How important can bank lending shocks be for economic fluctuations?

We analyze the quantitative importance of bank lending shocks on real activity fluctuations in Norway and the UK, using structural VARs estimated on quarterly data from 1988 to 2010. We find that an adverse bank lending shock causes output to contract, and that such shocks can account for a substantial share of output volatility. This suggests that financial intermediation is an important source of shocks. The empirical analysis comprises the Norwegian banking crisis (1988–1992) and the recent period of banking failures in the UK. However, the results are also non-trivial when omitting periods of systemic banking distress from the sample.     

How can firms access bank finance for circular business model innovation?

Access to bank finance has emerged as a key challenge for firms engaged in circular business model innovation (circular BMI), both in practice and in the academic literature. Through interviews, focus groups and archival documents, we document the experience of firms accessing finance for circular BMI and assess bank willingness to lend to firms that engage in circular BMI. Our findings offer potential strategies for firms who look for external (bank) finance to realise circular BMI. Using a case study-based theory-refining approach, we identify three core strategies that firms can use to obtain bank finance for circular BMI. First, firms can signal future cash flow expectations by aiming to secure customer contracts and preorders. Second, relationship building with banks, suppliers and customers improves the banks' risk perception of firms. Third, firms can design standardised, long-lasting circular assets that can serve as bank collateral, especially once secondary markets develop, overcoming the difficulty of lending based on innovative, firm-specific assets.     

Public intervention in UK small firm credit markets: Value-for-money or waste of scarce resources?

Loan guarantee schemes are used in many countries to provide financial support to small firms by guaranteeing loans from commercial banks, but questions remain about whether public intervention in private credit markets to support entrepreneurial firms is justified. This paper examines whether the UK Small Firms Loan Guarantee Scheme (SFLG) provides value-for-money to the UK tax payer, presenting a regression based performance approach which then feeds into a formal cost–benefit analysis. Specifically, we consider whether firm performance post-investment is such that it justifies the governments’ presence in the lending market and the costs associated with it. Our findings suggest that entrepreneurial firms that are able to access new finance through SFLG achieve superior performance in the form of improved sales, job creation and exports and that this justifies public intervention in private credit markets.     

Are Islamic incomes relevance to commercial banks in Malaysia？

A significant price-to-earnings relation is evident in many research findings, which includes study on Malaysia Stock Markets, that the strength, consistency and magnitude of the relation are not as large as those reported in institutionally more developed markets. However, the price adjustment is stronger if price reaction is measured over a long periods, which is consistent to speculative trading. Firm-specific variables such as revenue, firm size and debt-equity have no incremental information content beyond earnings implies that the market monitoring process in an emerging market focuses on earnings only during financial announcement. Therefore, this paper revisited the study on the relevant of accounting banks in Malaysia using the earnings response coefficients, earnings by looking at Islamic Income for commercial which are the earnings-to-share return coefficients that are estimated for sub earnings components by including Islamic banking incomes in the analysis. This paper discovered that though there is a positive effect, the earnings from Islamic banking operation are small. Thus, the total earnings as well as the sub-categories of earnings of banks appear to enter the pricing considerations of investors.     

What do bank acquirers value in non-public bank mergers and acquisitions?

This study investigates what target, market, and acquirer characteristics influence book value multiples in 288 non-public bank acquisitions from 2001 Q3 to 2005 Q4. Multiples rise with acquirer size and capital ratios. Targets with high proportions of industry-adjusted core and large deposits have higher multiples. When using target variables relative to acquirers, multiples rise with higher proportions of core and large deposits, larger average bank size in the market, and relative growth in assets, loans, and deposits as well as market growth. In contrast to prior findings for public targets, acquirers do not pay premiums for target accounting performance.     

Is small beautiful? Size effects of volatility spillovers for firm performance and exchange rates in tourism

This paper examines the size effects of volatility spillovers for firm performance and exchange rates with asymmetry in the Taiwan tourism industry. The analysis is based on two conditional multivariate models, BEKK–AGARCH and VARMA–AGARCH, in the volatility specification. Daily data from 1 July 2008 to 29 June 2012 for 999 firms are used, which covers the Global Financial Crisis. The empirical findings indicate that there are size effects on volatility spillovers from the exchange rate to firm performance. Specifically, the risk for firm size has different effects from the three leading tourism sources to Taiwan, namely USA, Japan, and China. Furthermore, all the return series reveal quite high volatility spillovers (at over 60%) with a one-period lag. The empirical results show a negative correlation between exchange rate returns and stock returns. However, the asymmetric effect of the shock is ambiguous, owing to conflicts in the significance and signs of the asymmetry effect in the two estimated multivariate GARCH models. The empirical findings provide financial managers with a better understanding of how firm size is related to financial performance, risk and portfolio management strategies that can be used in practice.     

Are betting returns a useful measure of accuracy in (sports) forecasting?

In an economic context, forecasting models are judged in terms not only of accuracy, but also of profitability. The present paper analyses the counterintuitive relationship between accuracy and profitability in probabilistic (sports) forecasts in relation to betting markets. By making use of theoretical considerations, a simulation model, and real-world datasets from three different sports, we demonstrate the possibility of systematically or randomly generating positive betting returns in the absence of a superior model accuracy. The results have methodological implications for sports forecasting and other domains related to betting markets. Betting returns should not be treated as a valid measure of model accuracy, even though they can be regarded as an adequate measure of profitability. Hence, an improved predictive performance might be achieved by carefully considering the roles of both accuracy and profitability when designing models, or, more specifically, when assessing the in-sample fit of data and evaluating out-of-sample forecasting performances.     

Determinants of bank interest margins in Russia: Does bank ownership matter?

This paper analyzes interest margin determinants in the Russian banking sector with a particular emphasis on the bank ownership structure. Using unique bank-level data covering Russia's entire banking sector for the 1999–2007 period, we find that the impact of a number of commonly used determinants such as market structure, credit risk, liquidity risk and size of operations differs across state-controlled, domestic-private and foreign-owned banks. At the same time, the influence of operational costs and risk aversion is homogeneous across ownership groups. The results overall suggest that the form of bank ownership needs to be considered when analyzing interest margin determinants.     

Are risk disclosures an effective tool to increase firm value?

The objective of this paper is to test the effect of risk disclosures on firm value. The results show that the disclosure of information on risks is positively associated with the value of a firm. In addition, our findings highlight that this association is mediated by corporate reputation, which improves for enhanced risk disclosure practices. This evidence is particularly important to understand the usefulness of the disclosure of information on risks in the dialogue between a firm and its stakeholders. Managers and regulators can better understand the consequences of the communication of information on risks.     

Are financial spreads useful indicators of future inflation and output growth in EU countries?

This paper seeks to address the policy issue of the usefulness of financial spreads as indicators of future inflation and output growth in the countries of the European Union, placing a particular focus on out-of-sample forecasting performance. Such analysis is of considerable relevance to monetary authorities, given the breakdown of the money/income relation in a number of countries and following increased emphasis of domestic monetary policy on control of inflation following the broadening of the ERM bands. The results confirm that for some countries, financial spread variables do contain some information about future output growth and inflation, with the yield curve and the reverse yield gap performing best. However, the relatively poor out-of-sample forecasting performance and/or parameter instability suggests that the need for caution in using spread variables for forecasting in EU countries. Only a small number of spreads contain information, and improve forecasting in a manner which is stable over time. © 1997 John Wiley & Sons, Ltd.     

Regional differences in small firm entry in manufacturing industries: Lower Saxony, 1979–1991 †

This paper is an empirical study of inter-regional and inter-temporal variations in entry of new firms using longitudinal data covering all manufacturing establishments in Lower Saxony between 1979 and 1991. Patterns of entry are reported for sixteen regions based on gross rates of entry (number of new firms) and entry intensities (shares of employees). An empirical model is applied to detect regional characteristics that are highly correlated with entry. Pooling of cross-section and time-series data allows for control of influences of varying macroeconomic conditions and unobserved regional characteristics that turned out to be important. Small firm entry tends to be positively related to high overall economic growth, and to be higher in regions where both the small firm employment share and the level of wealth are high while the wage rate is low. We find no evidence for a negative impact of the business tax rate or for a positive effect of regional subsidies.     

Are small firms really credit constrained? Empirical evidence from Kosova

This article uses firm level data from an SME survey conducted by Riinvest Institute in 2006 in order to examine the determinants of obtaining bank finance conditional upon applying. The results of the survey show that not all the firms receive credit they apply for, suggesting a slight excess of demand over supply of credit. Unlike some other studies in transition economies this article corrects for sample selection bias. Econometric evidence indicates that commercial banks base their decision to loan firms primarily on the basis of collateral. Well performing firms are more likely to ask for credit because of better business prospects in the future, but profitability as a measure of firm performance does not seem to be sufficient signaling for banks in order to allocate credits. Banks seems to prefer more to secure themselves from likely opportunistic behavior of potentially “bad borrowers” with use of collateral. Findings are in line with theoretical and empirical arguments that systematic use of collateral can mitigate the adverse selection by banks in choosing whom to allocate the credit especially in country with turbulent political environment and weak property right system. However, unlike other studies findings suggest that the rhetoric of financial constraints to some extent has been exaggerated in a transition context.     

How does the money market development impact the bank lending channel of emerging Countries? A case from China

Transforming from quantitative-based instruments to price-based instruments is the primary goal of the monetary policy transformation in emerging economies. In essence, this process is gradually replacing the interest rate channel with the credit channel from the perspective of the monetary policy transmission mechanism, which is mainly achieved by promoting financial development to reduce the financial friction. However, there are opposite effects of financial development on the bank lending channel; thus, the topic is controversial. Using banks’ data from 2010 to 2018, this paper studies whether and how the money market development weakens the effect of the bank lending channel in China. The result shows that the mechanism through which the money market development influences the bank lending channel is realized by affecting the substitution elasticity of the asset and liability structure of banks’ balance sheets. Different from the theoretical expectation, the effect of the money market development on the bank lending channel is nonsignificant in China but appears to be weakened when the interest rate market-oriented reform is considered. However, further research based on structural analysis demonstrates that the money market development exerts heterogeneous effects on the bank lending channel under different types of sub-markets and different characteristics of the banks considered.     

Do investments in intangible customer assets affect firm value?

This paper develops a simple model of investment by service firms in intangible customer assets, and tests whether the model identifies some critical drivers of firms’ stock returns. Similar to firms with significant research and development (R&D) expenditures, we argue that firms in fast-growing service industries with few tangible assets can increase firm value by investing in customer acquisition and service (A&S) expenditure. Using a unique hand-collected data set, we show that per-customer changes in firms’ revenues, customer acquisition costs, and customer service costs help to explain their abnormal stock returns.     

Does more finance mean more inequality in times of crisis?

Many recent empirical studies show that both banking crises and financial development (FD) play an important role in understanding the dynamics of income inequality (IncI) over the last decades. However, so far no study has investigated the role of FD in the amplification of IncI following banking crises. This paper seeks to address this issue based on a sample of 69 banking crises in 54 countries over the 1977–2013 period. Our analysis suggests that FD is associated with a significant increase in IncI in the aftermath of banking crises. This result is robust to a broad range of alternative specifications and is unaffected by various potential sources of endogeneity. We also show that the relationship between FD and the redistributive consequences of banking crises is not subject to a threshold effect and is stronger for developing countries.     

Are rules and boundaries sufficient to limit harmful central bank discretion? Lessons from Europe

Marvin Goodfriend׳s (2014) insightful, informative and provocative work explains concisely and convincingly why the Fed needs rules and boundaries. This paper reviews the broader institutional design problem regarding the effectiveness of the central bank in practice and confirms the need for rules and boundaries. The framework proposed for improving the Fed incorporates key elements that have already been adopted in the European Union. The case of ELA provision by the ECB and the Central Bank of Cyprus to Marfin-Laiki Bank during the crisis, however, suggests that the existence of rules and boundaries may not be enough to limit harmful discretion. During a crisis, novel interpretations of the legal authority of the central bank may be introduced to create a grey area that might be exploited to justify harmful discretionary decisions even in the presence of rules and boundaries. This raises the question how to ensure that rules and boundaries are respected in practice.     

Entrepreneurship in the informal economy: commercial or social entrepreneurs?

Recent research has revealed that a large proportion of entrepreneurs start-up their ventures operating on a wholly or partially off-the-books basis. Until now, it has been commonly assumed that those who operate in the informal economy are exclusively commercial entrepreneurs. They are assumed to be rational economic actors who weigh up the benefits of operating off-the-books against the costs of being caught and decide to operate in this manner. The aim of this paper is to evaluate critically this a priori assumption. Reporting evidence from a 2005/6 survey involving face-to-face interviews with 102 informal entrepreneurs in Moscow in Russia, the finding is that such entrepreneurs are not purely commercially driven. Examining their rationales, informal entrepreneurs are found to range from purely rational economic actors pursuing for-profit logics through to purely social entrepreneurs pursuing purely social logics, with the majority somewhere in-between combining both for-profit and social rationales. Neither do their logics remain static over time. What begins as a commercial entrepreneurial venture may become more socially oriented over time or vice versa. So too do their logics vary socio-spatially. Those living in deprived populations are more socially-orientated, whilst those in relatively affluent populations are comparatively more profit-driven. The outcome is a call for a more nuanced explanation of the complex and heterogeneous logics of informal entrepreneurs.     

Conflicting logics? The role of HRM in a professional service firm

HRM is considered of vital strategic importance in professional service firms, but professionals generally resist these managerial initiatives. In this article, I report on an in‐depth case study of a tax consultancy department in a major accounting firm by exploring the way professionals reconcile the logics of professionalism and HRM. Results indicate that the logics are reconciled in several ways as they are simultaneously replicated, revised, and rejected. Whereas current theories argue that the different logics balance each other, this study indicates that the professionals strengthen professional logic by acknowledging HRM and its procedures, simultaneously circumventing them through inverted appropriation. Results suggest that hybridity between conflicting logics may appear on an organisational level, whereas a single logic dominates in everyday work. The study contributes to in‐depth studies of institutional logics and to a detailed understanding of the workings of HRM in professional contexts.     

Is Ulrich's model useful in understanding HR practitioners' roles in non-western developing countries? An exploratory investigation across private and public sector organizations in the Sultanate Kingdom of Oman

This study set out to explore whether Ulrich's model is useful in understanding HR roles in non-western developing countries such as Oman. The study surveyed a random sample of 780 HR practitioners, line managers and employees from public and private sector organizations. In addition 12 HR practitioners and managers were interviewed to supplement the data collected from the survey. The findings indicate that HR practitioners in Oman perform all the roles. However, ‘strategic partner’ is the least performed role. The findings also indicate that HR practitioners in the private sector are more likely to perform all the five roles to a greater extent than their counterparts in the public sector. We also found partial support for our proposition that HR practitioners in the public sector would play more ‘operational’ roles (e.g. employee advocate or functional expert) than ‘strategic’ roles (i.e. strategic partner or HR leader). The study revealed that Ulrich's model is robust enough to help in the understanding of HR roles in a non-western, developing country context. The findings are discussed within the context of institutional and cultural frameworks. The paper argues for more research to improve the understanding of how socio-economic and cultural factors influence HR roles and how they are performed.     

Time-frequency co-movements between bank credit supply and economic growth in an emerging market: Does the bank ownership structure matter?

This study aims to shed some light on the causal link between bank credit supply and economic growth in Turkey for the banks with the different ownership structures between 1993Q4 and 2017Q3. Wavelet coherence test is used to obtain this objective and to answer the following questions: (i) does bank credit supply lead to economic growth in Turkey and vice versa, and (ii) does the bank ownership matters in this linkage? The findings from wavelet coherence reveal that between 1993 and 2003 in the short and medium term, economic growth leads credit supply but in the long run there is feedback causality between credit supply and economic growth for only public and private banks. However, in the long-run between 1993 and 2003 economic growth leads credit supply in the foreign banks in Turkey. Between 2004 and 2017, there is feedback causality between credit supply and economic growth. Moreover, our findings suggest that bank ownership affects the strength of the linkage between credit supply and economic growth in Turkey especially in the short and medium terms. More specially, within the three types of bank ownership, the findings imply that the strongest correlation among the variables is for the private banks while the weakest one is for foreign banks.