when does the prime rate change abstract we study the frequency of prime rate changes we model the prime rate as a time series variable that can be changed only at some cost this yields a logit model in which the probability of a prime rate change is a function of market variables we test this model using data from a micro data set that gives the dating of prime rate changes the results indicate that adjustment costs are important to the prime rate adjustment process and that changes in exogenous variables have a significantly larger effect on the probability of a prime rate increase than decrease

drexel burnham lambert s bankruptcy and the subsequent decline in underwriter fees abstract in the 1980s drexel burnham lambert dominated the underwriting of junk bonds with close to a 50 market share in 1990 drexel went bankrupt and was liquidated and the percentage underwriting fees for junk bonds subsequently dropped dramatically we present strong evidence that the exit of drexel burnham lambert and the resulting increase in competition for market share were major contributing factors to the decline in junk bond underwriter fees

interest on reserves and inflation abstract the payment of interest on reserves has been a common practice in inflationary economies this policy may seem paradoxical since it involves returning part of the seigniorage generated by the inflation process with the intention to finance the fiscal deficit this paper argues that the motivation for this policy can be captured by the discretionary regime where the policymaker pays interest on reserves because he is concerned with the erosion of real liquidity by inflation which is in part beyond his control however this policy is an unlikely outcome in the commitment regime where the policymaker is in full control of inflation

disproportional control rights and the governance role of debt we examine the governance role of debt in the context of u s based dual class ownership structures we hypothesize that the use of debt alleviates the conflict between shareholder classes by balancing the power of controlling insiders we document that dual class firms have higher leverage and a greater propensity to issue private debt they also more frequently use cash sweeps and performance based covenants dual class firms with greater agency conflicts and a greater need to access the capital market appear to rely more extensively on debt these findings are consistent with controlling insiders bonding against the agency costs associated with dual class ownership the governance role of debt is further corroborated by the valuation effect of debt for dual class companies private debt issuances trigger greater positive market reactions to the inferior dual class stock in relation to both the superior dual class stock and a matched sample of single class firms further leverage attenuates the previou

signal jamming in new credit markets this paper develops a simple two period model in which a lender s credit operations in a new market end up externalizing information on borrowers repayment capabilities this information improves the competitive position of outside lenders by allowing them to enter the credit market with a more accurate description of potential clients equilibrium strategies are then identified where an inside lender chooses to offer a costly first period contract with the explicit objective of distorting the quality of the external information flow in the second period

main banks influence on financial reporting quality in japan abstractthis study investigated main banks influence on the quality of accounting firms audits and corporate firms earnings focusing on companies on japan s nikkei 500 index we posed three questions in this research study about main banks influence on corporate clients earnings management first does a weakened main bank relationship influence corporate clients financial reporting quality second does japan s firewall deregulation influence firms earnings quality finally does the relationship between accounting firms and main banks affect client firms earnings quality our main findings were that main banks are not related to client firms earnings management however main banks mitigate client firms earnings management after firewall deregulation on the other hand firewall deregulation does motivate firms to manipulate their earnings management finally using pong and kita s 2006 study as a framework we found that main banks and client firms using the same accounting firms had no in

market response to bank relationships evidence from korean bank reform abstract this paper examines how the forced closure of failing banks and the transfer of their loans to surviving banks affect the market value of firms that borrow from the closed banks pre existing relationships between firms and the banks that acquire their loans are detrimental to the positive valuation effects of the event banks may have an incentive to favor pre existing relationships to increase the value of previously extended loans therefore loan renewals to firms with prior relationships do not signal borrower quality to the market which is aware of the banks conflicts of interest this study highlights the importance of the specific mechanisms employed to replace failed banks without decreasing the value of their client firms

trends in natural resource economics in jeem 1974 1997 breakpoint and nonparametric analysis abstract the purpose of this paper is to identify trends in natural resource economics as reflected in publications in jeem over the period since its inception in 1974 a secondary purpose is to suggest an explanation for any patterns we observe in the data the data base consists of all articles published during this period classified by topic and method we apply statistical techniques of increasing sophistication to determine the existence of trends and interpret the results by appealing to what we characterize as forces of demand and supply

do banks have a future abstract are banks special intermediaries do they play any unique role in the economy and if so will they retain their specialness in the ever faster changing world of finance the rapid evolution of finance over the last two decades and the breathtaking e age revolution have persuaded many that eventually banks will be indistinguishable from other financial intermediaries since all their functions can at least as efficiently be carried out by nonbanks this study re explores the issue of the specialness of banks in light of the large existing literature on the subject and presents an approach which identifies the banks specialness with their unique capacity to lend out claims on their own debt which the public accepts and uses as money the study discusses various structural and policy implications deriving from the approach and draws on it to point to the continuing relevance of banking in a world where nonbanks are taking business away from banks lending to production has become relatively less important and the use of e money may soon be dominating financial transactions

should banks own equity stakes in their borrowers a contractual solution to hold up problems abstract this paper develops a model to answer the question whether a bank should hold a share of the equity of a borrowing firm the model shows that a small equity stake held by the bank can have a significant and positive impact on the lending relationship the benefit of bank equity participation arises from the reduced ability of the bank to extract rents from the firm in multiple rounds of financing this in turn improves the firm s incentive to make investments in profitable projects that require future outside finance the benefit is likely to be significant for small to medium size firms growth firms and firms with ongoing capital needs the paper addresses from a corporate finance perspective the current debate about whether banks should be allowed to own equity stakes in corporations and how large these equity stakes should be

bankruptcy priority for bank deposits a contract theoretic explanation over the past decade several countries including the us have introduced or redesigned legislation that confers priority in bankruptcy upon all or some bank deposits we argue that in the presence of contracting costs such rules can increase efficiency we first show in a private information model that a borrower can reduce overall costs of finance by letting informationally heterogeneous lenders choose between junior and senior debt in particular we find that debt priorities reduce socially wasteful information gathering by investors we then argue why particularly in banking legal standardization of debt priorities may be superior to bilateral private arrangements article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

an empirical analysis of the determinants of corporate debt ownership structure i examine the relation between corporate debt ownership structure and several firm characteristics suggested by recent theory the results demonstrate the importance of monitoring and information costs the likelihood and costs of inefficient liquidation and borrowers incentives in affecting firms debt source preferences several theoretical predictions receive support while others do not the results also suggest important differences between bank and private non bank debt which contrasts with most theoretical models additionally i find evidence of systematic use of bank debt by firms with access to public debt suggesting the benefits attributed to bank debt in theoretical models remain important after firms gain access to public debt markets although different lenders appear to have different maturity preferences the results also suggest debt maturity and debt ownership decisions may be separable

the emergence and regulation of contingent commitment banking abstract in but a relatively few years banking has changed considerably now it is very much a business of making contingent promises or commitments and even just a decade ago it was not recognizing change is apparently easier though than accounting for it or than not worrying about it in this paper an attempt is made to account for the change from traditional to contingent commitment banking an attempt which must however be regarded as less than brilliantly successful and responding to the concern that has been expressed by among others federal reserve officials it is argued that even if banking keeps on changing until the last vestige of the traditional has disappeared the federal reserve need not in the end be less effective as the u s monetary authority than it is at present there is also a concern shared by some federal reserve officials that if change persists then unless bank regulatory policy is altered appropriately financial stability will be increasingly threatened that could be but as is argued in the paper it is far from obvious that more capital and or a risk adjusted capital requirement will make bank failures rarer than they otherwise would be

commercial bank underwriting of credit enhanced bonds are there certification benefits to the issuer recent studies have expanded the commercial bank certification hypothesis to include banks acting in an underwriting capacity this paper further develops that research by focusing on the industrial revenue bond market in which banks have the unique opportunity to simultaneously act as both credit guarantor and underwriter when explicitly allowing for bank issued standby letters of credit guarantees we find significantly greater yield spreads for those bonds underwritten by commercial banks compared to bonds underwritten by investment banks overall no net benefit appears to accrue to the bond issuer when attempting to achieve joint or double certification benefits by employing commercial banks as both credit guarantor and underwriters except in the special case where the same bank acts as both guarantor and underwriter this limited certification effect is further validated when the credit quality of participating banks is accounted for this result is consistent with an economy of scope in monitoring and reusing information

a bibliometric account of the evolution of ee in the last two decades is ecological economics becoming a post normal science abstract in ecological economics the debate on formalism and formalization has been addressed in the context of a lively discussion on ecological economics as a post normal versus normal science using ecological economics ee as a seed journal and applying bibliometric techniques to all 2533 the articles published in ee from january 1989 to december 2009 we analyze the evolution of the field of ecological economics aiming to shed light on this debate we observe the predominance and increased relevance of certain research topics methodological issues policies governance and institutions and valuation moreover collective action technical change and the environment and values stand as emergent themes of research finally we note that ecological economics experienced an empirical turn reflected in a shift away from exclusively formalized papers towards exclusively empirical and to a larger extent formal and empirical ones the combination of the prominent and emergent topics and the empirical turn mirrors the increasing awareness among researchers in the field of the need to address a key specificity of ecological economics the interdependence of the economic biophysical and social spheres on this basis we argue that at least through the lens of ee ecological economics has evolved towards a post normal science

environmental and ecological economics a citation analysis this study looks at two distinct questions dwhat have been the most influential journal articles in environmental economics and ecological economics over the 10 year period 1994 2003 t and dhow much overlap is there between the fields of environmental and ecological economics t we examine the references in all articles published in jeem and ecological economics ee over this period for each of these two fields a list of the top articles and top journals cited by articles published in jeem and ee is presented we also present some results based on our study of the isi journal citation reports we find that there is a significant overlap between the two fields at the journal level the two journals cite similar journals there is a correlation of 0 34 between the number of citations received by the journals that are most cited and the correlation is even higher if journal self citation is excluded the main differences are that ecological economics tends to cite but not be cited by general natural science journals more often than environmental economics does environmental economics cites more heavily from journals rather than other publications and citations in environmental economics are more concentrated on particular journals and individual publications however there is much less similarity at the level of individual articles nonmarket valuation articles dominate the most cited articles in jeem while green accounting sustainability and the environmental kuznets curve are all prominent topics in ee d 2005 elsevier b v all rights reserved

loan sales and the cost of bank capital this paper considers a model where banks may improve the returns on loans by monitoring borrowers bank regulation together with competitive deposit and equity financing can give banks an incentive to sell loans but the extent of their loan selling is limited by a moral hazard problem a solution is given for the optimal design of the bank loan buyer contract that alleviates this moral hazard problem an explanation is also given as to why some banks might buy loans and why loan sales volume has recently increased banks practice of making loans and then selling them to other institutions and individuals has grown in popularity an important example in the development of loan selling has been the increase in banks mortgage loans that are insured and pooled under the authority of the government national mortgage association gnma and then sold to secondary market investors recently however there has been a dramatic rise in the volume of other types of loans being sold especially by money center banks portions of commercial loans originated by these larger banks are being sold to smaller banks foreign banks and other financial and nonfinancial institutions in addition banks car loans and credit card receivables have also been pooled and sold to institutions and individuals selling loans that were once considered nonmarketable assets a process that has been termed asset securitization may be signalling the start of a fundamental change in the commercial banking business the leading banks in loan selling operations now view themselves more as originators and distributors of loans rather than as institutions holding loans as assets the potentially large impact of loan sales on the future of commercial banking naturally evokes the question of what incentives exist for banks to sell loans in this paper we show that loan sales allow some banks to finance loans less expensively than by traditional deposit or equity issue because bank funds received via loan sales can avoid costs associated with required reserves and

understanding the rise and decline of the japanese main bank system the changing effects of bank rent extraction this paper shows how main bank rent extraction affects corporate decisions about investment and financing during financial regulatory reform our model predicts that limited loanable funds can initially contain main bank controlled overinvestment even when new equity is available to the firm abundant funds facilitate overinvestment to the detriment of firm profitability a shift of control rights back to the firm due to financial deregulation produces an equity for upside potential and bank debt for downside risk bias against the banks a stock market and real estate boom in japan made it harder than ever for the banks to diversify risk the insights from this analysis help explain why japan s main bank system was beneficial in the capital constrained postwar period but became harmful during the capital abundant and even bubbly 1980s and why the adverse shocks of the post deregulation 1990s had such severe effects on the banking system

deposit insurance pricing and social welfare abstract recent literature has established that financial disruption has real costs which justify government intervention in the financial sector one form of government intervention is deposit insurance in this paper we determine the optimal pricing and subsidy of deposit insurance in a social welfare context the main conclusion is that optimal deposit insurance need not be actuarially fair in an economy with a real and a financial sector we consider the effects of taxation and social political weights of the sectors we analyze two policy tools government supervision and deposit insurance pricing

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

capital regulation and insured banks choice of individual loan default risks abstract how bankers choose the riskiness of their individual assets is an important question it is well known that fixed premium deposit insurance leads a bank to prefer a high variance asset portfolio but its effect on individual asset choice has not been carefully evaluated this paper demonstrates how bank examination procedures and capital adequacy standards can make the value of a bank s deposit insurance contract concave in individual asset risks insured bankers may therefore have a rational preference ceteris paribus for relatively safe individual loans even while they prefer risky portfolio returns the model s implications for loan securitization and the federal regulators new risk based capital standards are discussed

effect of the number of banking relationships on credit availability evidence from panel data of spanish small firms this paper investigates how the choice between single or multiple banking relationships affects credit availability for a complete panel of small and medium sized spanish firms the results seem to indicate the existence of rationing since a substitution relation has been found between trade and bank credit we also analyse the relationship between the level of indebtedness and the interest rate for each group of firms the results show that those smes that work with fewer financial intermediaries obtain fewer funds for the same increase in the interest rate which indicates that these companies have more financial restraints

low inflation the behavior of financial markets and institutions this paper provides a broad overview of the potential impact of low inflation deflation on u s financial markets and institutions it is argued that the contemporary experience of japan and the historical experience of the united states in the 1920s and 1930s offer only limited insights into the potential impact of low inflation deflation on today s u s financial system a number of potential implications are discussed including a decline in secondary market trading and a trend towards reintermediation in addition low inflation deflation is likely to have a material effect on bank duration and convexity exposures

how integrated are the money market and the bank loans market within the european union abstract this paper estimates cointegration vectors of the time series of money market interest rates and bank lending rates the study includes six member countries of the european union eu and covers a period of 10 years from 1985 to 1994 during this period significant steps were taken that intensified financial integration in the eu including the free flow of capital a system of stable exchange rate parities and the implementation of a single market for banking services we conclude that the domestic money markets are closely linked but the domestic banking markets are segmented preliminary investigation of international differences in the capital structure of firms on the one hand and of domestic business cycle conditions on the other hand do not seem to explain differences in bank spreads across countries the results point to other directions presumably to local market power and to differences in the role of lender monitoring

market response to banks granting lines of credit abstract prior research has shown and this paper confirms that when the market becomes aware a line of credit is granted the borrower s stock has a positive and significant reaction the borrower s reaction is used to identify the exact date the market becomes aware of the granting of the line of credit this date is used as a one day window to investigate whether the bank s stock also reacts this reaction will be most obvious with large lines of credit all lines of credit larger than us 1 billion granted during the years 1993 1996 are investigated the results show as predicted a positive and significant reaction by the bank s stock

underwriting by commercial banks incentive conflicts scope economies and project quality the authors study the issue of commercial bank underwriting of securities their analysis examines the incentive conflict faced by intermediaries that both lend and underwrite securities thereby imposing a cost on their customers seeking to raise capital despite this cost firms may choose to use such an intermediary if there are sufficiently large scope economies in combined lending and underwriting the authors demonstrate that the regulatory separation of such combined intermediation may be optimal if firms recognize the intermediary s subsequent incentive conflict when choosing projects to be funded and if there is a social cost to bank funding of poor quality projects they also examine the conditions for intermediaries reputation building to mitigate the incentive conflict without the need for regulation

what s different among banks abstract based on commercial paper being a nearly perfect substitute for certificates of deposits cds and cd reserve requirements creating a higher cost of funds for banks fama shows that the banking industry must have some monopoly power relative to other financial institutions his analysis does not resolve whether this monopoly power is vested in banks collectively vis a vis other financial institutions or if the monopoly power extends to the level of individual banks using an event study framework to examine the elimination of a reserve requirement we find significant evidence of monopoly power at the level of individual banks

bank regulation risk and return evidence from the credit and sovereign debt crises in this paper we analyze whether regulation reduced risk during the credit crisis and the sovereign debt crisis for a cross section of global banks in this regard we examine distance to default laeven and levine 2008 systemic risk acharya et al 2010 idiosyncratic risk and systematic risk we employ world bank survey data on regulations to test our conjectures we find that regulatory restrictions official supervisory power capital stringency along with private monitoring can explain bank risk in both crises additionally we find that deposit insurance schemes enhance moral hazard as this encouraged banks to take on more risk and perform poorly during the sovereign debt crisis finally official supervision and private monitoring explains the returns during both crisis periods

what s different about banks abstract negotiable certificates of deposit cd s trade in the capital market in competition with other securities like commercial paper and bankers acceptances if cd s must pay lenders competitive monetary interest the reserve tax on cd s is borne by bank borrowers viability of the tax means there must be something special about bank loans that makes some borrowers willing to pay higher interest rates than those on other securities of equivalent risk moreover there must be something special about banks that prevents other intermediaries from competing to assure that it never pays to finance loans with cd s

the value of risk measuring the service output of u s commercial banks rather than charging direct fees banks often charge implicitly for their services via interest spreads as a result much of bank output has to be estimated indirectly in contrast to current statistical practice dynamic optimizing models of banks argue that compensation for bearing systematic risk is not part of bank output we apply these models and find that between 1997 and 2007 in the u s national accounts on average bank output is overestimated by 21 percent and gdp is overestimated by 0 3 percent moreover compared with current methods our new estimates imply more plausible estimates of the share of capital in income and the return on fixed capital

banks equity stakes and lending evidence from a tax reform abstract we study how a bank s equity stake in a borrowing firm affects lending to that firm similar to prior papers we find a positive association between a bank s equity stake in a borrowing firm and lending to that firm while such a positive cross sectional correlation may be due to equity stakes benefiting lending it may also be driven by endogeneity to distinguish the two explanations we study a german tax reform that permitted banks to sell their equity stakes tax free after the reform many banks sold their equity stakes but did not reduce lending to the firms this observation is robust to several alternative model specifications control groups and time windows our findings suggest that banks equity stakes may be less important for lending than previously thought

relationships and rationing in consumer loans we empirically examine how relationships between individual households and their creditors affect the probability of being credit rationed using a data set where the credit rationing of individual households is observed directly we show that relationship duration and the number of activities between a family and a potential lender significantly lower the probability of being credit rationed additionally we examine the relative role of relationships in determining the interest rates of two consumer loans a mortgage loan and a special purposes loan and show that mortgage loan rates are driven less by relationship factors than the special purposes loan rates copyright 1999 by university of chicago press

reason for reserve reserve requirements and credit this paper considers the impact of a regulatory policy action on bank credit and traces its incidence across banks i make use of a reserve requirement increase in lebanon that was considerably greater on foreign currency deposits than on domestic currency deposits all banks cut lending as they scrambled to adjust portfolios but the policy shock disproportionately affected banks with a greater reliance on dollar funding and with low buffers of dollar liquid assets exposed domestic owned banks also adjusted more slowly than similar foreign owned banks that obtained outside funding descriptive firm bank matching evidence reveals a disproportionate impact on small firms

monetary policy and global banking when central banks adjust interest rates the opportunity cost of lending in local currency changes but absent frictions there is no spillover effect to lending in other currencies however when equity capital is limited global banks must benchmark domestic and foreign lending opportunities we show that in equilibrium the marginal return on foreign lending is affected by the interest rate differential with lower domestic rates leading to an increase in local lending at the expense of a reduction in foreign lending we test our prediction in the context of changes in interest rates in six major currency areas

the determinants of bank interest rate margins an international study abstract this paper studies the determinants of bank net interest margins nims in six selected european countries and the us during the period 1988 1995 for a sample of 614 banks we apply the ho and saunders model ho t saunders a 1981 the determinants of bank interest margins theory and empirical evidence journal of financial and quantitative analyses 16 581 600 to a multicountry setting and decompose bank margins into a regulatory component a market structure component and a risk premium component the regulatory components in the form of interest rate restrictions on deposits reserve requirements and capital to asset ratios have a significant impact on banks nims the empirical results suggest an important policy trade off between assuring bank solvency high capital to asset ratios and lowering the cost of financial services to consumers low nims the more segmented or restricted the banking system both geographically and by activity the larger appears to be the monopoly power of existing banks and the higher their spreads macro interest rate volatility was found to have a significant impact on bank nims this suggests that macro policies consistent with reduced interest rate volatility could have a positive effect in reducing bank margins

comment on cole the view that small rms face greater problems in obtaining credit thanlarge rms has a long history going back at least as far as the loan relationshipmodels of hodgeman 1961 and wood 1975 and the credit rationing work ofja ee and modigliani 1969 nevertheless there are few studies that provideor analyze direct evidence that credit is rationed with nonprice terms to rms at the macro level most empirical studies of business credit availability use in direct proxies ranging from early studies such as ja ee and modigliani 1969 who gauged availability by the share of small sized loans among all bank loans to more modern models that point to a role of cash ow as a determinant ofinvestment at the micro level empirical studies have indirectly tested forthe existence of credit rationing by assessing the behavior of loan pricing e g berger and udell 1992 1995 testing whether liquidity or cash owhas a greater impact on investment by smaller rms relative to larger rms e g fazzari et al 1988 or investigating whether smaller rms more heavilyuse expensive trade credit during periods of tight credit e g ja ee 1971 pe tersen and rajan 1994 cole 1998 lls a void in the literature on credit availability by testing how rm characteristics a ect a small rm s likelihood of experiencing a loan denialusing a unique cross section data set that provides direct evidence of nonpricecredit rationing this paper nds that preexisting nancial service relationshipswith a lender have a positive e ect on the probability of loan approvals con sistent with prior studies arguing that banks gain information about credit riskfrom monitoring borrower deposit activity e g black 1975 fama 1985 nakamura 1993 in addition results indicate that much of the e ect of

entry of foreign banks in the people s republic of china a survival analysis this study uses survival analysis to examine the factors determining the decision of a foreign bank to establish a branch in the prc bank size and international diversification are found to have a significant positive impact on the probability of entry banks from asia have particular cultural and locational advantages in this context and are found to be more likely to enter this market market conditions in the host economy exemplified by an improved political environment and increasing levels of international trade are also found to be significant determinants of the timing of entry access to china s banking sector will increase upon entry to the wto and again cultural links and location are likely to play a key role for foreign entrants particularly for those operating in local currency markets

banks and loan sales marketing nonmarketable assets theories of financial intermediation predict that bank loans should not be marketable because of moral hazard problems banks will not conduct credit risk analysis or monitor borrowers if they are not at risk for failing to perform these services throughout most of history bank loans have not in fact been marketable yet by the end of the 1980 s the amount of commercial and industrial loan sales outstanding had grown to over 250 billion from trivial amounts at the beginning of the decade to explain the opening of this loan sales market we present a model of incentive compatible loan sales that allows for implicit contractual features between loan sellers and loan buyers we then test for the presence of these features using a sample of over 800 recent loan sales

universal banking and firm risk taking abstract this paper analyzes the welfare implications of banks taking equity stakes in firms under conditions of imperfect information and moral hazard two cases of bank control over investment decisions are analyzed in the first the bank does not control the investment decisions of the firm here the investment efficiency is higher and bank risk is lower for an optimal positive level of bank equity holdings however in the case when the bank has veto power over investment proposals by the firm there is a trade off between increased investment efficiency and increased bank risk

the effect of lender identity on a borrowing firm s equity return previous research demonstrates that a firm s common stock price tends to fall when it issues new public securities by contrast commercial bank loans elicit significantly positive borrower returns this article investigates whether the lender s identity influences the market s reaction to a loan announcement although we find no significant difference between the market s response to bank and nonbank loans we do find that lenders with a higher credit rating are associated with larger abnormal borrower returns this evidence complements earlier findings that an auditor s or investment banker s perceived quality signals valuable information about firm value to uninformed market investors previous studies show that certain types of loan announcements generate significantly positive abnormal returns to the average borrower s equity 1 this finding contrasts with the negative equity returns generally associated with a corporation s issuance of public securities smith 1986 this difference in market reactions indicates that private and public securities are not perfect substitutes for the average firm in this sense lender identity defined as public versus private lender significantly impacts the borrower s abnormal equity return the standard theoretical explanation for this difference is that private lenders either obtain private information about the firm s value or they have the incentive and ability to monitor firm behavior more effectively than other outside monitors can although the empirical literature on private lending has evaluated primarily commercial bank loans and lines of credit these theoretical arguments apply equally to any type of private

does corporate lending by banks and finance companies differ evidence on specialization in private debt contracting this paper establishes empirically the existence of specialization in private market corporate lending adding a new dimension to the public versus private debt distinctions now common in the literature comparing corporate loans made by banks and by finance companies we find that the two types of intermediaries are equally likely to finance information problematic firms however finance companies tend to serve observably riskier borrowers particularly more leveraged borrowers evidence supports both regulatory and reputation based explanations for this specialization in passing we shed light on various theories of debt contracting and intermediation and present facts about finance companies

bank capital and equity investment regulations abstract this paper uses an intermediation model to study the efficiency and welfare implications of both banks minimum required capital asset ratio and the regulation that limits and in some countries forbids banks investments in the equity of nonfinancial firms there are two sources of moral hazard in the model one between the bank and the provider of deposit insurance and the other between the bank and an entrepreneur who demands funds to finance an investment project among other things the paper shows that capital regulation improves the bank s stability and can also be pareto improving equity regulation is never pareto improving and does not increase the bank s stability

the information content of distressed restructurings involving public and private debt claims abstract this paper examines debt restructurings by financially distressed firms we develop a model which predicts that in public debt exchange offers firms with unfavorable private information will offer equity claims to convince bondholders that the firm s prospects are poor in contrast offering equity to well informed private lenders conveys favorable private information to outsiders consistent with our analysis we find positive average abnormal returns around restructurings that offer equity to private lenders and senior debt to public debtholders and we find significant negative average abnormal returns when private lenders are offered senior debt and public lenders are offered equity

academic spin off s transfer speed analyzing the time from leaving university to venture for academic spin offs i analyze the length of time between the founder s leaving of academia and the establishment of his firm technology transfer can take place even years after leaving the mother institution a duration analysis reveals that a longer time lag is caused by the necessity of assembling complementary skills either by acquisition by a single founder or by searching for suitable team members furthermore new ventures are established earlier if the intensity of technology transfer is high the founders have access to university infrastructure or received informal support by former colleagues

debt and communications technology diffusion retrospective evidence this study has evaluated the relationship between debt in the capital structure of firms and the dynamics of broadband and digital technology adoption in the united states based on a large dataset on local exchange carriers in the united states over a contemporary historical fourteen year period from 1988 to 2001 using treatment effects modeling the impact of debt in impacting the levels of firms broadband deployment has been found to be negative and significant the primary source of debt in the sector has been in the form of arm s length corporate bonds and the assumptions of the monitoring hypothesis associated with such debt that lenders in the face of information and collective actions problems might not be able to control managers and hence invest less in highly technology intensive situations are supported by the data additionally the data set has been split into separate sets for two periods one between 1988 and 1995 for the period before the telecommunications act of 1996 came into force and the other set between 1996 and 2001 and the results have stayed consistent a test of the coefficients between the two periods has shown that the negative impact of leverage on broadband deployment has become stronger after the introduction of competition in the sector and this has suggested that the change in the institutional logics between the two periods has been of material impact in influencing lenders perceptions

monetary policy and bank regulations in an economy with financial innovations this is a study of financial innovations and moves towards the cashless society in a general equilibrium cash in advance model it is assumed that a subset of goods cash goods and check goods

deposit insurance and subsidized recapitalizations the 2007 2009 financial crisis saw a vast expansion in deposit insurance guarantees around the world and yet our understanding of the design and consequences of deposit insurance schemes is in its infancy we provide a new rationale for the provision of deposit insurance in our model the banking sector exhibits both adverse selection and moral hazard which implies that the social benefits of bank monitoring must for incentive reasons be shared between depositors and banks consequently socially too few deposits are made in equilibrium deposit insurance or equivalently bank recapitalization corrects this market failure we find that deposit insurance should be funded not by banks or depositors but out of general taxation the optimal level of deposit insurance varies inversely with the quality of the banking system hence when the soundness of the financial sector is uncertain governments should consider supporting deposit insurance schemes and undertaking subsidized recapitalizations

bank income structure and risk an empirical analysis of european banks the purpose of this paper is to investigate the relationship between bank risk and product diversification in the changing structure of the european banking industry based on a broad set of european banks for the period 1996 2002 our study first shows that banks expanding into non interest income activities present higher risk and higher insolvency risk than banks which mainly supply loans however considering size effects and splitting non interest activities into both trading activities and commission and fee activities we show that the positive link with risk is mostly accurate for small banks and essentially driven by commission and fee activities a higher share of trading activities is never associated with higher risk and for small banks it implies in some cases lower asset and default risks

atomistic and systemic approaches to research on new technology based firms a literature study the dominating view of new technology based firms is that these firms are driven by a heroic entrepreneur who pursues aggressive growth new technology based firms are expected to sooner or later develop tangible products with which new market niches are created and existing ones penetrated often the only perceived economic impact of new technology based firms is one delivered through rapid organic growth

deposit insurance a reconsideration abstract this paper undertakes a simple general equilibrium analysis of the consequences of deposit insurance programs the way in which they are priced and the way in which they fund revenue shortfalls in our economy the central issue in analyzing deposit insurance is how the government will make up any fdic losses deposit insurance premia matter only in so far as they affect the level of implied fdic revenue shortfalls moreover local variations in the magnitude of fdic losses will generically be irrelevant for the determination of any equilibrium quantities that affect agent welfare however large enough changes in these losses can matter there is no presumption that keeping these shortfalls low is a good idea finally we show that multiple pareto ranked equilibria can be observed the potential for multiplicity of equilibria may depend on components of fdic policy our analysis provides counterexamples to the following propositions 1 actuarially fair pricing of deposit insurance is always desirable 2 implicit fdic subsidization of banks through deposit insurance is always undesirable 3 large fdic losses are necessarily symptomatic of a poorly designed deposit insurance system 4 risk based deposit insurance premia can easily be used to reduce moral hazard problems associated with deposit insurance provision

monitoring cross subsidies and universal banking abstract we formalize the idea that a financial conglomerate may utilize commercial banking activities to cross subsidize investment banking through bundled offers the investment banking sector entails supra normal profits due to incentive problems with security underwriting universal banks may aim to capture some of those profits by providing discounts on commercial loans this practice has an adverse effect on commercial banks monitoring incentives encouraging the pursuit of private rents by entrepreneurs it also leads to lower underwriting fees and a lower probability of successful public offerings the social welfare effects of universal banking can be either positive or negative

interest rates in a credit constrained economy when households face credit constraints in an economy with inside as well as outside money stationary equilibrium real interest rates are below the household rate of time preference they also depend significantly upon household risk aversion the demand for inside versus outside money bank costs bank reserves inflation and the marginal productivity of capital and capital depreciation rates in addition changes in financial variables affect per capita capital and output to a greater extent when households are credit constrained copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

faculty entrepreneurship and economic development the case of the university of calgary abstract the common perception of universities as merely institutions of higher learning is giving way to one where universities are viewed as engines of economic growth and development this study documents the entrepreneurial activities of the faculty of the university of calgary as well as the impact the university has had and the impact its recent budgetary problems might have on such activities results indicate that nearly 100 new ventures with at least one full time employee were started by faculty or were started as a consequence of significant faculty inputs these ventures in turn have generated at least 723 new jobs in alberta furthermore our projections suggest that faculty entrepreneurs will create approximately 14 ventures per year in the near future implications for the role universities and governments should play to encourage faculty entrepreneurship are discussed

bond underwriting by banks and conflicts of interest evidence from japan during the pre war period abstract article 65 of the securities and exchange law of japan which was carried into effect in 1948 prohibited banks from underwriting corporate securities partially because of the concern that combining the banking and securities businesses might result in a potential conflict of interest this paper studies the pricing and long term default performance of industrial bonds underwritten by commercial banks the industrial bank of japan ibj and trust firms as compared to those underwritten by investment houses during the pre war period in japan when banks were allowed to underwrite industrial bonds the evidence rejects the concern about the conflicts of interest

trust interlinking transactions and credit in the industrial district an essential feature of the industrial district is trust among individuals and firms within it this paper focuses mainly on trust based on investments in building up a good reputation that is a personal capital that can even substitute for collateral in obtaining credit informal credit often linked to other transactions and especially subcontracting is therefore an important way of financing economic development in the industrial district moreover the importance of trust as personal capital gives rise to a double financial intermediation in the industrial district this double intermediation constitutes a device to reduce information problems that are usually responsible for credit rationing c 1994 academic press inc copyright 1994 by oxford university press

sharing default information as a borrower discipline device abstract creditors often share information about their customers credit records besides helping them to spot bad risks this acts as a disciplinary device if creditors are known to inform one another of defaults borrowers must consider that default on one lender would disrupt their credit rating with all the other lenders this increases their incentive to perform however sharing more detailed information can reduce this disciplinary effect borrowers incentives to perform may be greater when lenders only disclose past defaults than when they share all their information in some instances by fine tuning the type and accuracy of the information shared lenders can raise borrowers incentives to their first best level

bank information monopolies and the mix of private and public debt claims this article examines the determinants of the mix of private and public debt using detailed information on the debt structure of 250 publicly traded corporations from 1980 through 1990 we find that the relationship between bank borrowing and the importance of growth opportunities depends on the number of banks the firm uses and whether the firm has public debt outstanding for firms with a single bank relationship the reliance on bank debt is negatively related to the importance of growth opportunities in contrast among firms borrowing from multiple banks the relationship is positive

corporate bond covenants and social responsibility investment this paper examines the effect of corporate social responsibility csr on the number of bond covenants we find that a high csr score has a negative association with the number of bond covenants moreover our results are more pronounced for firms with a high bid ask spread and high agency costs our analysis highlights the effect of the good stakeholder relationship on the bond contracts

deposit insurance and lender of last resort functions we consider issues concerning the design of a banking system safety net when both a deposit insurer and a lender of last resort are present in our model both entities have a role to play moreover issues related to deposit insurance pricing are relatively unimportant in this context whereas issues related to discount window access and pricing are not we discuss when and why or why not a lender of last resort should lend liberally but charge high rates of interest and we raise the possibility that discount window policy may enhance or reduce the scope for multiplicity of equilibria

contract costs and financing decisions like bondholders most agents contract for fixed payoffs thus corporate capital structures which are less than 50 percent debt are less levered than overall contract structures in which about 90 percent of total flows are fixed payoffs the hypothesis analyzed here is that loans and bonds lower contract costs by delegating the monitoring and bonding of the default risks of fixed payoffs to credible specialists financial intermediaries bond holder trustees rating agencies and auditors other agents can then focus on their specialties that is efficient supply of labor materials and other services and the contract problems of these specialties copyright 1990 by the university of chicago

growth pattern of academic entrepreneurial firms abstract academic entrepreneurship the creation of new business ventures by university professors technicians or students is increasingly being promoted by university based innovation centers and university business offices it is seen as an efficient university industry technology transfer mechanism and in some cases may contribute to university revenue whereas most entrepreneurs leave the university at time of start up others keep their academic postings as full time or part time professors part time entrepreneurship may be interesting from a university point of view because i it keeps in the laboratory a creative individual ii it may provide through part time academic positions for a more efficient use of university resources and iii it encourages more contacts between faculty students and the business world however manufacturing firms led by part time entrepreneurs do not seem to be as aggressive and growth oriented as independent firms the university professor interested in the successful transposition of an idea an invention to the commercial sector may therefore have to do it through licensing or resign from the university to devote all his time and energy to the development manufacturing and commercialization process and the university interested in investing in a new academic firm created to exploit commercially an invention made in its own laboratories should beware of keeping the academic entrepreneur on staff or if he stays on staff of involving him with the management of the new company these are the main conclusions of a study of the evolution from 1980 1981 to 1984 1985 of 38 young firms originally created by entrepreneurs while at various universities in several canadian provinces the results supported by the observation of a small control group of 8 canadian hightechnology companies bring out a dichotomy for firms offering technical services the continued this project were made by colleen bigelow and branko peterman their help was greatly appreciated academic posting of the firm s creator does not appear to overly affect its operations and growth however manufacturing firms completely independent from the university tend to g row faster other results support the negative correlation that seems to exist between the growth rate of sales and closeness to academic life as measured for example by the use of university laboratories and equipment whether they are still closely connected to a university or not the entrepreneurs in our sample do note many potential positive benefits from continuing contacts with the academic world it is possible that the negative correlation between growth and university links observed in the sample results more from the individual characteristics of the entrepreneurs than from a negative influence by the university as venture capitalists have long noticed one of the main determinants of growth and success is the entrepreneur himself the entrepreneurs staying close to the university and using university services may be less aggressive and less risk oriented than the others

the use of loan sales and standby letters of credit by commercial banks abstract this paper examines the incentives banks have to engage in off balance sheet activities such as commercial loan sales and the issuance of standby letters of credit slcs i show that loan sales and loans backed by slcs have payoff characteristics similar to secured debt like secured debt off balance sheet activities permit banks to sell a portion of the cash flows associated with new investment oppurtunities this ability permits banks to invest in loans with positive net present values that they would pass up if restricted to deposit financing an examination of the risk premium on large certificates of deposit provides evidence consistent with the model

financial intermediaries ownership structure and monitored finance evidence from japan this paper introduces new and unique data from 127 japanese private equity funds that enable a first ever direct comparison of individual owner manager structures versus financial intermediation structures in terms of the governance provided to investee companies through private equity funds the data indicate individual owner manager structures financial disintermediation give rise to much smaller portfolios of entrepreneurial firms and more advice to entrepreneurs across the scope of different financial intermediation structures including banks life insurance companies securities firms corporations and government bodies there are further differences in the provision of governance and value added advice provided to investees the data further indicate us affiliated funds in japan are more likely to have smaller portfolios and provide more advice to entrepreneurial companies possibly due to a greater skill set in providing advice to facilitate the development of small entrepreneurial firms

benefits of relationship banking evidence from consumer credit markets abstract using a unique panel dataset that contains comprehensive information about the relationships between a large bank and its credit card customers we show that relationship accounts exhibit lower probabilities of default and attrition and have higher utilization rates than non relationship accounts dynamic information about changes in the behavior of a customer s other accounts at the same bank helps predict the behavior of the credit card account over time these results imply that relationship banking offers significant potential benefits to banks information the lender has at its disposal can be used to mitigate credit risk on the credit card account

an examination of the factors associated with bank switching in the u k small firm sector previous research has consistently shown that a large number of firms are sufficiently dissatisfied with their bank relationship to have considered switching to an alternative bank in practice however the number of firms which actually switch banks is relatively low this paper examines empirical evidence from a postal survey of small firms in order to investigate this paradox binomial and multinomial logistic regression is used to identify the characteristics which discriminate between a group of firms considering switching banks and two other groups namely those which had switched banks in the previous three years and those which had not switched banks and were not considering doing so the paper tests the hypothesis that some small firms may be informationally captured in that they are tied into their current bank relationship due to difficulties in conveying accurate information about their performance the results provide some evidence in support of the hypothesis in that rapidly changing information particularly changing technology was a characteristic associated with firms which were considering switching but had not switched however there was no significant evidence to support the hypothesis that superior performing firms are more likely to be informationally captured growth and perceived business success were both associated with firms which switched banks there was strong evidence that the main drivers of the decision to switch or consider switching banks were difficulties obtaining finance and dissatisfaction with the service provided the results also showed that firms which were considering switching banks tended to use more alternative non banking sources of finance it is concluded that some firms will resolve difficulties obtaining finance by switching banks whereas others will use alternative sources of finance depending on the balance between the benefits of switching such as increased finance and switching costs including information provision

optimal monetary policy with countercyclical credit spreads we study optimal monetary policy in a new keynesian dynamic stochastic general equilibrium dsge model with a credit channel and relationship lending in banking we show that borrowers bank specific deep habits give rise to countercyclical credit spreads which in turn make optimal monetary policy depart substantially from price stability under both discretion and commitment our analysis shows that the welfare costs of setting monetary policy under discretion with respect to the optimal ramsey plan and of using simpler suboptimal policy rules are strictly increasing in the magnitude of deep habits in credit markets and market power in banking

a framework for assessing credit risk in depository institutions toward regulatory reform abstract this paper develops and illustrates a new method for evaluating the credit risk borne by depository institutions that may prove to be an important element in a regulatory mechanism sensitive to risk in our framework depository institutions are forced to bear the costs of their risk exposure and hence to internalize this cost when extending loans using various loan portfolios and alternative macroeconomic scenarios we present numerical calculations demonstrating the ability of our framework to capture variations in risk exposure and highlighting the significance of portfolio concentrations these calculations are based on an important new source of information that permits an econometric analysis of loan losses by industry

comovement information production and the business cycle abstract recent theoretical research suggests that information production is a positive externality of aggregate economic activity veldkamp 2005 both the quantity and quality of information increase during periods of economic expansion and decrease during periods of contraction based on this insight we hypothesize and confirm that time varying information production drives the comovement patterns observed in stock returns we examine stock return comovement in 36 countries from 1980 to 2007 and show that consistent with the theory comovement patterns are countercyclical that is when information production is high low comovement is low high we also find that the relation between comovement and the business cycle is stronger in countries that experience large intertemporal swings in information production finally we show that the relation between business cycle and comovement is stronger in poor countries countries with less developed financial markets and countries with weaker accounting and transparency standards these results suggest that financial development and transparency are conducive to a steady flow of financial information over the business cycle

research trends in environmental and resource economics insights from four decades of jeem abstract this paper provides a contemporary analysis of how research issues have developed in the journal of environmental economics and management jeem over the four decades of its existence we have classified the articles in the journal along five dimensions content methods environmental media the regional dimension of studies and cross cutting issues while up to about 10 years ago non market valuation and cost benefit analysis natural resource economics and environmental policy instruments represented the lion s share of articles published in the journal more recently we observe a significant shift towards a more diversified array of research areas with climate change and energy issues finding their way into the journal in addition increasing methodological plurality becomes apparent reflected in a significant shift away from economic theory and towards empirical approaches we also analyze key distinctions between the major environmental economics journals finally we analyze jeem s external influence on leading general economics a journals we find that a citations are positively correlated with a focus on climate change economics market based environmental policies and policy comparisons the use of econometric and statistical methods or experimental approaches and negatively correlated with a focus on water pollution and other pollutants such as pesticides

continued entrepreneurship ability need and opportunity as determinants of small firm growth the purpose of this research was to enhance our understanding of the growth or non growth of individual small businesses growth here being regarded as an indication of continued entrepreneurship taken together earlier studies have suggested a very large number of determinants of entrepreneurship and growth yet no very strong explanatory factors emerge it is argued here that all of the specific lowlevel explanatory variables that have previously been used can be regarded as aspects of either of three major determinants ability need and opportunity a model based on these three major factors is developed and the results of previous studies are reviewed in the light of this more abstract model in the model objective factors are separated from their subjective counterparts and it is suggested that subjective factors or reality as perceived influence growth motivation and direct behavior although objective factors only partly determine subjective perceptions they can have important direct effects on outcomes i e actual growth using survey data from more than 400 swedish small firms and applying partial least squares analysis which is a technique for analyzing structural relations among indirectly measured concepts the parameters of the model are empirically estimated the results largely lend support for the usefulness of the model more specifically the analyses suggest that 1 objective measures of ability need and opportunity can explain a substantial share of the variation in actual historical growth rates 2 objective and subjective measures of these three factors can explain a substantial share of the variation in growth motivation 3 in both cases need related issues appear more important than ability and opportunity which would mean that satiation is the major reason why small firms stop growing 4 subjective factors contain growth relevant information that is not captured by objective measures 5 direct effects of objective variables on actual growth can be traced 6 some relations are consistent whereas others seem to vary considerably across industries and 7 while the model largely gains support the analyses also suggest some additional relations that are theoretically reasonable and may deserve consideration in future studies finally it is argued that for the advancement of entrepreneurship research conceptual models at a higher level of abstraction like the one developed in this article are needed such models can add meaning to empirical facts and have the virtue of reducing complexity without assuming away too many potential contingencies it is also suggested that entrepreneurship is a matter of degree and can show itself in different ways such as start up growth innovation etc in practice the sole measure of entrepreneurship has often been a person s current status as being or not being the founder or owner manager of a small firm in future studies the use of a composite measure of the degree of entrepreneurship may prove more fruitful than the comparison of characteristics approach has been

is financial inclusion good for bank stability international evidence abstract financial inclusion has become an important public policy priority following the recent global financial crisis yet we know very little of how it impacts soundness of the providers of financial services using an international sample of 2635 banks in 86 countries over the period 2004 12 we find that higher level of financial inclusion contributes to greater bank stability the positive association is particularly pronounced with those banks that have higher customer deposit funding share and lower marginal costs of providing banking services and also with those that operate in countries with stronger institutional quality the results are robust to instrumental variables analysis controlling for bank fixed effects alternative measures of financial inclusion among several other robustness tests our results highlight that the importance of ensuring inclusive financial system is not only a development goal but also an issue that should be prioritised by banks as such a policy drive is good for their stability

bank lending and initial public offerings abstract in this paper we test the hypothesis that banking relations are a signal about firm value we argue that bank processing of asymmetric information and external monitoring of corporate activities reduce the ex ante uncertainty of investors about firm value we demonstrate that the existence of bank debt and or lines of credit lowers the expected initial return associated with initial public offerings the empirical results are robust with respect to the inclusion of variables which reflect other mechanisms that can ameliorate ex ante uncertainty our work adds to the body of evidence that supports the hypothesis that intermediaries provide valuable asset services to corporate borrowers

top management compensation and capital structure the interrelationship between top management compensation and the design and mix of external claims issued by a firm is studied the optimal managerial compensation structures depend on not only the agency relationship between shareholders and management but also the conflicts of interests which arise in the other contracting relationships for which the firm serves as a nexus we analyze in detail the optimal management compensation for the cases when the external claims are 1 equity and risky debt and 2 equity and convertible debt in addition to the role of aligning managerial incentives with shareholder interests managerial compensation in a levered firm also serves as a precommitment device to minimize the agency costs of debt the optimal management compensation derived has low pay performance sensitivity with convertible debt instead of straight debt the corresponding optimal managerial compensation has high pay to performance sensitivity a negative relationship between pay performance sensitivity and leverage is derived our results provide a reconciliation of the puzzling evidence of jensen and murphy 1990 with agency theory other testable implications include 1 a relationship between the risk premium in corporate bond yields and top management compensation structures and 2 the announcement effect of adoption of executive stock option plans on bond prices the model yields implications for management compensation in banks and federal deposit insurance reform our results explain the dynamics of top management compensation in firms going through financial distress and reorganization

bank firm relationships and allocative efficiency in northeastern and central italy and in the south abstract we make two contributions on the extent and impact of relationship banking based on close and long lasting bank firm customer relationships in the three sub systems in which italy may be subdivided first we show that relationship banking is more extensive in both sub systems where small businesses prevail the fast growing northeast and center nec and the south the marginal area of dependent development second we demonstrate that relationship banking improves the allocation of credit in the nec but worsens it in the south this evidence suggests that relationship banking may be beneficial or detrimental depending on the socio economic structure

competitive interest payments on bank deposits and the long run demand for money reply this paper tests two assumptions made in previous demand for money studies the first assumption concerns the role assigned to the interest rate in the demand for money function common practice identifies the rate of interest with the opportunity cost of holding money in section i this formulation is shown to blur an important distinction between the price of money and the price of money substitutes and to implicitly assume that the relevant price variable is the difference between these two distinct prices a second assumption is that the current ban on interest payments on demand deposits is fully effective in section ii i operationally define these price variables and estimate perfectly competitive interest payments on commercial bank deposits this is done by crudely measuring commercial bank marginal costs and assuming that all excess profit is passed on to depositors in indirect ways section iii presents estimates of a more complete longrun demand for money relationship which explicitly includes an own price and a cross price as separate influences and assumes that the prohibition of the payment of interest on deposits is totally ineffective although no firm conclusion is reached concerning the proper functional specification of the demand function the results significantly improve upon previous demand for money estimates which assumed that the interest payment prohibition is totally effective in section iv the results are summarized and implications of the analysis for monetary theory are presented my competitive demand for money formulation leads to a reinterpretation of the existing evidence on what is generally referred to as the interest elasticity of demand for money this estimate is shown to be significantly biased downward it also implies that the demand for and supply of money are more interdependent than is usually assumed

patterns in the expansion of u s banks foreign operations combining foreign direct investment theory with data on 32 countries from the federal reserve board we examined u s banks patterns of foreign operations including their levels of banking services and choice of organizational forms in host countries results generally supported predictions but only in developed countries the lack of support in rapidly growing markets of asia and latin america raises serious theoretical concerns and presents fresh research opportunities into the global banking industry

the certification value of private debt renegotiation and the design of financial contracts empirical evidence from europe abstract by using a sample of bank loan renegotiations by european firms i show that the renegotiation of financial contracts bears a certification value while deeply changing the contractual features of the loan over time to the benefit of shareholders i find that amendments to financial covenants and to loan amounts increase the cumulative abnormal returns of a borrowing firm by 10 15 early and less frequent renegotiations of bilateral loans with short maturities also imply a positive stock market reaction amendments signaling the early accrual of new and positive information allow increasing firm value

mutual fund activism and market regulation during the pre ifrs period the case of earnings informativeness in china from an ethical perspective this paper investigates the emerging effect of mutual fund involvement on the agency problem between majority and minority shareholders during the pre ifrs period in china indicated by earnings informativeness from an ethical perspective we find that the presence of mutual fund hampers earnings informativeness implying that mutual funds in general at their early stage in china are not yet capable of serving as an effective monitor this finding is in sharp contrast to the role of institutional investors in mature markets as documented in the literature however mutual funds affiliated with banks have been found to be effective to improve earnings informativeness of chinese listed companies and the impact is more pronounced among those affiliated with joint equity banks compared to their counterparts affiliated with state owned banks