Demand for World Bank lending

This paper attempts to quantify the relevance of crisis lending in IBRD and IDA lending commitments. It finds that IBRD and IDA lending commitments are positively related to an increase in debt service payments and inversely related to the level of reserves of the borrowing country. These two variables explain a large part of the variation in IBRD and IDA lending commitments – adjustment lending as well as project lending – not only since the Asian crisis, but also during tranquil times over the last two decades. This finding implies that bridging the financing gap has been an important factor affecting developing countries’ decision to seek financial help from the Bank. While borrowing for servicing debt during a crisis is consistent with the World Bank's goal of poverty reduction and assisting countries without access to financial markets, such borrowing during tranquil times may conflict with these goals.     

Impact of World Bank lending in an adjustment-led growth model

Within a financial- and growth-programming framework, this paper develops a policy-driven growth model and addresses the effects of World Bank lending on economic growth in a sample of 30 countries, after having controlled for the effects of key macroeconomic variables. Both static and dynamic panel estimates suggest a positive significant effect of the rate of growth in World Bank lending on economic growth, conditional on other variables, namely changes in exchange rate, domestic credit growth, and inflation. Empirical evidence also reveals the positive effect of a macroeconomic policy index in this sample of developing countries.     

Editorial introduction: Is the World Bank lending effective in developing countries?

This special issue of Economic Systems includes five papers about the World Bank lending in developing countries. The motivation for the special issue stems from the relatively extensive literature on the sister institution, namely, the International Monetary Fund (IMF), but not on the World Bank itself. The papers’ focus is the influence of the World Bank lending on economic growth, education and health, poverty reduction, and regulation in the recipient countries. The papers’ findings contribute to our understanding of the effects of the World Bank lending in developing countries, which reflects both successes and shortcomings.     

世界银行的森林战略和政策述评

对世界银行各阶段森林战略和政策进行介绍和评价。世界银行在其援助贷款活动中实施森林战略和政策,是为保护森林资源提供资金保障,推进森林保护国际法律框架的形成。     

Does the World Bank have any impact on human development of the poorest countries? Some preliminary evidence from Africa

In an attempt to better understand the impact of the World Bank on human development in poor countries, we use cross-country data on African countries for the 1990–2002 period to examine this relationship. The coefficient estimates of our parsimonious fixed-effects models indicate that while loans and grants of the Bank have had a positive impact on some relatively short-term indicators of health and education in an average African country, there is little evidence to suggest that such loans and grants have helped these countries to consolidate on the short-term gains.     

Bank lending: The bank ownership focus in the pre- and post-global financial crisis periods

The objective of this research is to examine the impact of bank ownership on the composition of working capital, investment, and consumption loan types before and after the global financial crisis (GFC). The data has been grouped into pre-GFC and post-GFC sub-periods. The pre-GFC period encompasses the post-Asian crisis time period until 2006, just before the start of the GFC. The post-GFC period comprises the time period 2009 until 2016. Data were obtained from the Indonesian Banking Directory of the Indonesian Central Bank, commercial bank annual reports provided by Infobank magazine, and the Indonesian Banking Development Institute. The findings reveal the differences and changes in the composition of loan types for the different forms of bank ownership. Government-owned banks tend to focus on consumption loans, whereas foreign-owned banks outpace domestic-owned banks in the financing of working capital loans. After the GFC, government-owned banks increased their consumption loans significantly. This research augments the knowledge about loan portfolio compositions and trends pertaining to different bank types. It can serve as a benchmark and can be applied to enhance decision-making in the banking industry. Furthermore, Indonesian regulating authorities can utilize the information from a strategic and policy perspective to monitor, manage and control financial intermediation from a macroprudential perspective.     

Risky bank lending and countercyclical capital buffers

We study the properties of a monetary economy with an essential role for risky bank lending. Banks issue deposits and lend to entrepreneurs. Because banks׳ lending rate cannot be made contingent on aggregate shocks, and because banks face capital adequacy regulations, they require a capital buffer against loan losses. Capital adequacy regulations are modeled on the Basel-III rules, including a minimum capital adequacy ratio, an endogenous capital conservation buffer, and a countercyclical capital buffer. We find that a countercyclical capital buffer leads to a significant increase in welfare. It also reduces the need for countercyclical adjustments in policy interest rates.     

Bank capital regulation,loan contracts,and corporate investment

This paper studies the link between bank capital regulation, bank loan contracts and the allocation of corporate resources across firms’ different business lines. Credit risk is lower when firms write contracts that oblige them to invest mainly into projects with highly tangible assets. We argue that firms have an incentive to choose a contract with overly safe and thus inefficient investments when intermediation costs are increasing in banks’ capital-to-asset ratio. Imposing minimum capital adequacy for banks can eliminate this incentive by putting a lower bound on financing costs.     

Bank valuation in new EU member countries

This paper studies the role of institutional reforms in affecting bank valuation in new European Union (EU) member countries. It takes advantage of the dynamic nature of institutional reforms in transition economies and explores the causal effects of those reforms on banks’ Tobin's Q over the period of 1997–2008. Using a difference-in-difference approach, the paper shows that Tobin's Q increases substantially after these countries reform their legal institutions and liberalize banking. However, it decreases after stock market reforms. After further examination of the interactive relationships between different reforms and bank valuation, it is observed that when the banking reform is well implemented, legal reform can have a stronger impact on banks’ Tobin's Q. On the other hand, banking reform and security market reform has a substitutive relationship. The analysis also suggests that foreign ownership, market power, and asset diversification significantly affect Tobin's Q. These results are robust even after simultaneously controlling for equity risk.     

How corruption affects bank lending in Russia

The aim of this study is to investigate the impact of corruption on bank lending in Russia. This issue is of major interest in order to understand the causes of financial underdevelopment and the effects of corruption in Russia. We use regional measures of corruption and bank-level data to perform this investigation. Our main estimations show that corruption hampers bank lending in Russia. We investigate whether this negative role of corruption is influenced by the degree of bank risk aversion, but find no effect. The detrimental effect of corruption is only observed for loans to households and firms, in opposition to loans to government. Additional controls confirm the detrimental impact of corruption on bank lending. Therefore, our results provide motivations to fight corruption to favor bank lending in Russia.     

Bank asset structure,real-estate lending,and risk-taking

The banking industry changed substantially in the 1990s as the number of banks declined rapidly, and as we document, commercial banks dramatically shifted their assets to real-estate loans. The portfolio restructuring seems to be followed mainly by capital-constrained banks as real-estate banks have lower risk-based-capital ratios relative to those of our benchmark group. Trading off credit risk for interest-rate risk is only one of the ways to arbitrage regulatory capital. We also show that real-estate banks keep higher ratios of fixed-rate loans to total assets and face higher probabilities of insolvency. The increasing proportion of banks specializing in real-estate lending, the incentives of regulatory discipline, and the weaknesses of risk-management strategies could stress the condition of the banking system during periods of large unexpected increases in interest-rates and are important issues for regulators and bank managers.     

Bank equity and macroprudential policy

This paper proposes an alternative macroprudential policy in the framework of Gertler et al. (2012). In their model, the central bank subsidizes bank outside equity, where the subsidy rate is determined by the shadow cost of the deposit. We find that the alternative rule in which the subsidy rate responds to the aggregate bank outside equity ratio is welfare improving because it has a better stabilization effect on the bank asset deterioration after a financial shock. We disentangle different channels through which macroprudential policies affect the economy and demonstrate that the better stabilization in the post-crisis economy has a positive effect on the economy in normal times through security prices.     

Behavior of the firm under rate-of-return regulation with two capital inputs

Traditional electric utility companies face a trade-off between building generation facilities that utilize renewable energy (RE) and non-renewable energy (non-RE). The firm's input decision to build capacity for either source depends on several constraining factors, including input prices, policies that promote or discourage RE use, and the type of regulation faced by the firm. This paper models the utility company's decision between RE and non-RE capital inputs. From the model, we derive the result that rate-of-return (ROR) regulation decreases the investment in RE capital relative to the unregulated firm. These findings suggest restructuring electricity generation markets, which removes the ROR on generating assets, can increase the relative use of RE. A second result of the model shows that the renewable portfolio standard (RPS) increases the investment in capital that requires RE as a source of electricity, as expected. This paper contributes to the literature on the substitution between renewable and non-renewable resources, by examining the policies that affect the investment in the two types of technologies. The model can also be applied to other regulated utilities, such as water or natural gas companies, with outputs that are produced from different types of capital.     

Bank herding and systemic risk

Bank herding behavior is often hypothesized to increase systemic risk, but the actual effect is unclear ex-ante from the theory and unknown ex-post from the data. We expand the literature on this topic in several dimensions – posing alternative hypotheses regarding the effects of herding in asset, liability, and off-balance sheet portfolios; developing a novel set of bank-specific, time-varying measures of herding in these portfolios; and empirically testing the relations between bank herding for all three portfolios and bank systemic risk contributions. We find nuanced empirical results that differ by portfolio, bank size class, and periods before versus after TARP.     

价值工程理论在银行负债业务中的应用

价值工程理论在我国的工程建设、产品制造等领域应用较广,效果明显,但在金融服务等领域应用偏少。文章通过引入价值工程的概念和方法,结合银行负债业务改进的具体事例,从不同的视角,探索一条加快银行负债业务发展的全新途径。     

Investor protection,regulation and bank risk-taking behavior

This paper examines whether the influence of investor protection on banks’ risk is channeled through banking regulation, and vice-versa, using panel data from a sample of 567 European and US banks for the 2004–2015 period. As banking regulatory factors, we consider capital stringency, activity restrictions and private monitoring, whereas as investor protection factors, we consider the level of shareholder and creditor protection. We find that banking regulation moderates the positive direct influence of investor protection on banks’ risk, while investor protection reinforces the negative direct influence of banking regulation on risk. Moreover, we show that the negative effect of national regulations on banks’ risk is more pronounced during systemic crisis years. Finally, taking into account market competition, we argue that private monitoring only has a direct effect on banks’ risk, whereas the effects of capital stringency and activity restriction are channeled through market competition.     

The impact of bank competition and concentration on bank risk-taking behavior and stability: Evidence from GCC countries

This paper presents a comprehensive assessment of the impact of competition on bank fragility pre and post financial crisis period in the GCC banking market as measured by bank risk-taking behavior and bank stability during the period 1998–2016. Our results indicate that a higher level of bank competition and the greater degree of concentration adds to financial fragility. The findings further shows that during the 2008 crisis, lower bank competition maintain the stability of GCC banks. We also find that lower level of competition and lower concentration in the banking market increases the risk-taking behavior of the low capitalized, low liquid and small banks which add to fragility in the banking system. Our findings suggest that countries with greater capital stringency, greater supervisory power, greater market discipline, and private monitoring, with explicit deposit insurance schemes, higher shareholder protection, and higher legal efficiency decrease banks’ risk-taking and increase their stability. We also find that greater regulatory restrictions and higher creditor protection decrease banks’ stability and increase risk in concerned countries. We find support for both competition-fragility and competition-stability hypotheses in the GCC banking market. The results also confirm that the use of a single measure of competition is insufficient to assess the role of competition in banking stability.     

Bank shareholding and corporate cash management: Evidence from China

We study the effect of bank shareholding on corporate cash management in China. We document that for state-owned enterprises (SOEs) with some of their shares owned by banks, the market value of cash holdings is less, and the overinvestment of free cash flow is more than those SOEs without bank shareholding. For non-SOEs, we do not find such an adverse impact. We also find that the adverse impact of bank shareholding is confined to state-owned banks owning SOE shares and stronger for pyramidal structure than those of non-pyramidal structure SOEs. The Chinese environment offers lessons that can help other emerging markets to review their bank shareholding regulations.     

银行杠杆的顺周期行为与流动性关系问题研究

银行的高杠杆及其顺周期行为是一个与宏观经济波动以及银行自身多方面相关的重要问题。鉴于此,本文就银行杠杆的顺周期行为及其影响因素进行研究,并通过建立面板联立方程模型研究了与流动性之间相互作用的复杂关系。实证结果表明：我国商业银行杠杆存在顺周期行为,但不同类型银行之间存在差异。国有商业银行的杠杆顺周期行为并不十分明显,而较小规模的商业银行则强于平均水平。银行的贷款占比和存款占比对杠杆顺周期行为的影响存在非对称性,表现为贷款占比的增加放大了杠杆的顺周期行为,存款占比的提升则存在减缓的效果。银行杠杆与流动性之间存在相互作用关系,两者呈反方向变化,即银行杠杆越高,其流动性水平越低。考虑到杠杆本身的顺周期行为,那么银行通过提高杠杆水平扩张资产规模时,同样存在着流动性短缺风险。杠杆率监管要求的提出并不会显著影响银行盈利能力,而流动性要求的提高则会降低银行盈利能力。     

Capital accumulation and regulation

This paper sets up a dynamic model that analyzes a bank's capital decision and the impact of this decision on her default risk and lending that affects aggregate output in the economy under regulation. The model shows that even though capital regulation may reduce the default risk of the bank, it may lead to credit crunch, hence the ensuing decline in output in the real sector. Furthermore, it appears that the risk-based capital requirement changes the composition of both liability and asset of the bank's balance sheet.