9<Superscript>th</Superscript> Conference of the Swiss Society for Financial Market Research

Conference Announcement

9^th Conference of the Swiss Society for Financial Market Research     

Depositors Discipline through Interest Costs during Good and Bad Times: the Role of the Guarantor of Last Resort<Superscript>1</Superscript>

We investigate whether the public sector’s ability as the guarantor of last resort (GLR) to help banks or to guarantee banks’ liabilities affects the sensitivity of interest costs to bank fundamentals. We use a global bank sample and find that the sensitivity is an increasing function of GLR risk, regardless of the method applied to describe this risk. Therefore, our results indicate that increased levels of GLR risk might foster market monitoring by depositors.     

Customer values and CSR image in the banking industry

The authors analyse the role that collectivism and novelty seeking play in the formation process of corporate social responsibility (CSR) image in the Spanish banking industry. Two multisampling analyses of a structural equation model are performed on a sample of 1124 customers. The findings of the article allow the authors to anticipate CSR image based on (i) the congruence between the company and its CSR initiatives, (ii) the attribution of motivations for the company to implement CSR and (iii) corporate credibility in developing CSR initiatives. The findings also show that collectivists and innovative customers process information differently to individualists and conservative customers.     

Credit booms,banking crises,and the current account

A number of papers have shown that rapid growth in private sector credit is a strong predictor of a banking crisis. This paper will ask if credit growth is itself the cause of a crisis, or is it the combination of credit growth and external deficits? This paper estimates a probabilistic model to find the marginal effect of private sector credit growth on the probability of a banking crisis. The model contains an interaction term between credit growth and the level of the current account, so the marginal effect of private sector credit growth may itself be a function of the level of the current account. We find that the marginal effect of rising private sector debt levels depends on an economy's external position. When the current account is in balance, the marginal effect of an increase in debt is rather small. However, when the economy is running a sizable current account deficit, implying that any increase in the debt ratio is financed through foreign borrowing, this marginal effect is large.     

银行账户集中管理模式的支付结算探究

银行账户集中管理模式的支付结算方式,是建立在信息技术基础上的付款方、付款方开户行、账户管理机构、收款方开户行、收款方五方实时相联,付款方（或付款方开户银行）主动支付或经收款方要求经由计算机网络支付相关业务款项给收款方的资金结算方式。现行的支票、本票、汇票、电汇、信汇等支付工具和大额支付、小额支付等各种结算方式在未来均可被立足于网络的支付工具和结算方式所取代,     

Branding and relationships: Customer and supplier perspectives

This paper explores and investigates the role of branding within financial services. Specifically, the study aims to assess the importance of branding and its associated elements including brand image and brand experience in the relationships that exist between consumers and their financial brands. It aims to achieve this through research, which identifies gaps between the managerial and consumer perspectives on branding in relationships in retail financial services. It is well established that the characteristics of services are different from those of manufactured goods and that service personnel play a central role in the services experience. Moreover, the concept of relationship marketing within services proclaims the importance of one-to-one relationships between businesses and customers as well as relationships between consumers and their brands. Drawing from the fields of brand management, relationship marketing and services marketing, this research aims to investigate the perceptional differences between consumers and suppliers in relation to the importance of branding in financial service relationships. The research findings indicate that brand experience appears to be far more salient than brand image in shaping and building meaningful and lasting brand perceptions and promoting customer retention.     

Customer emotional regulation and relationship quality: Evidence from the banking industry

The aim of this paper is twofold: first to examine the extent to which customer perceptions of employee deep/surface acting influence customer deep/surface acting; second to assess the degree to which customer deep/surface acting strengthens/weakens the level of relationship quality (RQ). Survey data were collected from (291) respondents from 13 banks located in Jordan. Two key findings emerged from the current study. First, when customers encountered authentic employees (i.e., deep acting), they were more likely to modify their internal feelings to match the required displays, and less likely to express unauthentic emotions. On the other hand, when customers encountered unauthentic emotions, they were less likely to express unauthentic emotions. Second, customer deep acting is found to be positively associated with relationship satisfaction, commitment, and trust, whereas customer surface acting is negatively associated with relationship satisfaction and trust. This study adds to the body of knowledge on the antecedents of RQ through identifying customer emotional regulation as a key determinant of that.     

Changing banking relationships and client‐firm performance: Evidence from Japan for the 1990s

The extant literature generally suggests that the performance of client firms deteriorates if their distressed main bank reduces the supply of credit. However, this insight is only consistent with the notion that main banks have an information advantage over other banks to the extent that a client firm has trouble getting access to credit if the firm changes its main bank. This paper shows that Japanese firms did change their main banking relationship when their main banks become distressed in a period with financial shocks. Surprisingly, these firms did not suffer from loss of access to credit and actually their performance significantly improved after their change of main banks.     

An investigation on the causal relationships between banking concentration and economic growth

This paper explores the causality between concentration in the banking industry and economic growth. Two empirical tests are performed for Italy over the period 1991-2001: the first one is a standard Granger-Sims causality test, the second one studies the direction of causality by taking into account the impact of changes in banks' internal and external factors on their own market shares. The results show that in the short-run economic growth is predominantly caused by banking consolidation, while in the long-run a reverse causation direction emerges, so that economic expansions tend to reduce market shares and thus favour a stronger competition in the industry.     

A productivity analysis of Central and Eastern European banking taking into account risk decomposition and environmental variables

This paper develops a Luenberger productivity index that is applied to a technology where desirable and undesirable outputs are jointly produced and are possibly negative. The components of this Luenberger productivity index - the efficiency change and the components of the technological shift - are then decomposed into factors determined by the technology, adjusted and then for ‘risk and environment’, ‘risk management’ and ‘environmental effects’. The method is applied to Central and Eastern European banks operating during 1998-2003 utilising three alternative input/output methodologies (intermediation, production and profit/revenue). Additionally, the comparative analysis of the sensitivity of the productivity indices in the choice of the methodologies is undertaken using statistical and kernel density tests. It is found that the main driver of productivity change in Central and Eastern European banks is technological improvement. That is, in the beginning of the analysed period, the results hinged on the banks ability to capitalise on advanced technology and successfully take into account ‘risk and environmental’ factors. Whereas, in later periods, one of the most important factors of technological improvement/decline was ‘risk management’. Finally, the tests employed confirm previous findings, such as Pasiouras (2008)in this journal, that different input/output methodologies produce statistically different productivity results. Finally, we find that external factors, such as ‘risk in the economy’ and banking production, and a ‘corruption perception’ affect the productivity of banks.     

The market for certification by external parties: Evidence from underwriting and banking relationships

This paper provides evidence that an underwriter is better able to certify an equity issue if it has a lending relationship with the firm. An announcement of being underwritten by the firm’s lending-relationship bank reduces ex post information asymmetry, thereby improving the announcement return. Further, because this reduction in information asymmetry effectively disseminates what was previously the lending bank’s private information, it decreases its affiliated market maker’s information advantage, thus reducing its contribution to price discovery and liquidity. These results provide evidence on the value of information production and transmission by banks, and more generally on the role of external parties in reducing information asymmetry.     

Customer retention and cross-buying in the banking industry: An integration of service attributes,satisfaction and trust

Most previous studies have focused on customer retention and have ignored the importance of customers’ cross-buying behaviour. Customer retention seems to be the result of a kind of repetitive decision by the customers, but their decision to cross-buy involves a more complicated process. In this study, the authors examine the effects of locational convenience, one-stop shopping convenience, firm reputation, firm expertise, and direct mailings on both customer retention and cross-buying. The mediating roles of satisfaction and trust in the relationships between service attributes, customer retention, and cross-buying are also examined. The results indicate that banks can use different service attributes to influence customer retention and cross-buying. Trust and satisfaction play different mediating roles in the relationships between service attributes, customer retention, and cross-buying.     

Customer concentration and M&A performance

This paper examines how the target's customer concentration affects merger performance. We find that the acquirer purchasing a customer-concentrated firm experiences significantly lower stock market returns and worse long-run operating performance. The effect is more pronounced when customers face lower switching costs or the target undertakes a higher level of relationship-specific investments, exhibits higher cash volatility, or is acquired by a less well-known company. Further analysis shows that the negative association is mainly driven by corporate customers, while relatively safe government customers moderate the effect. We also find that shared major customers, overconfident CEOs, and poor corporate governance are more likely to increase the likelihood of customer-concentrated acquisitions. Overall, our findings suggest that higher customer concentration leads to lower value creation in mergers.     

From <Emphasis Type="Italic">The Geneva Papers on Risk and Insurance</Emphasis> to <Emphasis Type="Italic">The Geneva Risk and Insurance Review</Emphasis>

The Geneva Risk and Insurance Review celebrates in 2016 its 40^th year of existence. Yes. But it must be recalled that about half of these 40 years occurred under a different name—The Geneva Papers on Risk and Insurance. For a long time, the fate of the journal was very closely linked to the development of “The Geneva Association”.     

Competition and risk‐taking in investment banking

How does competition affect the investment banking business and the risks individual institutions are exposed to? Using a large sample of investment banks operating in seven developed economies over 1997–2014, we apply a panel VAR model to examine the relationships between competition and risk without assuming any a priori restrictions. Our main finding is that investment banks’ higher risk exposure, measured as a long‐term capital‐at‐risk and return volatility, was facilitated by greater competitive pressures for both boutique investment banks and full‐service investment banks. Overall, we find some evidence that more competition leads to more fragility before and during the recent financial crisis.     

Ethics <Emphasis Type="Italic">versus</Emphasis> Ethos in US and UK Megabanking

Company law in the US and UK fails to acknowledge that authorities’ propensity to rescue giant banks from the consequences of insolvency creates an implicit contract that assigns taxpayers a coerced and badly structured equity stake in too-big-to-fail institutions. The entrenched managerial norm of maximizing stockholder value abuses this stake. It does so by lending an undeserved moral legitimacy to efforts by TBTF managers to take on dangerous levels of tail risk because their bank’s deep downside is effectively eliminated by the prospect of unlimited taxpayer support. Conventional tools of prudential regulation constrain but do not de-legitimate this behavior. To accomplish that end, this paper calls for: (1) a formal recognition of the fiduciary duties and dividends that TBTF firms owe to taxpayers and (2) criminalizing aggressive pursuit of safety-net subsidies as a form of public endangerment.