Corporate governance and the insolvency risk of financial institutions

We investigate whether shareholder-friendliness of corporate governance mechanisms is related to the insolvency risk of financial institutions. Using a large sample of U.S. financial institutions over the period 2005–2010, we find that corporate governance is positively related to the insolvency risk of financial institutions as proxied by Merton’s distance to default measure and credit default swap (CDS) spread. We also find that “stronger” corporate governance increases insolvency risk relatively more for larger financial institutions and during the period of the financial crisis. Lastly, our results suggest that shareholder-friendliness of corporate governance mechanisms is viewed unfavorably in the bond market.     

Understanding the accumulation of bank and thrift reserves during the U.S. financial crisis

The level of aggregate excess reserves held by U.S. depository institutions increased significantly at the peak of the 2007–2009 financial crisis. Although the amount of aggregate reserves is determined almost entirely by the policy initiatives of the central bank that act on the asset side of its balance sheet, the motivations of individual banks in accumulating reserves differ and respond to the impact of changes in the economic environment on individual institutions. We undertake a systematic analysis of this massive accumulation of excess reserves using bank-level data for more than 7000 commercial banks and almost 1000 savings institutions during the U.S. financial crisis. We propose a testable stochastic model of reserves determination when interest is paid on reserves, which we estimate using bank-level data and censored regression methods. We find evidence primarily of a precautionary motive for reserves accumulation with some notable heterogeneity in the response of reserves accumulation to external and internal factors of the largest banks compared with smaller banks. We combine propensity score matching and a difference-in-differences approach to determine whether the beneficiaries of the Capital Purchase Program of the Troubled Asset Relief Program accumulated less cash, including reserves, than non-beneficiaries. Contrary to anecdotal evidence, we find that banks that participated in the program accumulated less cash, including reserves, than nonparticipants in the initial quarters after the capital injection.     

Unearthing antecedents to financial inclusion through FinTech innovations

Fintech innovations are enabling access to financial services through mobile devices for many unbanked in the world. Though fintech innovations are touted as game changers in deepening financial inclusion, their wide acceptance and use still remain limited. In the extant literature, technological and behavioural antecedents that influence users’ behaviour toward financial technologies are not fully understood. This study argues that understanding antecedents to the actual use of fintech innovations will lead to deepening financial inclusion. Using mobile money—a type of fintech innovation, this study adopts the Unified Theory of Acceptance and Use of Technology 2 (UTAUT2) and the Prospect theory. Drawing on survey data collected from 294 respondents, this study applies the partial least square structural equation modelling technique. The findings show that performance and effort expectancy have significant relationship with the intention to use mobile money services. However, contrary to well-established positions, price value, hedonic motivation, social influence and perceived risk do not influence intention and use of mobile money services. The study makes significant theoretical contributions and offers practical and policy implications for deepening financial inclusion.     

企业生命周期界定及财务战略选择

本企业都是有生命周期的,而且其发展具有动态周期性,生命周期的界定对其财务战略的制定有重要的作用,只有正确地划分了企业所处的阶段才能选择适合的财务战略。本文首先界定企业的不同生命周期阶段,并在此基础上选择理财目标,从而提出适合企业不同发展阶段的财务战略,以求降低企业财务风险,增强企业的财务稳定性。     

Universal banking and financial architecture

Discussions of systemic risk after the financial crisis of 2007–09 have focused heavily on so-called “systemically important financial institutions” (SIFIs) a cohort of financial firms that is almost exclusively (but not necessarily) comprised of large, complex and heavily interconnected financial conglomerates. This paper considers the economic and strategic drivers of SIFIs – if such institutions are a key source of systemic risk, it is important to understand how and why they get that way. The paper then sets forth a public-interest perspective on the financial architecture by setting out key benchmarks – static and dynamic efficiency, stability and robustness, and competitiveness – and the tradeoffs that exist between them, and examines how SIFIs can support or detract from these benchmarks. If SIFIs are to be subject to much sharper prudential regulation, its impact must be calibrated against systemic performance benchmarks. Finally, the paper focuses on some of the major regulatory initiatives following the 2007–09 financial crisis, and in particular the US Dodd-Frank legislation of 2010, in terms of their possible impact on business models of SIFIs. The paper concludes that improving the financial architecture in a disciplined, consistent, internationally coordinated and sustained manner with a firm eye to the public interest should ultimately be centered on market discipline. By being forced to pay a significant price for the negative externalities SIFIs generate – in the form of systemic risk – managers and boards will have to draw their own conclusions regarding optimum institutional strategy and structure in the context of the microeconomics and industrial organization of global financial intermediation. If this fails, constraints on their size, complexity and interconnectedness will be a major part of the policy reaction to the next financial crisis.     

Banks’ risk taking,financial innovation and macroeconomic risk

This paper shows how financial innovation in combination with the fall of macroeconomic risk can explain the strong growth of the primary and secondary credit markets in the U.S. economy. We document empirically the fall in macroeconomic risk, the expansion of the prime and secondary credit market and we provide evidence that changes in macroeconomic risk are closely related to the evolution of the prime market. In the theoretical part of the paper we study in a simple portfolio optimization framework the effect of financial innovation and macroeconomic risk on banks’ risk taking. The results of the model show that financial innovation increases bank appetite for risky investment both in the prime and secondary markets and that this effect is stronger in environments with low aggregate macroeconomic risk. In addition the banking system becomes less stable because of the portfolio risk of each individual bank increases.     

An empirical analysis of the impact of banking regulations on sustainable financial inclusion in the CEMAC region

Based on a panel analysis of six countries over the period 2004–2018, this study examines the impact of financial regulation on sustainable financial inclusion (FI) in the Central African Economic and Monetary Community (CEMAC) region. Using different approaches to estimate FI, we ?nd that banking regulation has a positive impact on FI. In particular, our ?ndings suggest that regulations for monitoring entry into the financial sector, external reporting and audits, and deposit insurance contribute sustainably to an increase in FI. In addition, banking regulations help the region to attract foreign direct investment and boost economic growth. An important policy implication of this paper is that CEMAC regulators should enhance synergy with mobile telephone network providers to promote digital FI, as it offers a low-cost option for promoting FI, especially for people living in areas underserved by mainstream financial institutions.     

Globalization,political institutions,financial liberalization,and performance of the insurance industry

This paper investigates the impacts of globalization, political institutions, and financial liberalization on the performance and risk-taking of insurance firms covering 1324 individual firms in 30 selected OECD countries. We find that greater globalization and a stable political institution lead insurance companies to exhibit a better performance—i.e., insurers adjust their strategies while being aware of institutional changes. By contrast, financial liberalization has an inverse impact on insurance company performance. Thus, greater globalization and a stable political environment both drive less risk-taking for insurers. These findings are particularly important to insurance markets’ competitors and national policymakers.     

雄安新区城市高质量发展的金融支持路径

“十四五”开局在即,雄安新区建设发展迈入新的征程。雄安新区致力于打造生态宜居、创新引领、协调发展、开放先行的现代化新城。树立“雄安质量”,金融必不可少。当前,雄安新区的金融支持力度仍显不足,投融资平台的融资能力与城市建设所需巨大资金不匹配,投融资体系仍在建设,仍需探索资本市场多渠道融资途径;金融机构参与城市建设与发展不够深入,仅银行开始深入布局,证券、保险业初步落户雄安,期货行业仍在规划参与阶段。应从拓宽融资渠道、鼓励市场参与、发展绿色金融以及推行科技金融创新等多角度入手,以政策引领和金融机构的市场化参与为基础,提升雄安新区城市建设与发展中的金融支持水平,建成创新、协调、绿色、开放、共享的高质量发展新区。     

Real income convergence and the patterns of financial integration in the EU

We analyse real income convergence among the EU28 countries throughout 1995–2017 and the relationship with the convergence patterns of financial systems. We apply the nonlinear latent factor model of Phillips and Sul (2007, 2009) to real incomes and the IMF financial development indices for financial markets and financial institutions (Svirydzenka, 2016), and identify convergence clubs endogenously. We have several results. First, income disparities narrowed significantly over the last twenty years; yet, the growth convergence process lost momentum triggered by the global financial crisis and countries legacies shaped up asymmetries that have crystallised. Second, countries' financial systems exhibit high fragmentation, especially for financial markets, with the new EU member states at a lower financial development, confirming the existence of a two-tier Europe. Overall, the convergence patterns for real incomes and financial development are strongly correlated. Finally, the financial structure matters and market-oriented economies feature higher long-run growth, indicating the need to implement pan-European policy actions that increase the opportunities of risk diversification, enhance capital raising and channel large-scale financing to firms.     

Institutional perspective of financial sector development: A multidimensional assessment

Financial sector development is a multidimensional process that plays a vital role in the economic growth and development of a country. This study investigates the effect of institutional quality on multidimensional financial sector development, and its dimensions, such as, depth, access, and efficiency. We used a panel dataset of 85 emerging and developing economies from 1996 to 2018 for analysis. Our findings based on 2SLS estimation demonstrate that institutional quality has a significant positive effect on the progress of the financial sector, especially its depth, access, and efficiency. The breakdown analysis shows that most of the key components (control of corruption, government effectiveness, regulatory quality, rule of law, and voice and accountability) of institutional quality enhance the financial sector development. Our empirical results are robust across alternative measures of institutional quality, split-sample analysis, alternative instrument, and estimator. This paper also offers useful policy implications to the stakeholders in emerging and developing economies.     

Financial sector strategies and financial sector outcomes: Do the strategies perform?

Financial sector strategies enable financial policymakers and stakeholders to take a holistic view at the financial development needs in their country and to formulate balanced financial policies. They help policymakers consider the systemic risk that different development policies involve and choose an informed way forward. We construct a new dataset of historical financial sector strategies covering 150 countries over the period 1985–2014, and assess the strategies using the rating criteria proposed by Maimbo and Melecky (2014). We then investigate how the quality of the strategies can affect financial sector outcomes such as financial depth, inclusion, efficiency and stability. We find that the use of financial sector strategies helped increase financial sector deepening, inclusion and stability, and that this impact could be greater for higher quality strategies. One way how financial sector strategies can improve financial sector outcomes is by improving the regulatory framework for finance. A significant relationship between the use of strategies and the efficiency of banks is not confirmed.     

Systemic risk of Chinese financial institutions and asset price bubbles

Although there has not been a large-scale systemic crisis in China, high-risk financial events have occurred continuously in recent years. This research thus creatively analyzes the determinants of systemic risk for Chinese financial institutions from the view of asset price bubbles. First, we identify bubbles in the China stock and real estate markets on the basis of the generalized sup Augmented Dickey-Fuller (GSADF) model and explain the reasons for bubble formations according to the stage of China's economic development and policies implementation. At this stage, considering the differences in economic development levels of different cities, the real estate bubbles in the first, second and third tier cities and the whole country were innovatively identified. Second, on the basis of the DCG-GARCH-CoVaR model to measure the systemic risk of listed financial institutions in China and to classify institutions, the results show that the main source of such risk is the banking sector. Furthermore, by constructing regression models, stock market bubbles and real estate bubbles both positively correlate with systemic risk throughout the sample period. Meanwhile, the impact of bubbles on the systemic risk of different types of financial institutions was taken into account so that regulators prioritized different types of institutions with different characteristics when faced with decisions. Finally, we provide macro-prudential policy advice to regulators in order to weaken the impact of bubbles on financial stability to avoid systemic crises.     

How financial intermediation challenges national sovereignty in emerging markets

This study explores the impact of changes occurring in financial markets on national sovereignty. Sovereignty involves both the authority to rule and the capacity to exercise this rule. Changes now occurring in financial markets and their most important institution, banks, present challenges to sovereignty. Domestic challenges include consolidation, conglomeration, automation, reduction of government banking, disintermediation, and the development of risk transfer markets and mechanisms. International challenges include freeing capital inflows and outflows, foreign control of financial service institutions, regional and supranational economic integration, and the abandonment of national currencies. These often create a web of obligations that may compromise national sovereignty. While sovereignty may not be viewed as absolute in terms of national priorities, and may be in a constant state of negotiation, it is a measure of national strength. Its infringement may produce resentments and dissatisfactions among international agents and within national political structure and render a toll on national growth and development.     

Partial cross-quantilogram networks: Measuring quantile connectedness of financial institutions

We propose partial cross-quantilogram networks for measuring the connectedness of 30 China’s financial institutions at different quantiles. We find that networks at the extreme quantiles are more closely connected than those at the median quantile. The network density and centrality show that the systemically important financial institutions vary across different quantiles. We observe an asymmetric effect in quantile connectedness during the period of “2015–16 Chinese stock market turbulence;” that is, the network connectedness at the lower quantile (i.e., 0.05 quantile) is higher than that at the upper and median quantiles (i.e., 0.95 and 0.50 quantiles). By analyzing the similarity of networks across quantiles, we find that the similarity index is relatively high in the crisis period. Our study provides useful information on connectedness of financial institutions for regulators and investors.     

An agent-based model for financial vulnerability

This study addresses a critical regulatory shortfall by developing a platform to extend stress testing from a microprudential approach to a dynamic, macroprudential approach. This paper describes the ensuing agent-based model for analyzing the vulnerability of the financial system to asset- and funding-based fire sales. The model captures the dynamic interactions of agents in the financial system extending from the suppliers of funding through the intermediation and transformation functions of the bank/dealers to the financial institutions that use the funds to trade in the asset markets. The model replicates the key finding that it is the reaction to initial losses, rather than the losses themselves, that determine the extent of a crisis. By building on a detailed mapping of the transformations and dynamics of the financial system, the agent-based model provides an avenue toward risk management that can illuminate the pathways for the propagation of key crisis dynamics such as fire sales and funding runs.     

What did Frederick the great know about financial engineering? A survey of recent covered bond market developments and research

This article is a survey of the covered bond market with a focus on recent developments in the U.S. Covered bonds are debt obligations secured by a pool of assets, usually consisting of residential mortgages or other public debt. The covered bond asset pool is ring-fenced, dynamically managed, and remains on the balance sheet of the issuer. The issuer replaces non-performing assets and maintains a minimum overcollateralization level. U.S. lawmakers, regulators, and financial institutions are currently working toward jump-starting a market for U.S. issued covered bonds. Recent academic research has focused on the determinants of covered bond spreads and whether these instruments can become an alternative source of mortgage financing in the U.S.     

Determinants of performance of independent financial advisors

This paper examines the performance of independent financial advisors (IFAs) in terms of their involvement in innovation activities, participation in business networks and open innovation as a strategy to cope with difficult market conditions caused by the recent economic downturn. Performance is assessed on the basis of average sales growth for years 2010–2012. The results of the study suggest that IFAs’ involvement in innovation activities, participation in networks and open innovation enhances business performance. The managerial implications are that IFAs may be able to achieve higher sales growth by participating in networks and engaging in innovation activities. The originality of this paper is that it provides an empirical assessment of possible strategies to support sales growth in small financial service sector firms facing volatile market conditions.     

Nonlinearity in the effects of financial development and financial structure on unemployment

The positive role of the financial sector in promoting economic growth has been well established among academics and practitioners since the early 1990s. However, more recently, there has been increasing evidence pointing to a vanishing, and even negative, effect of financial sectors at high levels of financial depth, particularly since the global financial crisis of 2007?2009. Too much finance could hurt growth. The paper shifts the focus towards labor market outcomes by examining whether too much finance also hurts unemployment. Using a dynamic simultaneous model via system GMM estimation and a panel of 97 OECD and non-OECD countries for the period 1991–2015, we find that the answer depends on the type of finance and the extent of a country’s labor market flexibility. Specifically, (i) too much financial development hurts unemployment for countries with more rigid labor markets; (ii) too bank-centered or too little market-oriented financial systems worsen unemployment, particularly for countries with more flexible labor markets; and (iii) too much credit to private enterprises deteriorates unemployment in countries with more rigid labor markets, whereas too little credit to households worsens unemployment in countries with more flexible labor markets. Evidence also shows that these unemployment consequences possibly run through investment and entrepreneurship channels.     

博弈视角下大学生互联网消费信贷决策行为研究

基于博弈论视角,从理论上构建了金融机构与大学生消费信贷决策的动态博弈模型,并引入信誉机制,比较分析了传统金融机构退出大学生信用卡市场而互联网金融大举进入校园信贷市场的深刻原因,同时借助大学生消费信贷调查一手数据实证检验了信誉机制的有效性,研究结果表明:在单次和有限次重复博弈中,“囚徒困境”普遍存在,而在无限次重复博弈中,尽管利率和交易成本下降有利于促进交易,但信息不对称问题却使博弈只能进行有限次,因此要达成长期合作,必须引入具有“社会性惩罚”的信誉机制来抑制大学生的短期投机行为,然信誉机制对于促进传统金融机构与大学生合作的作用有限,更多的是促进互联网金融机构与大学生消费信贷关系的达成,实证结果验证了该结论。由此得到的启示是,充分利用互联网大数据优势、强化互联网金融市场监管、引导大学生树立正确的消费观和责任意识,有助于破解“一放就乱,一管就死”的监管困局,这对于规范互联网金融校园消费信贷市场具有重要现实意义。