distance bank heterogeneity and entry in local banking markets we examine the determinants of entry into italian local banking markets during the period 1991 2002 and build a simple model in which the probability of branching in a new market depends on the features of both the local market and the potential entrant econometric findings show that banks are more likely to expand into those markets that are closest to their pre entry locations large banks are also more able to cope with distance related entry costs than small banks finally banks have become increasingly able to open branches in distant markets due to the advent of information and communication technologies

estimating the effect of hierarchies on information use theory suggests that greater hierarchical distance between a subordinate and his boss makes it more di cult to share abstract and subjective information in decision making a novel data set put together from credit dossiers of large corporate loan applicants enables us to observe the information collected by loan o cers and also how it is used by the ultimate loan approving o cer we flnd that greater hierarchical geographical distance between the information collecting agent and the loan approving o cer leads to less reliance on subjective information and more on objective information by exploiting non linearities in the assignment rules that determine an applicant s hierarchical distance and using information collecting agent flxed efiects we show that our result cannot be driven by endogenous assignment of applicants we also flnd that higher frequency of interactions between the information collecting agent and loan approving o cer both over time and through geographical proximity helps mitigate the efiects of hierarchical distance on information use our results show that hierarchical distance in uences information use and highlights the importance of human touch in communication

discriminatory tariffs and international negotiations abstract recent research has highlighted the efficiency of the mfn principle within the gatt wto structure this paper analyzes the exception made to mfn within article xxiii that allows discriminatory punishment for deviations from the agreement we argue that in the absence of collusion the mfn exception reduces the severity of punishment and thus lowers the level of cooperation that can be achieved by the agreement however discriminatory punishment may still be beneficial as we show that it reduces the problems associated with the potential for renegotiation during the punishment phase finally we argue that our results are also applicable to the question of whether to use trade policy sanctions as a means of enforcing agreements covering domestic policies

foreign activities of u s banks since 1997 the roles of regulations and market conditions in crises and normal times abstract using a unique newly constructed dataset on u s banks foreign activities since 1997 this paper examines how bank market and regulatory conditions in the u s and host countries affect u s banks choices of which foreign markets to enter and how much claims and liabilities to take on there using a two stage structural estimation framework the determinants of foreign market entry exit cross border claims and foreign affiliate claims and liabilities choices are examined in 107 host countries around the world it is shown that 1 the health of the balance sheet is the primary driver of foreign market entry exit choices especially so during the subprime crisis while host market and regulatory conditions play important roles in the choice of claims liabilities volumes 2 banks choose their foreign activities during banking and market crises differently than they do in normal times and 3 in addition to bank size previous experience with managing a global lending network significantly increases the intensity of banks foreign involvement structural estimates of the costs of foreign market entry exit and host market regulatory stringency are also derived

does financial agglomeration promote the increase of energy efficiency in china abstract whether financial agglomeration is conducive to the improvement of energy efficiency is of great significance for china to better follow the path of energy conservation and emission reduction and green sustainable development based on the balanced panel data of 285 cities in china from 2005 to 2017 this paper analyzes the impact of financial agglomeration on energy efficiency theoretical analysis shows that financial agglomeration can influence energy efficiency through scale economy effect innovation driving effect information spillover effect and structural adjustment effect dynamic spatial econometric results show that from a national perspective financial agglomeration has a positive impact on energy efficiency however from the perspective of different regions and different city sizes it is found that financial agglomeration can have different effects on energy efficiency financial agglomeration has a significant positive impact on energy efficiency in eastern and central regions megacities and big cities financial agglomeration has a significant negative impact on energy efficiency in western china and has no significant effect on energy efficiency in medium sized and small cities finally based on the conclusions of the study specific proposals for financial agglomeration to improve energy efficiency are proposed

is relationship lending special evidence from credit file data in germany the german financial market is often characterized as a bank based system with strong bank customer relationships the corresponding notion of a housebank is closely related to the theoretical idea of relationship lending it is the objective of this paper to provide a direct comparison between housebanks and normal banks as to their credit policy therefore we analyze a new data set representing a random sample of borrowers drawn from the credit portfolios of five leading german banks over a period of five years we use credit file data rather than industry survey data and thus focus the analysis on information that is directly related to actual credit decisions in particular we use bank internal borrower rating data to evaluate borrower quality and the bank s own assessment of its housebank status to control for information intensive relationships the major results of our study support the view that housebanks are able to establish a distinct behavioral pattern consistent with the idea of long term commitment we find that housebanks do provide liquidity insurance in situations of unexpected deterioration of borrower ratings with respect to loan pricing we find no evidence for intra or intertemporal price differentiation related to housebanking

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

strategic capital tax competition a pecuniary externality and a corrective device abstract d e wildasin journal of urban economics25 193 212 1989 identifies a source of inefficiency in capital tax competition models with price taking jurisdictions and provides a pigovian correction this paper identifies a second source of inefficiency in a non price taking environment when a jurisdiction increases its capital tax it affects the price of capital and thus other jurisdictions returns from trade in capital the pigovian correction to internalize this pecuniary externality is derived since a focus of recent research is on non price taking environments the existence of the pecuniary externality is important in qualifying existing results in the literature

small bank comparative advantages in alleviating financial constraints and providing liquidity insurance over time we use novel monthly survey data from 1993 to 2012 on small business managerial perceptions of financial constraints and other conditions matched with information on banks in their local markets the data suggest that small banks have comparative advantages in alleviating these constraints these advantages tend to be greater during adverse economic conditions and do not appear to decrease or increase secularly small banks also appear to have comparative advantages in providing liquidity insurance to small business customers of large banks experiencing liquidity shocks during financial crises our findings suggest a source of social costs from ongoing consolidation of the banking industry received december 28 2015 editorial decision january 13 2017 by editor philip strahan

relationship lending accounting disclosure and credit availability during the asian financial crisis we examine whether lending relationships benefit firms by making credit more available during periods of financial stress our main finding is that during the asian financial crisis of july 1997 through the end of 1998 relationship lending increased the likelihood that korean and thai firms would obtain credit but it had no effect on indonesian and philippine firms we ask if accounting disclosure might explain the observed differences among the three countries for which audit information is available we find that for indonesian firms with weak lending relationships banks replace relationship lending technology with a financial statement lending technology such a result does not hold for korean and philippine firms

implementing partial tax harmonization in an asymmetric tax competition game with repeated interaction this paper investigates the conditions under which partial harmonization for capital taxation is sustained in a repeated interactions model of tax competition when there are three countries with heterogenous capital endowments we show that regardless of the structure of the coalition i e full or partial tax coordination whether partial tax harmonization is sustainable or not crucially depends on the extent to which the capital endowment of the medium sized country is similar to that of the large or small country the most noteworthy finding is that the closer the capital endowment of the median country is to the average one the less likely the tax harmonization including the median country is to prevail and the more likely the partial tax harmonization excluding the median country is to prevail we also show that partial tax harmonization makes the member countries of the tax union better off and non member countries worse off which stands in sharpe contrast with previous studies such as konrad and schjelderup 1999 and bucovetsky 2009

are regional asymmetries detrimental to tax coordination in a repeated game setting abstract this paper reexamines the main findings of cardarelli et al cardarelli r taugourdeau e vidal j p 2002 a repeated interactions model of tax competition journal of public economic theory 4 19 38 and catenaro and vidal catenaro m vidal j p 2006 implicit tax co ordination under repeated policy interactions recherches economiques de louvain 72 1 17 who show that regional asymmetries undermine the implicit collusion of tax coordination in a repeated game model of capital tax competition in particular this paper investigates how increased regional differences in per capita capital endowments and or production technologies affect the willingness of each region to cooperate in achieving tax coordination it is shown that there may exist cases where as regional asymmetries in net capital exporting positions increase regions are more likely to cooperate on capital taxes and thereby achieve tax coordination

factor endowments and welfare levels in an asymmetric tax competition game abstract this paper addresses capital tax competition among an arbitrary number of countries countries are asymmetric not only in their population endowment but also in their capital endowment per inhabitant national governments tax capital and labor in order to finance a fixed public budget asymmetric capital taxation arises at equilibrium leading to a distortion on the international capital market we fully characterize how equilibrium taxes and welfare levels depend upon countries population and capital endowments we compare it to the autarky situation and show that fiscal competition erodes some but not all of the gains from capital markets liberalization

a more complete conceptual framework for sme finance abstract we propose a more complete conceptual framework for analysis of sme credit availability issues in this framework lending technologies are the key conduit through which government policies and national financial structures affect credit availability we emphasize a causal chain from policy to financial structures which affect the feasibility and profitability of different lending technologies these technologies in turn have important effects on sme credit availability financial structures include the presence of different financial institution types and the conditions under which they operate lending technologies include several transactions technologies plus relationship lending we argue that the framework implicit in most of the literature is oversimplified neglects key elements of the chain and often yields misleading conclusions a common oversimplification is the treatment of transactions technologies as a homogeneous group unsuitable for serving informationally opaque smes and a frequent misleading conclusion is that large institutions are disadvantaged in lending to opaque smes

the relationship between oil prices and exchange rates revisiting theory and evidence abstract this paper reviews existing theoretical and empirical research on the relationship between oil prices and exchange rates we start with theoretical transmission channels which point to bi directional causality empirical research is classified and shows that the evidence varies substantially depending on sample country choice and empirical method yet there are some common patterns i strong links between exchange rates and oil prices are frequently observed over the long run and ii either exchange rates or oil prices are a potentially useful predictor of the other variable in the short run but the effects are strongly time varying we also identify some important avenues for future research

distance and private information in lending we study the effects of physical distance on the acquisition and use of private information in informationally opaque credit markets using a unique data set of all loan applications by small firms to a large bank we show that borrower proximity facilitates the collection of soft information leading to a trade off in the availability and pricing of credit which is more readily accessible to nearby firms albeit at higher interest rates ceteris paribus analyzing loan rates and firms decision to switch lenders provides further evidence for banks strategic use of private information however distance erodes our lender s ability to collect proprietary intelligence and to carve out local captive markets suggesting that the requisite soft information is primarily local the author 2010 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

asymmetric tax competition abstract the paper analyzes nash equilibrium when two jurisdictions set tax rates on a tax base which is mobile between them population differences imply tax differences the smaller jurisdiction levies a lower tax rate in equilibrium and its residents are better off than those in the larger jurisdiction the nash equilibrium is inefficient if the two jurisdictions merged the resulting allocation would be efficient however if differences in population are great enough residents of the small jurisdiction would be made worse off by such a merger

is relationship lending still a mixed blessing a review of advantages and disadvantages for lenders and borrowers relationship lending is a common lending technology that is assumed to bring several benefits to small medium enterprises smes and to financial institutions that adopt it notably it could reduce information asymmetries permitting banks to offer better credit terms to the borrower however it also entails some costs for both sides the empirical evidence so far has not been conclusive in determining under what conditions relationship lending can be beneficial or harmful most of the studies suggest that smes that engage in relationship lending benefit from more credit availability especially during a financial crisis and lower interest rates this occurs when they are served by small banks are geographically close to the lender when the bank is adequately decentralized and when it is the dominant creditor of the firm however under certain circumstances banks can extract rents from the borrower or be captured by him in addition the consequences and the future of relationship lending will be remarkably affected by the level of competition among banks their ownership structure the regulatory framework and the business model that banks will have to adopt accordingly

credit rationing and relationship lending does firm size matter abstract using survey based data we investigate factors influencing credit rationing within a bank based financial system we show that rationing depends on various dimensions of the firm bank relationships and that the effects of relationship lending on rationing are not identical for different firm size groups multiple banking increases the probability of rationing for small and large firms debt concentration with the main bank affects positively smaller firms while the opposite is true for large companies the length of the relationship with the main bank decreases the probability of rationing for both groups but more so for large firms endowed with more bargaining power finally the firm bank spatial proximity measured by the headquarters vicinity does not affect the firm s access to credit

the role of regulatory arbitrage in u s banks international lending flows bank level evidence this paper examines how cross border differences in the stringency of bank regulations affect u s banks international activities the analysis relies on a unique bank level dataset on the globally most active u s banks balance sheet as well as their cross border foreign affiliate lending and foreign market entry choices in 82 foreign countries in the 2003 2013 period results show that u s banks are significantly more likely to enter foreign markets with relatively laxer bank capital and disclosure requirements and exit foreign markets with relatively stricter deposit insurance schemes and more restrictions on activities banks substitute away from foreign affiliate lending via subsidiaries in the foreign country towards cross border lending originating from the u s in foreign countries with more powerful and independent bank regulators and limits on activities

multiple versus single banking relationships theory and evidence a theory of the optimal number of banking relationships is developed and tested using matched bank firm data according to the theory relationship banks may be unable to continue funding profitable projects owing to internal problems and a firm may thus have to refinance from nonrelationship banks the latter however face an adverse selection problem as they do not know the quality of the project and may refuse to lend in these circumstances multiple banking can reduce the probability of an early liquidation of the project the empirical evidence supports the predictions of the model

the determinants of u s banks international activities abstract this paper develops a model and structural dynamic estimation of bank behavior to map the relationship between u s banks choices of foreign banking activities and bank and foreign market traits this estimation framework is applied to a unique bank level dataset compiled from regulatory sources covering u s banks foreign activities in 83 host markets over the 2003 2013 period bank traits are better able to explain the evolving patterns of foreign banking than host market characteristics after controlling for these traits the post financial crisis period shows a structural shift away from cross border claims towards foreign affiliate activities structural estimates of foreign market entry costs and regulatory attitudes towards risk are derived simulation exercises confirm the strong impact of banks and regulators risk stance on bank profits and portfolio composition

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

organizational distance and use of collateral for business loans abstract this paper examines the effect of organizational distance i e distance between the headquarters of the bank that grants a loan and the location of the borrower on the use of collateral for business loans by spanish banks on the basis of the recent lender based theory of collateral inderst r mueller h m 2007 a lender based theory of collateral journal of financial economics 84 826 859 we find that for the average borrower the use of collateral is higher for loans granted by local lenders than by distant ones we also show that the difference in the likelihood of collateral in loans granted by local lenders relative to distant lenders is higher among older and larger firms than respectively younger and smaller firms we also find that banks use lending technologies that are different for near and for distant firms in response to organizational diseconomies

responding to a shadow banking crisis the lessons of 1763 in august 1763 northern europe experienced a financial crisis with numerous parallels to the 2008 lehman brothers episode the 1763 crisis was sparked by the failure of a major provider of acceptance loans a form of securitized credit resembling modern asset backed commercial paper the central bank at the hub of the crisis the bank of amsterdam responded by broadening the range of acceptable collateral for its repo transactions analysis of archival data shows that this emergency source of liquidity helped to contain the effects of the crisis by preventing the collapse of at least two other major securitizers while the underlying themes seem to have changed little in 250 years the modest scope of the 1763 liquidity intervention together with the lightly regulated nature of the eighteenth century financial landscape provide some informative contrasts with events of late 2008

a coalition formation approach to equilibrium federations the authors develop a model in which states may choose to form coalitions to capture efficiency gains from policy coordination joining a coalition entails setting the policy variable to maximize the coalition s aggregate payoff at a nash equilibrium against nonmembers and to commit to a transfer scheme to share the gains with two states the unique equilibrium structure is complete federation with more than two states incomplete federation can be the unique equilibrium interpreting this result in terms of custom unions the trend to trading bloc formation may be equilibrium behavior even with cooperation and transfers within customs unions copyright 1997 by american economic association

relationship lending hierarchical distance and credit tightening evidence from the financial crisis abstract this paper examines the firms credit availability during the 2007 2009 financial crisis using a dataset of 5331 bank firm relationships provided by borrowers credit folders of three italian banks it aims to test whether a strong lender borrower relationship can produce less credit rationing for borrowing firms even during a credit crunch period the results show that exclusivity of the relationship can mitigate the firm credit rationing we also verify the influence of lending organizational structure during crisis a new measure of distance in lending technologies has been introduced the hierarchical distance calculated as the distance between the branch that originates the loan and the location of the hierarchical level responsible for financing decision our findings document a negative impact of distance on credit availability consistent with the idea that proximity facilitates the transmission of soft information

government loan guarantees and the credit decision making structure governments can alleviate the problem of banks denying credit to high risk borrowers and excluding weaker sectors from borrowing by introducing state guaranteed loan programs the main contribution of this paper is the elucidation of the importance of the bank s credit decision making structure in ensuring overall effectiveness of loan guarantees in particular the government can use the guarantee as an instrument for credit inducement and for affecting the bank s decision making system i e its degree of centralization bias towards approval of loans and reliance on objective loan specific information