Internal conflict and Bank liquidity creation: Evidence from the belt and Road initiative

The Belt and Road Initiative is the most important international economic strategy in the 21st Century initiated by China. In this paper, we conduct the first international study on the effects of the host country’s internal conflict risk of the Belt and Road Initiative on bank liquidity creation, one of the key functions banks provide for the public. We find that the host country’s internal conflict risk negatively affects bank liquidity creation. The results are also economically significant and robust to subsample tests. It also indicates that Chinese firms that will conduct foreign investments in the countries of the Belt and Road Initiative should take the host country’s internal conflict risk into account.     

央行货币政策报告文本信息、宏观经济与股票市场

本文利用金融情感词典和文本分析技术,分析中国人民银行货币政策执行报告的文本情绪、文本相似度和文本可读性等多维文本信息,刻画央行货币政策执行报告的文本特征,探究货币政策报告的文本信息与宏观经济和股票市场的关系。实证研究发现,货币政策报告的文本情绪的改善会引起显著为正的股票市场价格反应,报告文本相似度的增加会引起股票市场波动性的显著降低,报告可读性对公布后股票市场的波动性影响不显著。货币政策报告文本情绪还与诸多宏观经济指标显著相关。进一步研究发现,引起股票市场显著反应的是报告文本情绪中反映货币政策指引的部分,而反映宏观经济历史状态的部分对股票市场的影响不显著。本文从文本大数据分析角度证明了我国央行沟通的有效性,对国内央行沟通相关研究形成了有益补充。     

Investor protection,regulation and bank risk-taking behavior

This paper examines whether the influence of investor protection on banks’ risk is channeled through banking regulation, and vice-versa, using panel data from a sample of 567 European and US banks for the 2004–2015 period. As banking regulatory factors, we consider capital stringency, activity restrictions and private monitoring, whereas as investor protection factors, we consider the level of shareholder and creditor protection. We find that banking regulation moderates the positive direct influence of investor protection on banks’ risk, while investor protection reinforces the negative direct influence of banking regulation on risk. Moreover, we show that the negative effect of national regulations on banks’ risk is more pronounced during systemic crisis years. Finally, taking into account market competition, we argue that private monitoring only has a direct effect on banks’ risk, whereas the effects of capital stringency and activity restriction are channeled through market competition.     

How to get banks to take less risk and disclose bad news

There is wide agreement that before the recent financial crisis, financial institutions took excessive risk in their investment strategies. At the same time, regulators complained that banks did not reveal the extent of their difficulties in a timely fashion thus reducing the effectiveness of government intervention to prevent or mitigate the deleterious effects of the financial crisis. The purpose of this paper is to investigate how regulators can best use certain tools at their disposal to motivate banks to take less risk and to provide adverse information to regulators early. We argue that two tools, namely (i) allowing bank payouts to equity holders even when banks report they are in trouble and (ii) constraining banks’ future investment strategy when they are in trouble can achieve both goals. We show that, in some cases, it is optimal to use both of these tools in combination. That is, in such cases it is optimal to allow equity payouts when banks report they are in trouble, even though such payouts increase the incentive for banks to take excessive risk and even though these payments are financed by taxpayers. We also show that the more socially costly is constraining the bank’s portfolio selection or the more complex are the bank’s assets, the more likely it is that allowing larger payouts and fewer constraints is optimal. Finally we discuss how changes in bank capital requirements interact with inducing disclosure and preventing excessive risk taking.     

Threshold effect of economic openness on bank risk-taking: Evidence from emerging markets

This paper investigates the non-linear effects of two aspects of economic openness, namely, trade openness and financial openness, on banking system stability. We use a panel of 42 emerging markets from 2000 to 2014 to test whether bank risk-taking behaviour varies with the level of openness. We find that a higher degree of trade openness promotes bank stability linearly. Conversely, the non-linear effect of financial openness on bank risk-taking is evident. When the financial system is not sufficiently open, the impact of financial openness on bank stability is insignificant. However, as the domestic financial market becomes more open, financial openness can help discipline the behaviour of banks, making them more stable. We also find evidence that these effects are transmitted through the market discipline channel. Our findings highlight the importance of strengthening the domestic regulatory framework and transparency as the economy becomes more integrated.     

Bank business models and liquidity creation

Using a large panel of US bank holding companies from 2001 to 2015, this study investigates the association between functional diversification and bank liquidity creation. I document evidence of lower liquidity creation for higher diversification. The effect of moving into nontraditional activities on liquidity creation is more apparent with large banks and less pronounced with small banks. The impact of diversification on liquidity creation is less significant during the late stage of crisis and is more clearly observed in small and medium-sized banks. Low liquidity creation banks, leveraged by a higher share of non-interest income, are more likely to further decrease their liquidity creation. The study is of interest to regulators and policymakers who are concerned about bank business models.     

中国邮储银行大连分行网点转型下客户服务模式创新研究

随着社会大众对金融服务的要求不断增多,银行网点转型已经成为一个必然趋势。信息时代背景下,银行网点的转型大多向智能化的方向转变,而随着网点转型,其客户服务模式也在不断创新。论文以邮储银行大连分行为例,对银行网点智能化转型的影响进行了分析,探究了邮储银行大连分行网点智能化转型存在的问题,并且提出了相关的转型建议,最后对邮储银行大连分行智能化网点转型下客户服务模式的创新情况进行了研究,希望能够在银行网点智能化转型的背景下,促进其客户服务水平的不断提升。     

Independence in bank governance structure: Empirical evidence of effects on bank risk and performance

We investigate how different governance arrangements affect risk and return in banks. Using a new data set for UK banks over the period 2003–2012, we employ a simultaneous equations framework to control for the reciprocal relationship between risk and return. We show that separation of the roles of CEO and Chairman increases bank risk without causing a concurrent increase in return. We also find that oversight by a Remuneration Committee and Non-Executive Directors (NEDs) lowers the probability of bank failure, indicating that empowering an independent Chairman has different effects from empowering independent NEDs. Overall, our results underline the importance of accounting for the heterogeneity in corporate governance arrangements within banks.     

News-driven international credit cycles

How does news about future economic fundamentals affect within-country and cross-country credit allocation? How effective is unconventional policy when financial crises are driven by unfulfilled favorable news? I study these questions by employing a two-sector, two-country macroeconomic model with a banking sector in which financial crises are associated with occasionally binding leverage constraints. In response to positive news on the valuation of non-traded sector capital which turns out to be incorrect at a later date, the model captures the patterns of financial flows and current account dynamics in Spain between 2000–2010, including the changes in the sectoral allocation of bank credit and movements in cross-country borrowing during the boom and the bust. When there are unconventional policies by a common authority in response to unfulfilled favorable news, liquidity injections perform better in ameliorating the downturn than direct assets purchases from the non-traded sector.