The Relationship Between Equity-Based Compensation and Managerial Risk Taking: Evidence from China

The authors analyze the impact of equity-based compensation on managerial risk-taking behavior in Chinese listed firms from January 2006 to July 2011. They find that greater risk-taking incentives lead executives to invest more in research and development (R&D) projects and less in capital expenditures. Greater managerial risk-taking incentive increases firm focus. Managerial risk-taking incentives have positive effects on firms' leverage. Overall, increasing the sensitivity of chief executive officers' portfolio value to stock return volatility helps incentivize executives to work harder, as sharing gains and losses with shareholders aligns the interests of executives and shareholders. In addition, the results indicate that state control of firms has a negative effect on R&D investment, and this suggests that state-controlled firms should take more initiative to innovate.     

The Relationship Between Bank Risk and Earnings Management: Evidence from Japan

Using stock price data drawn from the 1990s in Japan, this paper empirically shows that bank risk is negatively associated with discretionary accruals, indicating that investors misinterpreted high reported earnings as favorable information about bank financial health. We also show that the negative relationship was very powerful prior to the major bank failures in late 1997 and 1998, but it diminished subsequent to the failures. We conclude that investors started to anticipate potential manipulation of financial reports by bank managers more rationally after the major bank failures.     

The Effectiveness of Public and Private Sector Summary Risk Measures in Predicting Insurer Insolvencies

This article investigates the abilities of four key summary risk measures to predict property-liability insurer insolvencies. The four summary risk measures studied are the NAIC's risk-based capital ratios, the NAIC's financial analysis solvency tools (FAST) scores, A.M. Best's Capital Adequacy Relativity ratios, and A.M. Best's ratings. The empirical tests find that the risk measures produced by the private sector are superior in predictive ability to the measures produced by regulators, perhaps because of the qualitative adjustments made by private sector analysts. The results also demonstrate that overall measures of risk are substantially better than risk-based capital measures in predicting insolvencies. Another finding is that the predictive ability of the NAIC's RBC ratios can be improved substantially if ranks are used rather than the ratios themselves.     

资本约束、风险承担与货币政策传导关系研究

分析资本监管对银行行为的影响途径及其与货币政策传导机制的关系,揭示风险识别与定价对货币政策的影响,并拓展风险承担渠道的概念后,发现流动性与风险承担行为是紧密相连的,并且会相互加强.     

Life Insurer Cost of Equity with Asymmetric Risk Factors

This study presents an improved model for estimating life insurer cost of capital with the inclusion of upside and downside risk factors and controlling for life insurer characteristics. Although various asymmetric measures of market risk have been shown to be priced factors for the broader equity market, life insurer realized equity returns include a much larger premium for bearing downside risk, even after controlling for firm characteristics and other measures of risk. Cross‐sectional regression analysis finds a positive (negative) premium for downside (upside) betas, conditional on down and up markets, respectively. Coskewness and cokurtosis are also priced factors.     

Fair Valuation of Equity-Linked Policies under Insurer Default Risk

Abstract

We consider the problem of computing the fair value of equity-linked policies with an interestrate guarantee when the insurer is subject to credit risk. The framework is developed based on modern financial theory using the no-arbitrage principle. In this context, an equity-linked policy is considered as a vulnerable contingent claim that expires before maturity if the firm asset value reaches a prespecified default threshold depending on the firm’s liabilities. We derive a closedform formula in a continuous-time environment to compute the fair value of the contract. We also develop a discrete-time model that allows us to address fair evaluation when the policy embeds a surrender option.     

Impact of the Heterogeneity in Market Power on the Relationship Between Risk Taking and Competition: Case of the Chilean Banking Sector

Until the end of the 1990s, the existence of a negative relationship between banking competition and stability was generally accepted in the economic literature. Since then, a new point of view has emerged questioning this relationship and instead argues about the existence of a positive relationship between these two variables. This paper studies the impact of the heterogeneity in market power on this relationship through the case of the Chilean banking sector. The results indicate that this kind of heterogeneity can play an important role in the relationship between risk taking and competition.     

Residential Mortgage Lending and Borrower Risk: The Relationship Between Mortgage Spreads and Individual Characteristics

The mortgage banking environment in Hong Kong is quite different from that in the United States. For example, the secondary mortgage market and mortgage insurance only started after 1997. Using a large data set on mortgages, we examine empirically how mortgage rates in this market vary with various individual borrower, property, and loan characteristics. We find that mortgage rates in Hong Kong do vary with individual characteristics, which suggests credit sorting according to both prepayment risk and default risk, as a higher mortgage rate is found to be related to either higher collateral (a lower loan-to-value ratio) or slower prepayment. The empirical results suggest that lenders in Hong Kong can observe the risk type of individual borrowers to a certain extent and charge a corresponding mortgage spread. Overall, the evidence is consistent with the sorting-by-observed-risk paradigm as in Berger and Udell (1990).     

国际影子银行体系的风险监管改革与启示

影子银行体系的超常规发展和信用扩张,是全球金融危机爆发的重要原因之一。本文从影子银行体系的内涵、运作机制展开研究,分析危机后西方主要国家有关的金融监管改革举措,并结合中国影子银行体系的现状提出有关建议。     

入世与我国金融市场风险管理

入世后，我国银行及非银行金融机构面临着各种风险，尤其是全球化金融市场风险。我们必须尽早学习和借鉴国外先进的风险管理经验，改善我国金融机构控制风险的能力，并探讨市场风险度量的主要方法，提高我国金融市场风险管理能力。     

The Challenge of Risk Reporting: Regulatory and Corporate Responses

Corporate collapses such as those of Ansett Australia, Centaur Mining, Enron, HIH and One. Tel have rekindled regulators' concerns about the lack of transparency in financial reporting on risks and uncertainties. This paper examines the broad conceptual issues and regulatory responses so far in leading jurisdictions and investigates risk reporting of Australian entities operating in the mining sector. The limited and uneven level of reporting on risk found, in this study, if replicated in other industries and jurisdictions, provides justification for standard-setters considering more explicit requirements than the existing piecemeal rules of restricted scope.     

The Theory of Bank Risk Taking and Competition Revisited

There is a large body of literature that concludes that—when confronted with increased competition—banks rationally choose more risky portfolios. We argue that this literature has had a significant influence on regulators and central bankers. We review the empirical literature and conclude that the evidence is best described as “mixed.” We then show that existing theoretical analyses of this topic are fragile, since there exist fundamental risk‐incentive mechanisms that operate in exactly the opposite direction, causing banks to become more risky as their markets become more concentrated. These mechanisms should be essential ingredients of models of bank competition.     

货币政策对居民就业影响实证分析

基于封闭经济下一般均衡分析框架,通过将内生劳动力供给引入Sidrauski模型,从货币供应量层面分析了货币政策对居民就业的影响。研究发现：如果消费者对商品消费的相对风险规避程度大于（小于）1,那么扩张性货币政策会促进（抑制）居民就业。考虑到目前中国居民消费的相对风险规避程度比较大,因而政府实施扩张性的货币政策有利于增加居民就业,实证检验也证实了这一结论。但从长期来看,居民消费的相对风险规避程度呈下降趋势,过度依赖于扩张性的货币政策来解决失业问题是不可行的。     

骆驼评价体系与商业银行风险管理

骆驼评价体系是金融监管机构通过对金融机构的资本充足程度、资产质量、管理水平、盈利水平和流动性五项指标进行评级打分，来评价金融机构的风险管理质量和经营安全程度，这对我国商业银行具有重要的借鉴意义。     

Reducing Regulatory Risk: The Case for a New Regulatory Contract with the Privatized Utilities

Privatization was intended to reverse the inefficiencies of state ownership. When the public utilities were privatized in the UK, between 1984 and 1996, newdedicated regulatory offices were established: Oftel, Ofgas, Ofwat, Offer and the ORR. Terms of reference for the regulators were set out in the privatization legislation, but more generally the regulators were given considerable discretion over their industries. Against the background of the Government Green Paper on the future of regulation in the UK, this article argues that while regulatory discretion was desirable in the early days of regulation, there is now a stronger case for introducing 'contracts' which constrain regulatory discretion and reduce regulatory risk.