The German volunteer service

The German Volunteer Service (GVS) is an institution whose cooperation in development aid applies especially to such programmes aimed at making a concrete contribution to the emancipation of economically and socially weak groups. Since 1963 the service has sent more than 4,000 volunteers to developing countries.     

Which firms engage small, foreign, or state banks? And who goes Islamic? Evidence from Turkey

We study a representative dataset from Turkey that identifies firm–bank connections. Banks in Turkey differ not only in size and nationality, but also in ownership and orientation (non-Islamic versus Islamic)—resulting in at least six distinct bank types. We estimate a multinomial logit of the choice by the firm of bank type. We document a strong correspondence between bank type and firm characteristics that is not always the same as has been documented so far for US datasets. For example, small firms engage large rather than small banks. Young, large, multiple-bank, and industry-diversified firms, that are located in or close to Istanbul, team up with foreign banks. Islamic banks mainly deal with young, multiple-bank, industry-focused and transparent firms.     

Understanding the effect of market orientation on circular economy practices: The mediating role of closed-loop orientation in German SMEs

The implementation of circular economy (CE) practices is considered a key driver towards sustainable development of firms. Earlier studies point to the general strategic approach of market orientation as an antecedent to CE practice implementation. Still, insights are limited as the mechanisms underlying this relationship remain unclear. Based on a sample of 121 German small and medium-sized enterprises (SME), we empirically examine how the strategic approach of closed-loop orientation mediates the relationship between market orientation and the implementation of three types of CE practices. Using structural equation modelling, we find that while market orientation is positively related to all three types of CE practices, closed-loop orientation mediates these relationships for only two. Our study extends CE literature by suggesting that market orientation is translated into closed-loop orientation to spur CE practice implementation. We also offer a differentiated understanding of CE practice implementation in the context of German SMEs.     

Will Money Talk? Firm Bribery and Credit Access

We investigate whether corruption impedes firm growth by limiting access to bank credit. Our estimates demonstrate that access to credit tightens when a firm is more frequently involved in bribery practices and that bribery (most likely) causes this loss of access. We also find that the detrimental impact is mainly driven by supply‐side rather than demand‐side factors and that the loss of access is particularly strong when there are fewer foreign banks in the vicinity of the firm or when competition is either very low or very high in the local banking market. Finally, the bribery‐driven increase in financing obstacle significantly impedes future firm growth.     

“Lending by example”: Direct and indirect effects of foreign banks in emerging markets

Using a novel dataset that allows us to trace the bank relationships of a sample of mostly unlisted firms, we explore which borrowers are able to benefit from foreign bank presence in emerging markets. Our results suggest that the limits to financial integration are less tight than the static picture of firm-bank relationships implies. Even though foreign banks are more likely to engage large and foreign-owned firms, after an acquisition, a bank is 20% less likely to terminate a relationship with a firm if the acquirer is foreign rather than domestic. Most importantly, within a credit market, firms appear to have the same access to financial loans and ability to invest whether they borrow from a foreign bank or not, while foreign banks benefit all firms by indirectly enhancing credit access.     

Bank-Firm Relationships and International Banking Markets

This paper reviews how long-term relationships between firms and banks shape the structure and integration of banking markets worldwide. Bank relationships arise to span informational asymmetries that are endemic in financial markets. Firm-bank relationships not only entail specific benefits and costs for both the engaged firms and banks, but also directly affect the structure of banking markets. In particular, the sunk cost of screening and monitoring activities and the 'informational capital' collected by the incumbent banks may act as a barrier to entry. The intensity of the existing firm-bank relationships will determine the height of this barrier and shape the structure of international banking markets. For example, in Scandinavia where firms maintain few and strong relationships, foreign banks may only be able to enter successfully through mergers and acquisitions. On the other hand, Southern European firms maintain many bank relationships. Therefore, banks may consider entering Southern European banking markets through direct investment.     

A Survival Analysis of Islamic and Conventional Banks

Are Islamic banks inherently more stable than conventional banks? We address this question by applying a survival analysis based on the Cox proportional hazard model to a comprehensive sample of 421 banks in 20 Middle and Far Eastern countries from 1995 to 2010. By comparing the failure risk for both bank types, we find that Islamic banks have a significantly lower risk of failure than that of their conventional peers. This lower risk is based both unconditionally and conditionally on bank-specific (microeconomic) variables as well as macroeconomic and market structure variables. Our findings indicate that the design and implementation of early warning systems for bank failure should recognize the distinct risk profiles of the two bank types.     

Impact of Foreign Bank Presence on Foreign Direct Investment in China

We analyze the impact of foreign bank presence on foreign direct investment (FDI) in China. The connection between the two could be particularly relevant for an emerging economy like China because the supply of financial services provided by banks may act as a constraining factor. Foreign bank presence may then enable and foster FDI and not simply result from it. Our estimates demonstrate that FDI across regions in China is increasing in the existing network of regional branches of foreign banks, which itself is driven (and, therefore, instrumented) by the timing of the regional phasing out of the local limits for foreign banks on local currency business. The effect of foreign bank presence on FDI is particularly strong for some specific sectors (farming, manufacturing, construction, transportation, wholesale/retail trade and real estate) if those sectors are strongly represented in the source economies.