A new approach to measuring universal banking

Noninterest income is widely used in the literature to account for the degree of the universal business model by banks. This paper proposes a novel measure of universal banking constructed using the relative contribution of each operating segment to total assets using an entropy approach. We here propose a novel dataset containing the Universal Banking Index (UBI) at both country and bank levels. Using a sample of international banks, we evaluate the extent to which our proposed metric affects banks’ profitability, stability, liquidity and capitalisation. Results suggest that a higher degree of diversification is associated with increased stability. In addition, banks that feature a more diversified business model, as proxied by the UBI, are also better capitalised, as opposed to banks with high noninterest income share. Our results suggest that regulatory-induced restriction on universal banking may indeed reduce the benefits of risk sharing across operating segments, exposing banks to heightened risks.     

Institutions and the financial development–economic growth nexus in sub-Saharan Africa

Using a sample splitting approach that does not impose an exogenous quadratic term, we examine the effect of financial development on economic growth in sub-Saharan Africa by allowing the link to be mediated by the level of institutions. Our findings reveal a disproportionate growth-enhancing effect of finance, given countries’ distinct level of institutional quality. More specifically, when the International Country Risk Guide-based measure of institutions is used as the threshold variable, below the optimal level of institutional quality, financial development does not significantly promote economic growth. For countries with institutional quality above the threshold, higher finance is associated with growth. However, when institutions are measured by World Governance Indicators proxy, we find a significant effect of financial development, irrespective of whether a country is below or above the threshold. Interestingly, the growth-enhancing effect of finance is greater for low-institution countries relative to high-institution countries. Thus, through its ability to provide some crucial roles, the well-developed financial sector may also perform the function of sound institutions in influencing economic growth.     

上海市大力发展农村金融服务的SWOT分析

运用SWOT方法对上海市大力发展农村金融服务进行分析。分析结果可知上海在大力发展农村金融服务时存在政策、地理位置优势;但在法律和农户金融意识方面存在劣势;此外,上海市既面临"互联网+"与金融合作、潜在需求大的机遇,也面临违约和诈骗风险的威胁。     

信息分享对原始设备制造商与其合同制造商竞争的影响

研究了原始设备制造商的预测信息分享对一个原始设备制造商和一个与其同时有合作和竞争的合同制造商组成的供应链系统的影响,建立制造商间信息分享的模型,该模型包括一个原始设备制造商和一个合同制造商。研究发现,原始设备制造商关于市场潜在需求预测信息的分享对其预期利润是不利的,同时需求信息预测的精度对原始设备制造商信息分享的决策也有影响,原始设备制造商没有动机与其供应链成员进行信息分享,但信息分享使得供应链整体利润增加。最后,建立一个信息分享补偿机制分享供应链利润的增加量,以期通过信息分享补偿机制促使原始设备制造商有动机进行信息分享,从而实现其与合同制造商的“双赢”。     

Culture,financial crisis and the demand for property,accident and health insurance in the OECD countries

Culture has been known to play an important role in explaining differences in consumption behaviour across countries. Yet, we know very little how it affects spending on non-life insurance products. This paper attempts to shed some light on how cultural characteristics impact the demand for property, accident and health insurance, focusing on the OECD countries in the period 2000–2017. We find, via the system generalized method of moment estimations, that cultural characteristics such as individualism, long-term orientation, masculinity and uncertainty avoidance were the drivers of the expenditure on property insurance, whereas long-term orientation, uncertainty avoidance and hypometropia explained accident and health insurance spending across the OECD countries. In the presence of the global financial crisis, cultural effects on property insurance spending turned out to be relatively minor, with the exception of individualism. These findings provide valuable information for non-life insurance companies, consumers and policy makers in the OECD countries.     

Disappearing investment-cash flow sensitivities: Earnings have not become a worse proxy for cash flow

According to a recent conjecture in the literature, earnings have become a poorer proxy for cash flow from operations over time. We find that since 1988, when cash flow statements started to be consistently reported in Compustat, the cash effectiveness of earnings has actually increased for a large sample of US manufacturing firms. This occurs despite the introduction of fair value accounting and increasing accounting accruals during the last three decades. Also contrary to the conjecture, using more comprehensive measures of cash flow does not restore the investment-cash flow sensitivity, which continues to be around 0.05 in more recent periods.     

Interenterprise Credit and Adjustment during Financial Crises: The Role of Firm Size

Small and medium‐sized enterprises (SMEs) suffered a sharp contraction in their borrowing from banks during the Great Recession. Analyzing a large firm‐level database for European countries, the paper shows that trade credit amplified the liquidity squeeze on SMEs, with adverse effects on their real activity. SMEs sharply increased their net trade credit and thus transferred financial resources to larger firms. Given the large weight of SMEs in the economy of European countries, the liquidity squeeze of SMEs likely contributed to the depth of the output fall and the slow recovery in Europe during the Great Recession.     

FINANCE,DISTRIBUTION AND THE ECONOMIC OBJECTIVE OF FINANCIAL COOPERATIVE INSTITUTIONS

This paper proposes a model where the structure rather than the size of the financial sector explains its influence on income distribution. Because of information asymmetries, a financial sector dominated solely by profit‐maximizing financial intermediaries will increase income and wealth inequality as it gives preferential access to credit for high‐income agents, whereas a diversified inclusive financial sector with alternative models of finance, like cooperatives, will reduce the inequality gap. No full convergence in income distribution can be realized through finance only and there is still a need for redistribution policies. Accordingly, an objective function for cooperative financial institutions should define a desired pricing behaviour that can increase the income of members at a rate higher than the average growth rate of the economy.     

Extreme risk spillovers between crude palm oil prices and exchange rates

This study is the first attempt to examine the extreme risk spillovers between Malaysian crude palm oil (CPO) and foreign exchange currencies of the three largest CPO importers: India, the European Union and China throughout the global financial crisis. Using daily data of three currencies, CPO spot and futures from 2000 to 2018, our results show: First, before the crisis, the unexpected change in foreign exchange rates is the primary driver of risk spillover to the CPO market. Second, during the crisis, the extreme movement of CPO spot returns is dominant in the Malaysian exchange rates relative to the euro. Third, after the crisis, the spillover flows from the CPO market to the foreign exchange market. Overall, our findings show the importance of CPO pricing dynamics in mitigating foreign exchange risk over the crisis period. This paper contributes to the extant literature by recognizing the effect of risk spillover on the targeted foreign exchange rate for portfolio allocation.     

Investor behaviour and reaching for yield: Evidence from the sterling corporate bond market

We provide evidence on how corporate bond investors react to a change in yields, and how this behaviour differs in times of market‐wide stress. We also investigate ‘reaching for yield’ across investor types, as well as providing insights into the structure of the corporate bond market. Using proprietary sterling corporate bond transaction data, we show that insurance companies, hedge funds and asset managers are typically net buyers when corporate bond yields rise. Dealer banks clear the market by being net sellers. However, we find evidence for this behaviour reversing in times of stress for some investors. During the 2013 ‘taper tantrum’, asset managers were net sellers of corporate bonds in response to a sharp rise in yields, potentially amplifying price changes. At the same time, dealer banks were net buyers. Finally, we provide evidence that insurers, hedge funds and asset managers tilt their portfolios towards higher risk bonds, consistent with ‘reaching for yield’ behaviour.