Central bank disclosure as a macroprudential tool for financial stability

The Basel Capital Accord (pillar 3) states that disclosure of information (transparency) is essential to financial stability. This study analyzes, through inflation reports, the disclosure of information from the Central Bank of Brazil concerning the credit market. We consider credit risk and capital buffers as measures of financial stability in this analysis. Furthermore, in order to measure the perception of the monetary authority on the credit market, we built two indices based on the central bank’s communication on credit development. We performed a panel data analysis based on a sample of 125 banks for the period from June 1999 to September 2014 (7000 observations). The findings suggest that central bank communication regarding expectations concerning the credit market contributes to financial stability. Therefore, this kind of communication of central banks (about credit development) may constitute an important macroprudential tool to improve financial stability.     

Factors influencing bank risk in Europe: Evidence from the financial crisis

We use a dynamic panel data model to analyze bank-specific and macroeconomic determinants of bank risk for a large sample of commercial banks operating in the euro area. The selected time span, from 2001 to 2012, considers the impact of the on-going financial and economic crisis on the Eurozone banking system. Our results indicate that capitalization, profitability, efficiency and liquidity are inversely and significantly related to bank risk. However, the recourse to wholesale funding by banks seems to increase their risk. We also find that less-concentrated markets, lower interest rates, higher inflation rates and a context of economic crisis (with a falling GDP) increase bank risk.     

Does transparency of central banks communication affect credit market? Empirical evidence for advanced and emerging markets

This study examines the effect of the transparency of central banks communication on credit market. In particular, this study investigates how central banks’ effort to provide more detailed information about their objectives regarding the price stability (monetary policy transparency) and financial stability (financial stability transparency) policies are able to mitigate information asymmetry on credit market, through the net interest margin charged by the banks to engage in financial intermediation (credit spread). The findings denote central bank transparency is able to reduce the credit spread. Additionally, the evidence suggests the effect of central bank transparency on the credit spread is greater in emerging markets, where there is less information available on credit market. In brief, transparency in central banks communication is an important tool to mitigate the information asymmetry in the credit market.     

Does bond market development enhance the banking sector’s efficiency in resource allocation? Industry-level evidence from Korea

Korea’s financial system used to be bank-based, with banks playing the leading role in financing corporations. As highlighted by Park et al. (2019), however, bond markets have developed rapidly in Korea and other Asian countries. The corporate bond market competes with banks as a source of finance for large borrowers. As such, bond markets may affect banking sector operation, a process known as disintermediation. In this paper, we examine whether bond market development improves the efficiency of resource allocation in Korean bank lending. We propose two channels through which bond market development affects the efficiency of bank lending. Since the two channels have opposing effects on the efficiency of banking, the issue must be settled by empirical analysis. We find that bank loans are much less efficient than bond financing in allocating resources across industries. Furthermore, banks are particularly inefficient in resource allocation in industries that rely more on bond financing. This suggests that competition from bond financing does not improve allocative efficiency of bank loans.     

Accounting enlightenment in the age of reason

We scrutinize the role financial reporting for fair values, asset securitizations, derivatives and loan loss provisioning played in the Financial Crisis. Because banks were at the center of the Financial Crisis, we focus our discussion and analysis on the effects of financial reporting by banks. We conclude fair value accounting played little or no role in the Financial Crisis. However, transparency of information associated with asset securitizations and derivatives likely was insufficient for investors to assess properly the values and riskiness of bank assets and liabilities. Although the FASB and IASB have taken laudable steps to improve disclosures relating to asset securitizations, in our view, the approach for accounting for securitizations in the IASB's Exposure Draft that would require banks to recognize whatever assets and liabilities they have after the securitization is executed better reflects the underlying economics of the securitization transaction. Regarding derivatives, we recommend disclosure of more disaggregated information, disclosure of the sensitivity of derivatives' fair values to changes in market risk variables, and implementing a risk-equivalence approach to enable investors to understand better the leverage inherent in derivatives. We also conclude that because the objectives of bank regulation and financial reporting differ, changes in financial reporting needed to improve transparency of information provided to the capital markets likely will not be identical to changes in bank regulations needed to strengthen the stability of the banking sector. We discuss how loan loss provisioning may have contributed to the Financial Crisis through its effects on procyclicality and on the effectiveness of market discipline. Accounting standard setters and bank regulators should find some common ground. However, it is the responsibility of bank regulators, not accounting standard setters, to ensure the stability of the financial system.     

Measuring the impact of restructuring and country-specific factors on the efficiency of post-crisis East Asian banking systems: Integrating DEA with SFA

This paper investigates the relationship between post-crisis bank restructuring, country-specific conditions and bank efficiency in Asian countries from 1997 to 2001 using an approach that integrates data envelopment analysis and stochastic frontier analysis. We focus on restructuring measures related to bank ownership. The results indicate that although domestic mergers produce more efficient banks, overall, restructuring does not lead to more efficient banking systems. Banking system inefficiencies are mostly attributed to country-specific conditions, particularly, high interest rates, concentrated markets and economic development.     

Monetary policy and bank performance: The role of business models

This paper examines the relationship between monetary policy and bank performance in a multiple-instrument environment, particularly highlighting the conditioning role of bank business models. Employing a unique dataset of Vietnamese commercial banks from 2007 to 2019, we display that banks react to monetary policy changes, either when the central bank increases policy rates or injects money into the economy through open market operations, by decreasing overall returns and increasing financial instability. Additionally, we document that the accumulation of foreign exchange reserves benefits bank outcomes, contrasting to open market operations, albeit the central bank uses both of these policy instruments to alter money supply in the economy. Our key analysis of interest reveals that business models considerably matter in the effects of monetary policy on bank performance. Collectively, our findings demonstrate that banks’ business models that yield more non-interest income or diversify more into different income sources may mitigate the pass-through of monetary policy to bank performance. This finding holds across all interest- and quantitative-based monetary policy indicators and across all the functions of risk-taking behavior, earning-profit capacity, and financial stability. Furthermore, while plotting the marginal effects of monetary policy, we realize that they are insignificant for banks whose business models heavily rely on non-traditional segments.     

Trade credit financing and stock price crash risk

This study investigates the association between trade credit financing and stock price crash risk within China's context. We find that firms using more trade credit financing have significantly lower future stock price crash risk. This negative association is more pronounced for firms with greater information asymmetry and for firms located in less developed financial markets. This finding is robust to the endogeneity concern, alternative measures of stock price crash risk, and the inclusion of other factors identified in prior studies that might affect stock price crash risk. Further evidence suggests that both the monitoring mechanism and the disclosure mechanism drive the documented relation. Our study suggests that access to trade credit can significantly reduce the likelihood of crash risk in a country like China with less developed formal bank financing. Our study also suggests that investors can effectively avoid stock price crash risk by using the trade credit information disclosed in financial statements.     

以国债为我国公开市场操作主要工具的实证分析

随着我国金融宏观调控从直接调控为主转向间接调控为主,公开市场操作越来越成为主要的间接调控手段。相比政策性金融债券和中央银行票据,国债因其所具有的优势决定了其更加适合作为我国公开市场操作的主要工具。本文通过中美国债比较,认为通过优化国债投资方向和国债期限结构等一系列政策手段,解决目前我国国债在发行规模、期限结构、投资者资产结构和市场结构方面存在的问题,可使得以国债作为主要工具更加具有可行性。     

Banking and sovereign debt crises in a monetary union without central bank intervention

We analyze the conditions of emergence of a twin banking and sovereign debt crisis within a monetary union in which: (i) the central bank is not allowed to provide direct financial support to stressed member states or to play the role of lender of last resort in sovereign bond markets, and (ii) the responsibility of fighting against large scale bank runs, ascribed to domestic governments, is ensured through the implementation of a financial safety net (banking regulation and government deposit guarantee). We show that this broad institutional architecture, typical of the Eurozone at the onset of the financial crisis, is not always able to prevent the occurrence of a twin banking and sovereign debt crisis triggered by pessimistic investors’ expectations. Without significant backstop by the central bank, the financial safety net may actually aggravate, instead of improve, the financial situation of banks and of the government.     

Bank Relationships and Private Firms’ Financial Reporting Quality

Private firms with relatively high (proprietary) costs of disclosure may benefit from a close relationship with a bank. Relationship lending is based on intertemporal contracting that assumes that the bank is able to acquire private information about the firm and, moreover, to keep this information private. For both reasons, we expect and find that private firms with fewer bank relationships exhibit lower levels of financial reporting quality. Controlling for many other factors, firms with a single bank relationship disclose their financial reports about 14 days later. The size of such firms’ financial reports is also smaller, containing approximately 8% fewer words than the median report. Firms with a single bank relationship also exhibit more earnings management, exceeding the median value of the three-year sum of absolute discretionary accruals by about 20%. The results are robust to different econometric specifications, including endogeneity concerns. They indicate that private firms choose to be opaque in the presence of fewer lending relationships.     

Trading income and bank charter value during the financial crisis: Does derivatives dealer designation matter?

Derivative markets have exploded over the last decade, remained active in the midst of the 2007–2009 financial crisis and continue to be dominated by a small group of bank holding companies (BHC). BHC motives for derivative usage are usually tied to hedging purposes (balance sheet risk management), trading purposes (profit motives) or some combination thereof. This paper examines the relationship between derivative trading income and bank charter value for 27 BHC between 2001Q1 and 2011Q3. We find that the impact of derivative trading income on bank charter value, using Tobin's Q, is very small and seems to be tied to BHCs derivatives dealer trading designation. We also find that trading incomes are a modest fraction of net operating revenue, highly volatile, and did not contribute to overall BHC income during the crisis.     

A Study of Corporate Disclosure Practice and Effectiveness in Hong Kong

The recent economic turmoil in Asia has led to a wider recognition of the importance of corporate transparency and disclosures in financial dealings. The objective of this study is to provide comprehensive and up-to-date evidence of current practice and perceived effectiveness of corporate disclosure of listed companies in an emerging economy—Hong Kong. The study compares the perceptions of chief financial officers (CFOs) and financial analysts about a variety of information flow, disclosure and capital market efficiency issues. It also seeks to determine whether there is a perceived need for increased financial reporting regulations and to what extent this and other alternative means might improve market functioning. While both subject groups believed that a majority of firms only adopt a conservative one-way disclosure strategy and the existence of a communication gap, analysts perceived a much higher need than CFOs for increased financial reporting regulations. Neither group thought that enhancing disclosure requirements alone would suffice to close this gap. Instead, they suggested an improvement in the quality of the communication and disclosure processes through means such as choosing more appropriate communication media, formulating a more proactive disclosure strategy, enhancing investor relationship, and voluntarily reporting more information desired by users.     

金融分权对企业投资效率的影响

本文基于金融分权的内涵,分析金融分权对企业投资效率的影响机制,并利用2003—2015年的上市公司数据,估算企业投资效率,实证检验金融分权对企业投资效率的影响。结果表明,金融分权降低了企业投资效率,并主要体现为投资过度;财政分权加剧了金融分权对企业投资效率的负效应。进一步研究发现,相对于国有企业而言,金融分权对非国有企业投资效率的负效应较小。中介效应检验表明,金融分权通过影响企业银行信贷和代理成本来降低企业投资效率。本文的政策含义是：理顺中央和地方财政关系,降低地方政府对金融资源的竞争性需求;完善地方政府官员考核机制,弱化地方政府参与金融竞争的激励;完善金融分权,既要求政府在保证金融市场稳定、不发生系统性风险的前提下应向市场逐步分权,又要求清晰界定中央政府与地方政府各自的监管权限,明确双方的救助责任。     

Network VAR models to measure financial contagion

Financial contagion among countries can arise from different channels, the most important of which are financial markets and bank lending. The paper aims to build an econometric network approach to understand the extent to which contagion spillovers (from one country to another) aris from financial markets, from bank lending, or from both. To achieve this aim we consider a model specification strategy which combines Vector Autoregressive models with network models. The paper contributes to the contagion literature with a model that can consider bank exposures and financial market prices, jointly and not only separately. From an empirical viewpoint, our results show that both bilateral exposures and market prices act as contagion channels in the transmission of shocks arising from a country to other countries.     

The impact of government intervention on the stabilization of domestic financial markets and on U.S. banks’ asset composition

The 2007–2009 financial crisis that evolved from various factors including the housing boom, aggressive lending activity, financial innovation, and increased access to money and capital markets prompted unprecedented U.S. government intervention in the financial sector. We examine changes in banks’ balance sheet composition associated with U.S. government intervention during the crisis. We find that the initial round of quantitative easing positively impacts bank liquidity across all bank samples. Our results show a positive impact of repurchase agreement market rates on bank liquidity for small and medium banks. We conclude that banks have become more liquid in the post-crisis period, especially the larger banks (large and money center banks). We show that real estate loan portfolio exposures have reverted to pre-crisis levels for money center banks and remained flat for all other bank samples.     

公司治理、信息披露质量与知情交易

通过对公司治理、信息披露质量与知情交易之间关系的检验,发现股权集中导致的协同效应及壕沟效应同时存在,董事会规模及独立性对信息披露质量及知情交易的影响不明显,高管货币薪酬激励手段比股权激励手段更有效。研究表明,在当前我国资本市场不完善、知情交易日益增多的背景下,努力提高信息披露质量、实现股权适度分散以及合理制定高管薪酬契约对减少知情交易、维护资本市场的良好秩序具有重要意义。     

商业银行贷款定价体系的构建

银行贷款利率与资本市场息息相关。文章通过对金融市场的分析,研究了我国商业银行贷款定价体系是对其的必要补充。     

Voluntary Disclosure by State-owned Enterprises Listed on the Stock Exchange of Hong Kong

This study examines the impact of international capital market pressures on the voluntary disclosure of three types of information (strategic, financial, and non-financial) in the annual reports of former wholly state-owned People's Republic of China (PRC) enterprises, listed on the Stock Exchange of Hong Kong (SEHK). Consistent with a cost­benefit framework, we find that PRC H-Share firms disclose significantly more strategic and financial information than other SEHK firms. Additional analysis of disclosures in their home listings on the PRC exchanges, however, suggests an alternative explanation. The fact that these firms have been selected for "showcasing" in international capital markets may also play a role in our findings. While H-Share firm disclosures in the PRC also appear sensitive to management's assessment of the associated costs, the magnitude of differences across listing locations suggests that disclosure practices on the SEHK may also reflect the effects of state-encouraged disclosure policies. Our findings contribute to the understanding of disclosure behavior among former wholly state-owned enterprises and to the emerging literature on the efficacy of the privatization process.     

The Economic Relevance of Environmental Disclosure and its Impact on Corporate Legitimacy: An Empirical Investigation

In determining its environmental disclosure strategy, a firm's management faces a tension between responding to the information needs of financial markets and maintaining its legitimacy within the community. In this paper, relying on information economics and legitimacy theory, we explore how firms resolve this tension. Results show that a firm's environmental disclosure enhances the quality of analysts' information context, which ultimately allows them to make better forecasts. Moreover, financial analysts seem to be able to decipher environmental information, discounting discourses that are inconsistent with a firm's underlying environmental performance. We find also that a firm's environmental disclosure serves another purpose, as it influences how its other stakeholders (beyond financial ones) perceive its legitimacy. Such enhanced legitimacy reduces the information uncertainty faced by financial analysts. Our results suggest also that both economic‐based environmental disclosure and sustainable development and environmental disclosure are useful to analysts in making their forecasts and enhance a firm's legitimacy. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment.