Lending technologies,banking relationships,and firms’ access to credit in Italy: the role of firm size

This paper analyses the role of lending technologies and banking relationships on firms’ credit access in Italy. Using EFIGE firm-level data, we show that the depth and strength of firm–bank relationships have heterogeneous effects on credit demand and rationing probabilities depending on the size of the borrower. Multiple banking relationships alleviate financial constraints for small firms, while borrowing from a large number of lenders hinders access to credit for large companies. Small and medium-sized enterprises with a higher share of debt with the main bank have a lower probability of being credit denied, as debt concentration contributes to overcome the opacity problems typical of the SMEs. Long-lasting relationships, by reducing information asymmetries, significantly improve access to credit for small and large firms. Conversely, we find that medium-sized enterprises are more exposed to financing constraints as relationship duration increases, due to possible lock-in effects. Finally, firms maintaining banking relationships based on transactional technologies are more likely to be credit denied, while the use of relationship lending technologies improves credit availability for both small and large enterprises.     

Ownership, institutions, and capital structure: Evidence from China

We employ a unique data set to explore the role of ownership structure and institutional development in debt financing of non-publicly traded Chinese firms. We show that state ownership is positively associated with leverage and firms’ access to long-term debt, while foreign ownership is negatively associated with all measures of leverage. Surprisingly, firms in better developed regions are associated with reduced access to long-term debt, suggesting the availability of alternative financing channels and the tightening of the lending standards under the on-going banking reform. The combination of ownership structures and institutions explains up to 6% of the total variation in firms’ leverage decisions, while firm characteristics alone explain no more than 8% of the variation. Further, we show that non-state-owned firms tend to have lower total and short-term debt than their state-owned counterparts in less developed regions. Finally, we show that state-owned firms’ easy access to long-term debt is positively associated with long-term investment and negatively associated with firm performance.     

Stability periods between financial crises: The role of macroeconomic fundamentals and crises management policies

This study aims to identify which factors explain why some countries enjoy long durations of stability, while others experience crises in shorter intervals. We analyze the duration of stability periods between currency, debt, and banking crises by employing an innovative econometric strategy, the Finite Mixture Model (FMM). Real and financial variables show high predictive power for stability spells between currency crises. Regarding debt crises, the real interest rate is observed to be the best predictor. The time between systemic financial crises appears to be prolonged through government interventions and through IMF program participation, while bank recapitalization has a negative impact.     

COMMERCIAL BANK LENDING TO DEVELOPING COUNTRIES: THE EXPANSION OF THE MARKET

The developing country debt crisis brought attention to the type of lending behavior that predominated while the commercial bank market developed. This article presents the major characterizations of bank behavior, particularly regarding predictions that can be tested empirically. Critically comparing existing empirical studies with these predictions shows that the magnitude of default risk and deposit insurance were incorporated into the lending behavior. However, these alone do not explain the evolution of the market. One can understand this evolution in terms of information imperfections in the market, but this evaluation contradicts a major role for agency problems in the banking firm.     

SOME ESTIMATES OF TRADE FLOWS IN BANKING SERVICES

This paper presents some estimates of international trade in banking services. We use IMF data on assets and liabilities of both domestic banks and non-banks with foreign banks, and of foreigners with the domestic banking system to construct measures of the volume of transactions on which banking intermediation services are provided across national borders. We then use estimates of the spread between borrowing and lending rates for depositors and borrowers with the financial institutions involved to estimate the value of international flows of intermediation services. Estimates are presented for 1982–84 and 1991–93 for the U.S., the U.K., and Canada.     

THE WORLD BANK'S RESPONSE TO THE DEVELOPING COUNTRY DEBT CRISIS

The World Bank has responded to what it has perceived as two debt crises. The first is the highly publicized crisis in the middle-income, heavily indebted countries–mainly those in Latin America. The second has affected a set of about 20 much poorer African countries. The World Bank's responses to the two crises have been dissimilar as well. In the case of the heavily indebted, middle-income countries, whose debt is mainly to private creditors, the World Bank first responded with its Special Program of Action, beginning in 1983. Under the October 1985 Baker Plan, the World Bank was to increase its gross disbursements to these countries by 50 percent–a goal it has nearly met. Unfortunately, other creditors have not met Baker Plan goals, and so investment and growth in debtor countries has stagnated. The World Bank cannot continue providing a disproportionate share of financing needs. The World Bank has responded to the problems of the poorest debtor countries through its Special Program of Action for debt-distressed countries in Africa, and has coordinated its own concessional International Development Agency–soft loan window–lending with aid from other official creditors and donors.     

IMF concern for reputation and conditional lending failure: Theory and empirics

In this paper we suggest that the dual role played by the IMF, as a creditor and as a monitor of economic reforms, might explain the lack of credibility of the Fund threat of sanctioning non-compliance with conditionality. Specifically, we show that the IMF's desire to preserve its reputation as a good monitor may distort its lending decisions towards some laxity. Moreover, such distortionary incentives may be exacerbated by the length of the relationship between a country and the Fund. Estimating a dynamic panel of 53 middle-income countries, for the period 1982–2001, we find that a longer relationship does increase IMF disbursements.     

IMF concern for reputation and conditional lending failure: Theory and empirics

In this paper we suggest that the dual role played by the IMF, as a creditor and as a monitor of economic reforms, might explain the lack of credibility of the Fund threat of sanctioning non-compliance with conditionality. Specifically, we show that the IMF's desire to preserve its reputation as a good monitor may distort its lending decisions towards some laxity. Moreover, such distortionary incentives may be exacerbated by the length of the relationship between a country and the Fund. Estimating a dynamic panel of 53 middle-income countries, for the period 1982–2001, we find that a longer relationship does increase IMF disbursements.     

基于期权思想的融券费率定价方法研究

证券融资融券交易是成熟证券市场普遍实施的一种交易制度。融券与融资不同,其标的不是资金而是证券,但两者都是信用业务,需要为相关交易支付一定的费用,融资的利率相对容易确定,而融券费率则比较复杂一些,目前各类管理规定中对此并没有明确的说法。本文借鉴了我国台湾地区的经验,计算出我国大陆地区试行融资融券可行的融券费率。     

A role for preferred stock in the financing decision of a public utility

Summary We have shown that preferred stock has a unique role in the financing of public utility capital expenditures, particulary when returns allowed by regulatory commissions are perceived to be inadequate. From the firm's perspective there is no tax advantage for debt because the commission effectively passes the tax savings through the consumers. If allowed returns on common stock are inadequate and the firm has exhausted its perceived debt capacity, then preferred stock becomes the optimal financing instrument. The regulatory commissions compute the costs of debt and preferred stock so that companies can expect returns to cover payments on debt and preferred stock if the assets being financed are necessary and will be included in the rate base. During extremely bad years when revenues are much less than expected, the companies can delay or miss preferred stock dividends without running the risk of default. The data on new capital sources for the electric and gas utilities indicate that these companies made adjustments which are consistent with the implications of our model, but they did not follow the extreme policy of using only debt and preferred stock when market-to-book ratios for common stock were below one. Regulators have, on occasions, used capital structures for rate-making that differ from actual capital structures, and a utility might be penalized for using an extreme capital structure policy. The main emphasis of regulatory review of capital structure, however, has been on the debt component. One strategy would be to use a debt level that satisfies the regulatory commission and then adjust equity between preferred stock and common stock to maximize value for common stockholders.     

THE BANKING SYSTEM CRISIS IN LATIN AMERICA

A major "bootstraps" challenge lies ahead for Latin America: finding enough savings capacity at home to finance needed increases in investment during the 1990s. The banking system throughout the region cannot carry out its role in this process, however, due to a ruinous process of internal debt accumulation and corporate bankruptcy—the domestic analog of the external debt crisis of the 1980s.
This paper briefly reviews recent financial liberalization experiences in Latin America. It identifies three factors as contributing to the undermining of the banking system and the failure of liberalization in the region: (i) foreign exchange risks that the banking system has assumed, (ii) unsound lending and borrowing practices, and (Hi) inadequate regulatory and supervisory frameworks. A case study of Chile illustrates the dynamics of frustrated reform and privatization in the financial markets.
The paper concludes that Latin America has no real choice but to pursue liberalization and to rely more on the private sector in the financial markets. The path to deeper financial markets is extremely complex, however, and Latin America must continue seeking the proper balance between state sector supervision and intervention and an increased role for the private sector. An agenda for research points to some thorny issues awaiting empirical investigation.     

Fiscal deficits,monetary reform and inflation stabilization in romania

Developing countries have witnessed an increase in foreign bank participation during the last decade. Using bank level data for the period 1991–2001, we examine the influence of foreign banks on the financing of small firms in Tanzania. Despite dominating the banking sector, results suggest that the financing of small firms by foreign banks is insignificant compared to domestic banks. Clearly, there is a need for a new approach to policy that will encourage significant foreign bank lending to small firms.     

Explaining changes in tax burdens in Latin America: Do politics trump economics?

This paper examines whether elections, which are generally held on fixed dates, and banking crises explain the timing of tax reforms and the allocation of the additional tax burden. Using an original fine-grained data set of tax reforms, the paper finds support for the role of these two sources of variation. In particular, the probability of reform is higher during banking crises. During electoral periods, increasing taxes becomes highly unlikely, even if the government is facing financing problems. Interestingly, politics seem to trump economics: banking crises do not affect the probability of having a reform during electoral times. Moreover, the presence of an IMF program affects the tax instruments chosen: countries with a program increase the value-added tax, while those without raise the personal income tax. Finally, the ideology of the president does not explain who bears the additional tax burden.     

SHOULD A MANDATORY SUBORDINATED DEBT POLICY BE INTRODUCED IN THE UNITED KINGDOM? EVIDENCE FROM THE ISSUANCE ACTIVITY OF BANKS AND BUILDING SOCIETIES

Current research is beginning to question the role and effectiveness of traditional rules‐based bank regulatory oversight in favor of incentive‐compatible regulatory design and market discipline and, in particular, mandatory subordinated debt market discipline. However, research on the suitability of a mandatory subordinated debt policy (MSNDP) has focused primarily on the United States. The primary aims of this article, therefore, are to examine the market for subordinated debt (SND) issued by UK credit institutions and to assess the suitability of introducing an MSNDP into UK banking regulation. A further contribution of this article is that it explores SND issuance and its characteristics at a bank level and, uniquely, considers them in relation to regulatory, structural, and economic events that either are specific to the UK or otherwise affect international banks. The article compares the UK findings with research on SND markets in the United States and Europe and, in so doing, raises concerns over whether an MSNDP for the largest global credit institutions would be feasible. Although the focus of this study is the UK banking industry, the country‐focused bank‐level approach provides conclusions that might be relevant to other countries considering the implementation of an MSNDP.(JEL G18, G28)     

Government interventions in banking crises: effects of alternative schemes on bank lending and risk taking

We analyse the effects of policy measures to stop the fall in loan supply following a banking crisis. We apply a dynamic framework in which a debt overhang induces banks to curtail lending or choose a fragile capital structure. Government assistance conditional on new banking activities, like on new lending or on debt and equity issues, allow banks to influence the scale of assistance and externalise risks, implying overinvestment or excessive risk taking or both. Assistance without reference to new activities, like granting lump sum transfers or establishing bad banks, does not generate adverse incentives, but may have higher fiscal costs.     

What determines the likelihood of structural reforms?

We use data for a panel of 60 countries over the period 1980–2005 to investigate the main drivers of the likelihood of structural reforms. We find that: (i) external debt crises are the main trigger of financial and banking reforms; (ii) inflation and banking crises are the key drivers of external capital account reforms; (iii) banking crises also hasten financial reforms; and (iv) economic recessions play an important role in promoting the necessary consensus for financial, capital, banking and trade reforms, especially in the group of OECD-countries. Additionally, we also observe that the degree of globalisation is relevant for financial reforms, in particular in the group of non-OECD countries. Moreover, an increase in the income gap accelerates the implementation of structural reforms, but increased political fragmentation does not seem to have a significant impact.     

Economic Analysis and the World Debt Problem

The world debt problem continues to pose the greatest threat to international financial stability since World War II. This article reviews the contribution of economic theory to analysis of the debt problem. The textbook model of country borrowing is found to identify limits on borrowing that are considerably weaker than those likely to be faced in the real world. In particular, too little attention has been paid in the literature to uncertainty about key assumptions, to limits on the ability of governments to tax domestic resources and to the ability of debtor countries to generate foreign exchange. The article also looks at the application of banking models to country lending.     

The IMF'S Role in Structural Adjustment

In the 1980s conditional lending for structural adjustment in developing countries moved the IMF beyond its role of macroeconomic crisis management. Fund-supported adjustment programmes have often been flawed by a lack of distributional analysis and by poor sequencing of reforms, notably premature financial liberalisation. As a result they have caused avoidable hardship. In addition, the attempt to taper out aid as part of the reform programme leads to avoidable reductions in post-stabilisation growth. An important role for the Fund in post-stabilisation environments is to provide credible signals to private investors.     

IMF Conditionality as a Screening Device

A theoretical model is developed in which both buybacks and the adoption of an IMF programme can be used as screening devices which enable a creditor to discriminate between debtor countries which are willing to use debt relief in order to invest and repay and countries which are not. Asymmetric information is assumed. This problem can be solved if the country has sufficient resources to engage in a debt buyback and so gain the debt relief. When the country is credit constrained, an alternative screening mechanism is to undertake an IMF programme in return for debt reduction and possibly an IMF loan.     

International capital flows,liquidity risk,and monetary policy

In recent years, there has been a large amount of lending coming from the public sector of many developing countries. At the same time, the financial sectors in many advanced countries have issued a large share of portfolio debt to other countries. What are the implications of these events for the global financial system and overall economic activity? Do they have an impact on the transmission channels of monetary policy across countries at different stages of economic development? We investigate these important issues using a micro-founded model of money and banking so that the effects of monetary policy across countries can be meaningfully studied. Notably, the increase in capital outflows to the advanced economy renders monetary policy in developing countries to be less effective, while the effects of monetary policy in advanced economies are more pronounced. Yet, our results indicate that it can indeed be optimal for lower income countries to lend to the advanced world. Importantly, we find that the optimal amount of lending to advanced countries critically depends on the degree of liquidity risk — if it is sufficiently high, then public sector lending to advanced economies is not warranted. Consequently, our results indicate that governments in developing countries should carefully consider how much capital they send abroad to foreign countries.