On the relationship between financial inclusion and bank performance

This study examines the relationship between various financial inclusion measures and banks' performance across multiple countries with varying institutional, regulatory and income levels. To construct an aggregate bank performance index, we employ principal component analysis, which utilises a set of critical indicators summarised by the CAMEL rating system, including banks' solvency, asset quality, efficiency, profitability and liquidity. Our primary findings indicate that different measures of financial inclusion exhibit varying associations with bank performance. Specifically, there is a trade-off between bank performance and credit deepening, especially in high-income nations. Conversely, in low-income nations, higher financial inclusion, measured by deposits to GDP, number of deposits, and number of borrowers, does not affect bank performance adversely. Banks in low-income nations could achieve significant gains by improving financial access and enhancing regulatory environments.     

The Economics of Director Heterogeneity

We investigate the potential costs and benefits of firms constituting a heterogeneous pool of directors relative to more homogeneous boards. We measure director heterogeneity along six separate dimensions and divide board heterogeneity into occupational and social components. Our empirical analysis indicates that corporate complexity and managerial control exhibit significant influence on board heterogeneity. Using the heterogeneity of the county population of the firm's headquarters as an instrument, we also find that investors place valuation premiums on heterogeneous boards in complex firms but discount heterogeneity in less complex firms. Overall, our analysis indicates greater heterogeneity may not necessarily improve board efficacy.     

Deposit Insurance, Capital Adequacy Requirements and Interest Rate Dynamics

This paper examines the long run interaction among deposit insurance, bank deposit rates and capital adequacy requirements. Using analysis similar to the price discrimination model of Lott and Roberts (1991) we find that a competitive environment among banks would link the spread between insured and uninsured deposit rates to the size of the insurance premium. We also find that banks that choose to operate at the regulatory minimum capital level, would increase asset risk with increased capital requirements if (1) the implicit interest paid to insured and uninsured depositors is equally sensitive to changes in risk and capital adequacy and (2) the insurance premium is independent of the level of risk and capital adequacy. Under the present risk-based premium structure, asset risk has the potential to decline when the regulatory agency raises capital requirements. Finally, we examine the time series behavior of insured and uninsured interest rates to see if it is consistent with our theoretical model. We find that insured and uninsured rates, along with deposit insurance premiums, are cointegrated series as suggested by our model.     

Factors of production,productivity, institutions,and development: Evidence from Brazil

The economic growth and development literature emphasizes that investment in technology and physical and human capital is essential for achieving higher levels of development. Political and economic institutions are also relevant in this process. With a sample of 5,503 Brazilian municipalities, this study carries out a development accounting exercise and measures the effects of institutional quality on per capita gross domestic product (GDP), physical capital intensity, human capital stock, and productivity. The empirical results indicate that institutional quality affects GDP per capita mainly through human capital accumulation and total factor productivity.     

Public Sector Banks in India: Rationale and Prerequisites for reform

This paper contributes to the debate on public sector banks by suggesting several rationales for government ownership of banks in India. The paper then proceeds to argue that due to high economic costs, the current public sector banking system is unsustainable. Although a policy of wider private ownership was introduced in the 1990s, it is suggested that there are several prerequisites to be met before such a reform can be more fully implemented. It is argued that these prerequisites arise from the rationales for government ownership, and they include a credible bank regulatory regime, and government promotion of co‐operative banks and credit unions.     

Incentives to invest and to give access to non-regulated new technologies

We analyze the incentives of a vertically integrated firm, which is a regulated monopolist in the wholesale market and competes with an entrant in the retail market, to invest and to give access to a new wholesale technology. The new technology represents a non-drastic innovation that produces retail services of a higher quality than the old technology, and is left unregulated. We show that for intermediate values of the access price for the old technology, the vertically integrated firm may decide not to invest. When investment occurs, the vertically integrated firm may be induced to give access to the entrant for a low access price for the old technology. Furthermore, when both firms can invest, investment occurs under a larger set of circumstances, and it is the entrant the firm that invests in more cases. We also discuss the implications for the regulation of the old technology.     

Development Policies in the EU: An International Comparison

This paper studies the impact of the EU Structural Funds Program for the period 1989–93 on the growth paths of the major recipient countries, Greece, Ireland, and Portugal. It uses an endogenous growth model of private, public, and human capital accumulation in which the public sector and current account balances play a crucial role. Simulation results show that these programs had a substantial impact on economic growth in these economies and contributed markedly to their convergence to EU standards. Their relative long-run position, however, would still be far from EU standards, which suggests the importance of continuing the transfer program.     

Marginal risk aversion and preferences in a betting market

An individual's behavioural attitudes toward variance and non-symmetry in the payoff distributions of pari-mutuel gambles are empirically examined using the von Neumann - Morgenstern expected utility of wealth paradigm. Preferences over payoff distributions for a representative bettor are estimated from observed payoffs at a greyhound racetrack. The results indicate that the representative bettor exhibits increasing absolute risk aversion and, given that the representative bettor is locally non-satiated with regard to wealth, exhibits preference for variance and aversion to positive skewness in the payoff distributions of the gambles examined.