Bank Competition and Loan Quality

We analyze the impact of bank competition on the equilibrium quality of loans in a formal model where banks do not observe the type of loan applicants, i.e. face an adverse selection problem, nor borrowers’ effort, i.e. also face a moral hazard problem. The main finding is that there exists an inverted U-shaped relationship between competition and the average quality of loans. Policy implications are derived from this result and from an extension to the basic model where banks may sequentially acquire information about potential borrowers.     

Bondholders’ wealth effects in domestic and cross-border bank mergers

The recent credit crisis and the increased internationalization of the European banks have given the debate about the role of national regulators a renewed urgency. We therefore investigate the determinants of bondholders’ abnormal returns for both domestic and cross-border bank merger announcements that involve European acquirers for the period 1998–2002. We find that bondholders’ abnormal returns are higher for Domestic Mergers than cross-border mergers, in direct contrast to evidence from equity prices where no difference is found. Further investigations in which we control for the changes in market power for example suggest this result may be indicative of investors perceiving Domestic Mergers as increasing the probability of a government bailout in case of distress. Banks’ bondholders also experience higher abnormal returns when the country of the partner bank has stricter rules in relation to forbearance of prudential regulations than the own country, and when functional diversification between lending and fee/trading activities increases.     

Eliciting experts' knowledge: A comparison of two methods

This paper reports on a detailed comparison of the practical application of two well-known forecasting methods—a surprisingly rare exercise. Delphi and cross-impact analyses are among the best-known methods that apply quantitative approaches to derive forecasts from expert opinion. Despite their prominence, there is a marked shortage of clear guidance as to when and where–and how–particular methods can be useful, or as to what their costs and benefits are. This study applied the two methods to the same area, future European transport systems, using the same expert knowledge base. The results of the implementation of the two techniques were assessed and evaluated, in part through two evaluation questionnaires completed by the experts who participated in the study. This paper describes these encounters with methodology and evaluation, presents illustrative results of the forecasting study, and draws lessons as to good practice in use of these specific methods, as well as concerning methodological good practice in general—for example, stressing the need for systematic documentation, and the scope for debate about established practices.     

Facilitators and Barriers of Applying Low Impact Development Practices in Urban Development

To support sustainable long-term developments and minimize urban sprawl, Low Impact Development (LID) practices have been highlighted for a long time. They are useful, but understanding on LID practices and broadening the LID applications among practitioners is another important task. The main purpose of this study is to understand local professionals’ perceptions on different LID techniques and awareness on their benefits, while also gathering opinions on barriers and incentives. An online survey was delivered to 91 recipients, a diverse pool of stakeholders involved in the Energy Corridor District (ECD) area in Houston, Texas. The majority of the respondents answered that they were familiar with LID. The techniques that have been applied to a larger extent are Detention Ponds and Bioswales. When asked about applying techniques in the future, Retention Ponds, Rain Gardens, Bioswales, and Detention Ponds are highly probable items. Decision-makers identified the major barriers as being the lack of incentives for their application, lack of knowledge of the client, and lack of knowledge of the development team. Education programs would be the most successful incentive, followed by financial incentives and innovations in policy systems. Urban planners have the most expertise in LID practices, followed by architects/landscape architects, while developers were found not to be very familiar with the concepts. This study understands the current and practical opinions about LID from the decision-makers. Different groups understand the importance of education and identified a major barrier as the lack of policy instruments. Some innovation in regulations may elevate proper LID practices.