The transmission of bank capital requirements and monetary policy to bank lending in Germany

We investigate the transmission of changes in bank capital requirements and monetary policy, and their interaction, on German banks’ corporate loan growth and lending rates. Our results show that increases in capital requirements are associated with an immediate decrease in total domestic and cross‐border bank lending. Changes in the euro area's monetary policy stance are positively related to corporate loan interest rates in general. Regarding the interacting effect of national bank capital requirements and euro area monetary policy, we observe that the transmission of accommodative euro area monetary policy to corporate lending rates can be attenuated by contemporaneous increases in bank capital requirements. Moreover, more strongly capitalized banks increase their loan growth in response to accommodative monetary policy whereas, for weaker banks, increasing capital requirements implies a decrease in their corporate loan growth. Our results confirm a tradeoff between higher capital requirements and accommodating monetary policy originating from banks’ capital constraints.     

Bank efficiency in South‐Eastern Europe

This study examines the cost and profit efficiency of banking sectors in six transition countries of South‐Eastern Europe over the period 1998–2008. Using a stochastic frontier approach, our analysis reveals that the average cost efficiency of South‐Eastern European banks is 68.59 percent, and the average profit efficiency is 53.87 percent. Regressions on the determinants of bank efficiency show that foreign banks are characterized by higher profit efficiency but lower cost efficiency, and government‐owned banks are associated with lower profit efficiency than domestic private banks. However, the efficiency gap between foreign‐, domestic private‐ and government‐owned banks narrows over time. We also find that the market power of a bank has a positive association with both cost and profit efficiency. Institutional development, proxied by progress in banking regulatory reforms, privatization and enterprise corporate governance restructuring, also has a positive impact on bank efficiency.     

银行盈利的宏微观因素——对中国银行业的实证研究

This paper seeks to examine the determinants of the profitability of the Chinese banking sector during the post-reform period of 2000–2005. The empirical findings from this study suggest that all the determinants variables have statistically significant impact on China banks profitability. However, the impacts are not uniform across bank types. We find that liquidity, credit risk, and capitalization have positive impacts on the state owned commercial banks (SOCBs) profitability, while the impact of cost is negative. Similar to their SOCB counterparts, we find that joint stock commercial banks (JSCB) with higher credit risk tend to be more profitable, while higher cost results in a lower JSCB profitability levels. During the period under study, the empirical findings suggest that size and cost results in a lower city commercial banks (CITY) profitability, while the more diversified and relatively better capitalized CITY tend to exhibit higher profitability levels. The impact of economic growth is positive, while growth in money supply is negatively related to the SOCB and CITY profitability levels.      

Credit booms and busts in emerging markets

We investigate to what extent corporate governance and risk management mitigate the involvement of banks in credit boom and bust cycles. We study a unique, hand‐collected dataset covering 156 banks from Central and Eastern Europe during 2005–2012. We document that stronger risk management is associated with more moderate pre‐crisis credit growth but not with fewer credit losses in the crisis. With respect to bank governance, we find that a higher share of foreign members on the supervisory board is associated with less rapid credit growth in the pre‐crisis period and a lower level of credit losses during the crisis period.     

Charter value,risk-taking and systemic risk in banking before and after the global financial crisis of 2007-2008

ABSTRACT

We investigate how bank charter value affects risk for a sample of OECD banks by using standalone and systemic risk measures before, during, and after the global financial crisis of 2007–2008. Prior to the crisis, bank charter value is positively associated with risk-taking and systemic risk for very large ‘too-big-too-fail’ banks and large U.S. and European banks but such a relationship is inverted during and after the crisis. A deeper investigation shows that such a behaviour before the crisis is mostly relevant for very large banks and large banks with high growth strategies. Banks’ business models also influence this relationship. We find that for banks following a focus strategy, higher charter value amplifies both standalone and systemic risk for large U.S. and European banks. Our findings have important policy implications and cast doubts on the relevance of the uniform more stringent capital requirements introduced by Basel III.     

Determinants of banks’ Nerlovian economic efficiency: a DEA-bootstrap approach

ABSTRACT

This study aims to evaluate the Nerlovian economic efficiency of Taiwanese commercial banks and its determinants by assuming the presence of an imperfectly competitive market using a two-stage estimation procedure: Nerlovian economic inefficiency and its components’ price, technical and allocative efficiencies computed and decomposed in the first stage, which are regressed on the explanatory variables with a bootstrapped truncated approach in the second stage. The estimation results show that in the first-stage analysis, the Nerlovian economic inefficiency of banks is primarily due to allocative inefficiency, and indicate the existence of price inefficiency in Taiwan. In the second-stage analysis, the results confirm that both the years in operation of the bank and the ratio of credit loans are the main determinants of banking profit efficiency. In addition, this study not only shows that publicly owned banks contribute to better price efficiency but also proves that loan loss reserve to total assets is negatively associated with technical efficiency. The equity ratio exerts an insignificant favourable impact on allocative efficiency. The findings of this research are essential for bank managers in Taiwan.     

Ex ante capital position,changes in the different components of regulatory capital and bank risk

We investigate the impact of changes in capital of European banks on their risk-taking behaviour from 1992 to 2006, a time period covering the Basel I capital requirements. We specifically focus on the initial level and type of regulatory capital banks hold. First, we assume that risk changes depend on banks’ ex ante regulatory capital position. Second, we consider the impact of an increase in each component of regulatory capital on banks’ risk changes. We find that, for highly capitalized, adequately capitalized and strongly undercapitalized banks, an increase in equity or in subordinated debt positively affects risk. Moderately undercapitalized banks tend to invest in less risky assets when their equity ratio increases but not when they improve their capital position by extending hybrid capital or subordinated debt. On the whole, our conclusions support the need to implement more explicit thresholds to classify European banks according to their capital ratios but also to clearly distinguish pure equity from hybrid and subordinated instruments.     

Human Capital,Gender and Organisation in Transition Agriculture: Measuring and Explaining the Technical Efficiency of Bulgarian and Hungarian Farms

Based on survey data on Bulgarian and Hungarian crop and dairy farms, a double-peaked distribution of technical efficiency is observed. Several factors explain differences in efficiency. Human capital matters not only through age and education but also through gender, as farms with a higher proportion of women are more efficient. Contracting with upstream processors increases efficiency through facilitating the adoption of technology and access to credits. The superiority of family farms over corporate farms is confirmed for crops but not for dairy produce.     

Size,Non-Performing Loan,Capital and Productivity Change: Evidence From Indian State-Owned Banks

While the relationship between portfolio risk and capital and its interrelationship with operating efficiency has been extensively studied, little work has been forthcoming on the interrelationships among credit risk, capital and productivity change. The paper makes an attempt to examine the same in the Indian context. Using data on state-owned banks (SOBs) for the period 1995–96 through 2000–2001, the paper finds capital, risk and productivity change to be intertwined, with each reinforcing and to a degree, complementing the other. The results imply that inadequately capitalized banks have lower productivity and are subject to a higher degree of regulatory pressure than adequately capitalized ones. Finally, the results lend support, especially for medium-sized banks, to the belief that lowering Government ownership tends to improve productivity.

     

机构投资者持股和企业银行借款关系研究

近年来,机构投资者在中国资本市场蓬勃发展。通过分析机构投资者持股变化对公司治理的影响,可以发现机构投资者持股和企业新增银行借款比例呈倒U型关系:机构投资者持股比例的增加有助于企业获得银行借款,但当机构投资者持股达到一定比例后,机构投资者持股的增加又会抑制企业银行借款的增加。机构投资者持股对于企业获取银行借款的影响依赖于持股比例的变化。     

Quality-oriented growth: a new trend for Chinese firms

ABSTRACT

Based on data from the China Employer-Employee Survey (CEES), this study analyses the actual effect of quality-driven growth on firms’ performances in the economic transition of recent years. The results show positive and significant effects between the firms’ performance and quality-oriented growth, which is defined as a strategy that supports the spirit of greater entrepreneurial innovation, the advancement of input quality, and corporate governance improvement. Using a quality-driven growth mode, firms can effectively relieve the adverse effect of downward macroeconomic growth pressure on performance. This study proposes that China’s macroeconomic policy should shift from demand-oriented management to supply-oriented management, with a particular focus on quality development strategy. Moreover, firms should establish a quality-driven development strategy, facilitating a spirit of entrepreneurial innovation, advancing input quality, and improving corporate governance. This strategy will increase the firm’s performance, and effectively relieve the macroeconomic downward pressure.

Abbreviations: CEES: China Employer-Employee Survey, TFP: Total factor productivity     

Considerations on Inequality,Corporate Governance,and Financialization

Abstract

Disjunctures between corporate governance, increasingly dominated by financial considerations, and social inequality have been among the motor forces of current world-wide “populist” voter revolts. This article looks for clues for the relation between economic inequality, corporate governance, and financialization by re-examining the work of Karl Marx and of Adolphe Berle and Gardiner Means. Marx is widely considered, in Japan, to have pointed out that the division of profit into the wages of management and the profit of enterprise is considered as a path to the association. However, this general interpretation in Japan may not be sufficient for capturing capitalism’s contemporary reality. This presentation develops an alternative interpretation of this chapter by combining Marx’s explanation with the theory of the separation of ownership and management proposed by Berle and Means. We then explore causal relations among income inequality, corporate governance, and financialization.     

Large lending and banks performance. Is there any relationship? Empirical evidence from US banks

Large lending in the banking industry has sparked concerns about banks’ efficiency performance, particularly, if it is related to their credit risk, as trade credit, provided by large, creditworthy firms. We provide evidence of a rather neglected issue regarding the impact of large lending on banks’ efficiency using cost and profit stochastic functions. A unique dataset was constructed concerning all US banks collected from the Statistics on Depository Institutions report compiled by the Federal Deposit Insurance Corporation. Our sample contains US banks tracked yearly for the period 2010–2017, creating an unbalanced panel of year observations. An econometric framework based on nested non-neutral frontiers was developed to estimate the influence and the decomposition of large lending on the three banks’ performance aspects. Moreover, different types of frontiers aiming at the cost and profit sides have been investigated, and the associated elasticities have been calculated. We notice that large lending plays a crucial role in banks’ technical efficiency. Variations among different frontier models, type of bank and size, banks’ ownership structure, and macroeconomic conditions appear to be present. By considering all capital adequacy asset quality management earnings liquidity parameters, we notice that banks’ financial strength affects banks’ efficiency.     

Does the technology background of the Party Committee Secretary affect firm’s innovation efficiency? Evidence from listed state-owned enterprises in China

ABSTRACT

With the increasing emphasis of the government on the importance of Party organisations in China’s state-owned enterprises (SOEs), we need to pay more attention to its role in the operation of enterprises. As the research on board of directors emphasises the central position of the chairman, this paper focuses on the top leader of the Party organisation, namely the Party Committee Secretary. Based on upper echelon theory, this paper proposes the relationship between the technology background of a Party Committee Secretary and firm’s innovation efficiency, and how this relationship is moderated by position duality and environment dynamism. Using the data of China’s listed SOEs which issue A-shares in Shenzhen and Shanghai stock exchanges from 2014 to 2016 and operate in the manufacturing industry, the main effect and moderating effects are tested. We find that the existence of a Party Committee Secretary with technology background positively affects the SOE’s innovation efficiency. In addition, this relationship is strengthened by environment dynamism. Our conclusions not only enrich literature about upper echelon theory and determinants of firm’s innovation, but also are helpful for improving corporate governance in developing countries.     

The Myth of Market Neutrality: A Comparative Study of the European Central Bank’s and the Swiss National Bank’s Corporate Security Purchases

ABSTRACT

Monetary policy operations in corporate security markets confront central banks with choices that are traditionally perceived to be the prerogative of governments. This article investigates how central bankers legitimise corporate security purchases through a comparative study of the European Central Bank (ECB) and the Swiss National Bank (SNB). As we show, central bankers downplay the novelty of corporate security purchases by relying on familiar pre-crisis justifications of Central Bank Independence. Citing an ideal of ‘market neutrality’, central banks present corporate security purchases as pursuing a narrow objective of price stability and obfuscate their distributive consequences. In this way, central bankers depoliticise corporate security purchases: they reduce the potential for choice, collective agency, and deliberation concerning both the pursuit of corporate security purchases and the choices made in implementing these policies. We also describe the undesirable democratic, social and environmental dimensions of these practices, which we propose to address through enhanced democratic accountability.     

Social Security Reform and Corporate Governance

Abstract

This paper considers implementation issues arising from potential reforms to the United States Social Security system. Many reform proposals involve individually invested accounts, but the corporate governance implications of such accounts have not been fully explored. Existing reform plans will result in a large fraction of votes being concentrated at one private fund manager. The implications for corporate governance and debt management under alternative fund management strategies are evaluated. The use of futures to construct synthetic investments could alleviate corporate governance and debt management problems.     

Regulatory Policy and the Efficiency of the Banking Sector in Australia

This paper examines the technical efficiency of Australian banks during the post‐Wallis period (1997–2005). The results based on data envelopment analysis reveal that the extent of technical efficiency varies across the banks and over the years. The National Australia Bank, Commonwealth Bank and Macquarie Bank are found to be technically efficient, whereas Adelaide Bank, the Bank of Queensland and Westpac Bank are found to be prominently inefficient. Technical efficiency is the lowest among small banks and has declined over time largely due to deterioration in scale efficiency. Medium‐sized banks have outperformed both the small and large banks in terms of efficiency improvements. Some insights into the debate over the removal of the ‘four‐pillar’ policy are provided.     

Can good governance lower bank intermediation costs?

ABSTRACT

This paper argues that better governance practices can reduce the costs, risks and uncertainty of financial intermediation. Our sample covers 100 high-, middle- and low-income countries during 1996 to 2015. Using panel regressions accounting for endogeneity and cross-sectional dependance, we find that net interest margins of banks are lower if various governance indicators are better. Governance indicators range from comprehensive indices on the rule of law to more narrow indicators like ethics of private firms. The global financial crisis seems not to have had a strong impact except via credit risk. Finally, we estimate that potential annual savings from lower net interest margins could average almost 0,3 percent of GDP, had the governance indicators been at the top decile. These simulations lend credence to the intuition that better governance practices should reduce costs, risks and uncertainty.     

中国上市公司治理对技术效率的影响——来自中国制造业上市公司的经验证据

已有的公司治理文献主要是研究上市公司的绩效、治理结构以及投融资决策等问题,而对上市公司治理与技术效率关系的关注较少。本文基于我国制造业上市公司面板数据构造模型,实证检验了公司治理对技术效率的影响关系。本文的研究表明:第一,股权治理与公司技术效率之间的关系因行业而异,第一大股东持股比例、前三大股东持股比例以及是否国有控股对公司技术效率的影响与行业特征有关;第二,债权治理与公司技术效率之间存在正相关关系,即公司偿债能力越强、融资能力越强,公司技术效率则越高;第三,董事会治理,即董事会规模、独立董事比例以及董事长与CEO的两职合一与公司技术效率之间的关系因公司所处行业以及公司自身特性而异;第四,经营管理层报酬与公司技术效率之间的关系显著为正,经营管理层持股比例对公司技术效率的影响因行业而异;第五,公司控制权市场竞争和产品市场竞争有助于提高公司技术效率,法律基础及中小投资者利益保护机制的完善对于提高公司技术效率具有积极作用。基于研究结论,本文还从公司治理视角就如何提高我国上市公司技术效率提出了政策建议。     

Balancing market liquidity: Bank Structural Reform caught between growth and stability

Abstract

The European Commission’s proposal for a Bank Structural Reform (BSR) aimed at increasing banks’ resolvability through separating risky trading activities from deposit-taking institutions. In contrast to initial plans, the final proposal exempted market-making activities of banks. This exemption, we argue, was brought about by the Commission’s discursive framing of the BSR as a balancing act between stability and growth. Coupled with the incapacity to unambiguously measure the effects of the reform on market liquidity and on growth, this pushed the assessment of market-making from the technical to the political realm, leading to a reproduction of the prevalent market-based banking system.