险公司面临的风险将更为复杂和多样,如何对这些风险进行有效管理是寿险公司面临的重要难题,而VaR模型作为当前国际金融风险管理和金融监管的主流方法,含有丰富的风险管理思想,故对VaR模型进行研究并探讨其在我国寿险公司风险管理中的应用具有一定的现实意义。本文分析了寿险公司应用VaR模型时需注意的问题,并指出我国寿险公司建立基于VaR的风险管理体系需在公司治理结构、风险管理组织架构、风险管理技术、风险数据库等方面加以完善。     

A framework to measure integrated risk

A framework underlying various models that measure the credit risk of a portfolio is extended in this paper to allow the integration of credit risk with a range of market risks using Monte Carlo simulation. A structural model is proposed that allows interest rates to be stochastic and provides closed-form expressions for the market value of a firm's equity and its probability of default. This model is embedded within the integrated framework and the general approach illustrated by measuring the risk of a foreign exchange forward when there is a significant probability of default by the counterparty. For this example moving from a market risk calculation to an integrated risk calculation reduces the expected future value of the instrument by an amount that could not be calculated using the common pre-settlement exposure technique for estimating the credit risk of a derivative.