liquidity at risk joint stress testing of solvency and liquidity abstract the traditional approach to the stress testing of financial institutions focuses on capital adequacy and solvency liquidity stress tests have been applied in parallel to and independently from solvency stress tests based on scenarios which may not be consistent with those used in solvency stress tests we propose a structural framework for the joint stress testing of solvency and liquidity our approach exploits the mechanisms underlying the solvency liquidity nexus to derive relations between solvency shocks and liquidity shocks these relations are then used to model liquidity and solvency risk in a coherent framework involving external shocks to solvency and endogenous liquidity shocks arising from these solvency shocks we define the concept of liquidity at risk which quantifies the liquidity resources required for a financial institution facing a stress scenario finally we show that the interaction of liquidity and solvency may lead to the amplification of equity losses due to funding costs which arise from liquidity needs

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

financial intermediary coalitions abstract in this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment it is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors private information core allocations these intermediaries which are coalitions of agents exhibit the following characteristics in equilibrium they borrow from and lend to large groups of agents they produce information about investment projects and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers

does corporate social responsibility matter in asian emerging markets this study addresses the question whether corporate social responsibility csr matters in asian emerging markets based on csr scores compiled by credit lyonnais securities asia we assess the csr performance of major asian firms over a period of 3 years from 2001 to 2004 the results show that there is a positive and significant relation between csr and market valuation among asian firms we further find that csr is positively related to the market valuation of the subsequent year more importantly asian firms are rewarded by the market for improving their csr practice

sulfur dioxide control by electric utilities what are the gains from trade title iv of the 1990 clean air act amendments caaa established a market for transferable sulfur dioxide so2 emission allowances among electric utilities this market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit so2 from firms with lower costs and this is expected to yield cost savings compared to a command and control approach to environmental regulation this paper uses econometrically estimated marginal abatement cost functions for power plants affected by title iv of the caaa to evaluate the performance of the so2 allowance market specifically we investigate whether the much heralded fall in the cost of abating so2 compared to original estimates can be attributed to allowance trading we demonstrate that for plants that use low sulfur coal to reduce so2 emissions technical change and the fall in prices of low sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985 the flexibility to take advantage of these chan

corporate social responsibility and socially responsible investing a global perspective this research examines the relationship between corporate social responsibility csr and company stock valuation across three regions of the world after a brief introduction the article gives an overview of the evolving definition of csr as well as a discussion of the ways in which this construct has been operationalized presentation of the potential impact of corporate social performance on firm financial performance follows including investor characteristics the rationale behind their choices and their influence on the marketplace for securities worldwide the unique method used to select socially responsible investments is then provided that also includes a description of the quantitative techniques employed in the analyses results are offered subsequently and the close describes implications for global enterprises as socially responsible investments

the cost efficiency of australian airports post privatisation a bayesian methodology abstract this paper reports on the cost efficiency of australian airports using a bayesian panel stochastic frontier model with data from 2002 to 2007 the paper focuses mainly on the post privatisation period of australian airports the results show that the cost efficiency of australian airports has increased over time to reach a high value of 90 08 in 2007 the paper discusses the potential impact of factors such as privatisation price cap regulations and capital investments on the current efficiency level of australian airports

self fulfilling fire sales fragility of collateralised short term debt markets this paper shows that collateralised short term debt although privately optimal for reducing borrowers moral hazard can cause fragility multiple equilibria when the collateral market is illiquid a new form of coordination failure between borrowers ex ante margin and risk taking decisions engenders a systemic run in the collateralised debt market large changes in credit rationing margins repo spreads etc the model also captures the large small crosssectional differences between safe and risky collateral in bad good times finally i show that asset price guarantees could improve welfare and promote stability but repealing repo contracts automatic stay exemption might do the opposite

the length of stay of tourists in madagascar abstract survival models are a type of analysis that investigate the length of stay of tourists in certain tourist destinations this study analyzes the length of stay of tourists in madagascar a duration model is used to analyze the length of stay based on a questionnaire to ascertain the significant characteristics influencing the length of stay of these tourists policy implications are derived to improve the understanding and management of the length of stay of tourists

survival analysis of the spanish hotel industry abstract the main objective of this study is an analysis of survival in the spanish hotel industry we used a sample of 1033 hotels opened from 1997 to 2009 examining financial and non financial variables including size location type of hotel management economic and financial structure and the year they opened whether during an expansion or crisis period the methodology included an econometric analysis of survival using the non parametric kaplan meier estimator of constructed variables in order to detect the particular influence of each variable semi parametric regression was done with the cox proportional hazards model confirming which variables clearly influenced the survival of hotels and which signs existed for each analysed variables influence the survival of hotels depends on their size location management and launch in a time of prosperity however survival rates were not significantly tied to particular types of hotels or configurations of their economic and financial structures

money in a theory of banking we introduce money in a model of banking in order to examine how open market operations can affect aggregate bank lending and output we see two important ways changes in money supply affect the banking system first by changing prices and interest rates it affects the wealth of demanders of real liquidity and thus the equilibrium production of liquid assets aggregate output and the health of the banking system second it changes the value of money as a means of payment and thus the attractiveness of moving from deposits to currency the demand for financial liquidity again this impacts the health of the banking system and thus bank lending and aggregate output we use this understanding to see how changes in money supply can create alleviate or be ineffective in banking crises

corporate social responsibility ownership structure and political interference evidence from china prior research suggests that ownership structure is associated to corporate social responsibility csr in developed countries this article examines whether and how ownership structure affects csr in emerging markets using chinese firms social responsibility ranking our empirical evidences show that for non state owned firms corporate ownership dispersion is positively associated to csr however for state owned firms whose controlling shareholder is the state this relation is reversed we attribute the reversed relationship to political interferences and further test this hypothesis by demonstrating that regional economic development is negatively related to csr for state owned firms due to decreased political interference in more developed areas this study is the first to directly examine the relationship between the dispersion of corporate ownership and csr in emerging markets and our results depict that it is important to consider ownership type in assessing csr in emerging market where state ownership is still prevalent such as china the results also reveal that firm size profitability employee power leverage and growth opportunity affect csr in china

the signaling effect of corporate social responsibility in emerging economies what signals do firms in emerging economies send to stakeholders when they adopt corporate social responsibility csr practices we argue that in emerging economies firms that adopt csr practices positively signal investors that their firms have superior capabilities for filling institutional voids from an institution based view we hypothesize that the institutional environment moderates the signaling effect of csr on a firm s financial performance based on a sample of firms from ten asian emerging economies we find a positive relationship between csr practices and financial performance this positive relationship is stronger in the less developed capital market than in the more developed one the financial benefits of csr practices are also more salient in the low information diffusion market than in the high one we emphasize that signaling theory and the institution based view can jointly contribute to the csr literature

distinguishing panics and information based bank runs welfare and policy implications in this paper we contrast panics and information based bank runs in an effort to provide a robust and empirically plausible model of how bank runs are triggered the model of information based runs is characterized by two sided asymmetric information the bank cannot observe the true liquidity needs of the depositors while depositors are asymmetrically informed about bank asset quality we also examine the relative degrees of risk sharing provided by bank deposit contracts and traded equity contracts we show that the choice of deposit or equity depends on the attributes of and information about the underlying investment returns

lenders on the storm of wholesale funding shocks saved by the central bank abstractwe provide empirical evidence on banks responses to shocks in the wholesale funding market using data of 181 euro area banks over the period from august 2007 to june 2013 responses to funding liquidity shocks for both banks lending volumes and loan rates to households and corporates are analysed in a panel var framework we thereby distinguish banks by country extent of eurosystem borrowing bank size and capitalization the results show that shocks in the securities and interbank markets have significant effects on loan rates and credit supply particularly of banks in stressed countries of the periphery the results also suggest that central bank liquidity has mitigated this effect on lending volumes lending to nonfinancial corporations is more sensitive to wholesale funding shocks than lending to households lending volumes of large banks that are typically more dependent on wholesale funding and banks with large exposure to sovereign bonds show stronger responses to wholesale funding s

runs versus lemons information disclosure and fiscal capacity we study the optimal use of disclosure and fiscal backstops during financial crises providing information can reduce adverse selection in credit markets but negative disclosures can also trigger inefficient bank runs in our model governments are thus forced to choose between runs and lemons a fiscal backstop mitigates the cost of runs and allows a government to pursue a high disclosure strategy our model explains why governments with strong fiscal positions are more likely to run informative stress tests and paradoxically how they can end up spending less than governments that are more fiscally constrained

optimal financial crises empirical evidence suggests that banking panics are related to the business cycle and are not simply the result of sunspots panics occur when depositors perceive that the returns on bank assets are going to be unusually low we develop a simple model of this in this setting bank runs can be first best efficient they allow efficient risk sharing between early and late withdrawing depositors and they allow banks to hold efficient portfolios however if costly runs or markets for risky assets are introduced central bank intervention of the right kind can lead to a pareto improvement in welfare from the earliest times banks have been plagued by the problem of bank runs in which many or all of the bank s depositors attempt to withdraw their funds simultaneously because banks issue liquid liabilities in the form of deposit contracts but invest in illiquid assets in the form of loans they are vulnerable to runs that can lead to closure and liquidation a financial crisis or banking panic occurs when depositors at many or all of the banks in a region or a country attempt to withdraw their funds simultaneously prior to the twentieth century banking panics occurred frequently in europe and the united states panics were generally regarded as a bad thing and the development of central banks to eliminate panics and ensure financial stability has been an important feature of the history of financial systems it has been a long and involved process the first cerntral bank the bank of sweden was established more than 300 years ago the bank of england played an especially important role in the development of effective stabilization policies in the eighteenth and nineteenth centuries by the end of the nineteenth century banking panics had been eliminated in europe the last true panic in england was the overend gurney company crisis of 1866

taste variation in discrete choice models this paper develops an extension of the classical multinomial logit model which approximates a class of models obtained when there is uncontrolled taste variation across agents and choices in addition to the stochastic noise inherent in the logit model unlike semiparametric and parametric alternatives the extended logit model is easy to estimate even when there are many potential choices unlike parametric alternatives it does not require the specification of a distribution of varying tastes the extended logit model can give a quick indication of the impact of taste variation on estimates and it generates estimates of the covariances of the taste shifters it can be used as an exploratory device en route to the construction of a model incorporating a particular form of random taste variation and it can be used to determine whether such effort is required at all when the amount of taste variation is not excessive the approximate model can be adequate itself the model nests the conventional logit model which leads to a misspecification diagnostic a method for estimating the model using conventional logit model software is proposed asymptotic properties of estimators are derived and an application is presented

length of stay for low cost tourism abstract awareness of tourists length of stay and the factors which determine that is an essential element for good planning and management at tourist destinations this article analyses to what extent the personal characteristics of the low cost tourist those of the trip and stay and those of the destination itself are significant in determining the duration of a trip to this end an econometric duration model is estimated the results obtained show that the effect of time restrictions seem to be relevant for explaining the observed differences in length of stay as well as the effects of the tourist s spending capacity prices and the differences between urban and sun and sand destinations furthermore the model also allows us to analyse changes in the likelihood of the stay being ended at a specific point in time hazard associated with changes in the explanatory variables and to obtain predicted survival times for different groups of tourists

do corporate global environmental standards create or destroy market value arguments can be made on both sides of the question of whether a stringent global corporate environmental standard represents a competitive asset or liability for multinational enterprises mnes investing in emerging and developing markets analyzing the global environmental standards of a sample of u s based mnes in relation to their stock market performance we find that firms adopting a single stringent global environmental standard have much higher market values as measured by tobin sq than firms defaulting to less stringent or poorly enforced host country standards thus developing countries that use lax environmental regulations to attract foreign direct investment may end up attracting poorer quality and perhaps less competitive firms our results also suggest that externalities are incorporated to a significant extent in firm valuation we discuss plausible reasons for this observation

spillovers from good news and other bankruptcies real effects and price responses abstract we model debt restructurings that could endogenously end in bankruptcy and study spillovers to competitors operating decisions profits restructuring outcomes and security prices we show that while bankruptcy could cause the firm s share price to drop bankruptcy always signals good news about the firm we identify the conditions under which a bankruptcy also signals good news about competitors we demonstrate that when a firm s bankruptcy costs are relatively small bankruptcy raises its share price while lowering the prices of competitors shares and debt as well as boosting the probability that they will enter bankruptcy when there is little information asymmetry about the firm s prospects or the information asymmetry is about industry prospects bankruptcy raises competitors share and debt prices and lowers their probability of bankruptcy

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

liquidity efficiency and bank bailouts governments can efficiently provide liquidity as when the banking system is bailed out we study a model in which not all assets can be used to purchase all other assets at every date agents sometimes want to sell projects the market price of the projects sold depends on the supply of liquidity which is determined in general equilibrium while private liquidity provision is socially beneficial since it allows valuable reallocations it is also socially costly since liquidity suppliers could have made more efficient investments ex ante there is a role for the government to supply liquidity by issuing government securities

liquidity provision banking and the allocation of interest rate risk abstract the paper studies the efficient allocation of technology induced interest rate risk and the implications of such risk for efficient liquidity provision complete immunization against interest rate risk is shown to be undesirable as it precludes the exploitation of favourable reinvestment opportunities under the assumptions of diamond dybvig 1983 interest induced valuation risks of long term assets should be born by early withdrawers reinvestment opportunity risks of short term assets by late withdrawers efficient liquidity provision thus entails no shifting of interest rate risk in the absence of additional moral hazard second best allocations can be implemented through unregulated competition among banks

what broad banks do and markets don t cross subsidization abstract we show that interbank markets are a poor substitute for broad banks that operate across regions or sectors in the presence of regional or sectoral asset and liquidity shocks interbank markets can distribute liquidity efficiently but fail to respond efficiently to asset shocks broad banks can condition on the joint distribution of both shocks and hence achieve an efficient internal allocation of capital this allocation involves the cross subsidization of loans across regions or sectors compared to regional banks that are linked through well functioning interbank markets broad banks lead to higher levels of aggregate investment higher output and less fluctuations within regions however broad banks generate endogenously aggregate uncertainty

bank bailouts and aggregate liquidity governments sometimes bail out banks by recapitalizing them or by offering to insure their liabilities the government s goal may be to rescue borrowers bankers or depositors and economists have developed rationales why each of these constituencies may merit protection e g diamond 2001 these potential benefits have to be weighed against the costs of a bailout which are typically thought to be the damage to long run incentives that such intervention engenders in this paper we present a different effect of bank bailouts bank bailouts alter the availability of aggregate liquidity in the economy while a well targeted bailout can help rescue an otherwise collapsing banking system see diamond and rajan 2001a a poorly targeted bailout can even tip a banking system into a systemic crisis this ex post crisis cost of bank bailouts to the best of our knowledge has not been examined elsewhere and is the focus of this paper

bank resolution a framework for the assessment of regulatory intervention more than ever the current crisis has highlighted the cost of banking crises in budgetary and economic growth terms whether or not to restructure a bank is a key determinant of who bears the costs the present article surveys the main issues concerning banks restructuring by considering the bargaining game that is played between regulators and shareholders when a bank is in distress this revolves around the framework of negotiation that was established by the regulator the fall back position which is determined by bankruptcy legislation and the objective function of the regulator in this context we argue that it is possible to improve upon existing restructuring mechanisms by making banks bail outs less costly to taxpayers and improving the ex ante incentives of banks managers and shareholders the authors 2012 published by oxford university press

the role of demandable debt in structuring optimal banking arrangements demandable debt finance by banks warrants explanation because it entails costs of bank suspension liquidation and idle reserve holdings an explanation is developed in which demandable debt provides incentive compatible intermediation where the banker has comparative advantage in allocating investment funds but may act against the interests of uninformed depositors demandable debt attracts funds by giving depositors an option to force liquidation its usefulness in transacting follows from information sharing between monitors and nonmonitors copyright 1991 by american economic association

a model of capital and crises we develop a model in which the capital of the intermediary sector plays a critical role in determining asset prices the model is cast within a dynamic general equilibrium economy and the role for intermediation is derived endogenously based on optimal contracting considerations low intermediary capital reduces the risk bearing capacity of the marginal investor we show how this force helps to explain patterns during financial crises the model replicates the observed rise during crises in sharpe ratios conditional volatility correlation in price movements of assets held by the intermediary sector and fall in riskless interest rates

the impact of environmental management on firm performance environmental management has the potential to play a pivotal role in the financial performance of the firm many individuals suggest that profitability is hurt by the higher production costs of environmental management initiatives while others cite anecdotal evidence of increased profitability a theoretical model is proposed that links strong environmental management to improved perceived future financial performance as measured by stock market performance the linkage to firm performance is tested empirically using financial event methodology and archival data of firm level environmental and financial performance significant positive returns were measured for strong environmental management as indicated by environmental performance awards and significant negative returns were measured for weak environmental management as indicated by environmental crises the implicit financial market valuation of these events also was estimated cross sectional analysis of the environmental award events revealed differences for first time awards and between industries first time award announcements were associated with greater increases in market valuation although smaller increases were observed for firms in environmentally dirty industries possibly indicative of market skepticism this linkage between environmental management and financial performance can be used by both researchers and practitioners as one measure of the benefits experienced by industry leaders and as one criterion against which to measure investment alternatives

intermediary asset pricing abstract we model the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary intermediaries face an equity capital constraint risk premia r

bank panics suspensions and geography some notes on the contagion of fear in banking bank panics suspensions and geography some notes on the contagion of fear in banking recent attempts to understand bank panics tend to emphasize informational asymmetries or the possibilities of multiple equilibria such approaches stand in contrast to historical research that emphasizes legal factors influencing the organization of the banking system this paper constructs a model of a banking system operating under regulations similar to those in effect under the national banking system and in which information is complete in all other respects the model resembles that of diamond and dybvig 1983 the results indicate that given the regulatory environment it would have been surprising if suspensions of convertibility had not recurred periodically i introduction traditional explanations of panics under the national banking system 1863 1913 offered both by scholars and contemporaries stressed three factors 1 limitations on branching created incentives for the development and heavy use of correspondent banking relations 2 regulations favored holding interbank deposits with a relatively small group of new york banks this concentrated the reserves of the banking system in one location guaranteeing that heavy withdrawals of interbank balances from any source would affect new york banks and through them the entire banking system 3 legal restrictions prevented banks especially those holding large interbank deposits from adjusting interest rates in order to protect those deposits during periods of heavy withdrawal demand 1 this traditional explanation of the periodic recurrence of panics which emphasizes the organization of the banking system stands in marked contrast to more recent theories of panics which tend to focus on various informational asymmetries between banks and depositors 2 most of the recent literature on panics follows diamond and dybvig 1983 in modelling banks as a mechanism for pooling liquidity risks faced by depositors more specifically potential depositors can invest in the same primary assets available to banks however primary assets are costly to liquidate and depositors face random future liquidity needs at the time they make their investment decisions in such a framework the role of banks is to create and issue liabilities more liquid than their assets this activity provides insurance to depositors against random liquidity needs in diamond and dybvig s paper exogenous shocks to agents liquidity preference motivate withdrawal demand contracts between banks and depositors allow agents with liquidity needs to liquidate deposits at a lower cost than would be incurred in liquidating the primary asset however for each withdrawal due to inopportune liquidity needs a bank must liquidate primary assets and bear these costs hence the provision of liquidity by banks is feasible only if withdrawal demand is restricted to those actually requiring liquidity in the model of diamond and dybvig 3 panics can occur because the liquidity needs of individuals are private information in particular banks are assumed to be unable to observe whether any individual needs liquidity and hence cannot limit payments to individuals who actually need to withdraw funds banks are thus subject to runs as the result of self fulfilling prophecies if all depositors fear a run and they all seek to withdraw it will not be feasible for the banking system to provide liquidity to all of them thus the banking system must either suspend payments or be rendered insolvent of course a crucial component of this reasoning is that banks cannot distinguish legitimate from panic motivated withdrawals and hence cannot ration funds on this basis this model of panics provides no role for the organization of the banking system it therefore suggests that different countries or different regulatory regimes within the same country should have similar histories with respect to panics so long as they had similar deposit insurance schemes and similarly behaving lenders of last resort

international and domestic collateral constraints in a model of emerging market crises abstract we build a model of emerging markets crises which features two types of collateral constraints firms in a domestic economy have limited borrowing capacity from international investors they also have limited borrowing capacity with respect to each other we study how the presence and changes in these collateral constraints affect financial and real variables a binding international constraint in the aggregate leads to a sharp rise in interest rates and fire sales of domestic assets while limited domestic collateral can lead to wasted international collateral these two collateral constraints can interact in important ways the first is disintermediation a fire sale of domestic assets causes banks to fail in their function of reallocating resources across the economy leading to wasted international collateral the second is a dynamic effect we show that firms in an economy with limited domestic collateral and a binding international collateral constraint will not adequately precaution against adverse shocks increasing the severity of these shocks

financial integration specialization and systemic risk this paper studies the implications of cross border financial integration for financial stability when banks loan portfolios adjust endogenously banks can be subject to sectoral and aggregate domestic shocks after integration they can share these risks in a complete interbank market when banks have a comparative advantage in providing credit to certain industries financial integration may induce banks to specialize in lending an enhanced concentration in lending does not necessarily increase risk because a well functioning interbank market allows to achieve the necessary diversification this greater need for risk sharing though increases the risk of cross border contagion and the likelihood of widespread banking crises however even though integration increases the risk of contagion it improves welfare if it permits banks to realize specialization benefits

the paradox of liquidity the more liquid a firm s assets the greater their value in a short notice liquidation it is generally thought that a firm should find it easier to raise external finance against more liquid assets this paper focuses on the dark side of liquidity greater asset liquidity reduces the firm s ability to commit to a specific course of action as a result greater asset liquidity can in some circumstances reduce the firm s capacity to raise external finance firms with excessively liquid assets are in the best position to finance illiquid projects this leads us to a theory of financial intermediation and disintermediation based on the liquidity of assets

incorporating destination quality into the measurement of tourism performance a bayesian approach studies on destination benchmarking have so far ignored destination quality in the measurement of tourism performance destination quality plays a critical role in attracting tourism outputs e g arrivals receipts and hence ignoring it represents an important shortcoming that might bias the benchmarking outcomes the present paper develops for the first time a bayesian stochastic frontier model that incorporates destination quality into the estimation of tourism performance the model we propose benchmarks tourism destinations based on both overall performance i e technical efficiency and quality performance we impose a dynamic structure on both technical efficiency and destination quality and differentiate between short run and long run estimates of these measures we provide ranking of technical efficiency and destination quality for 101 tourism destinations and discuss the implications of our findings

airport activity and local development evidence from italy the role of infrastructure as a factor of growth and development of countries and regions is often considered to be crucial among the various types of transport infrastructure airports are considered as particularly strategic because of the increasing importance of air transport in connecting territories this paper studies the impact of airports on italian provinces to this end it builds on the framework proposed by brueckner where sectoral employment is regressed on a series of controls and on airline traffic that framework is extended to take account of selection bias due to the location choices of airports and spatial spillover effects it is found that the elasticity of service sector employment to airport passengers is 0 045 and that of spillover effects due to neighboring airports is almost 0 017

liquidity shortages and banking crises we show in this article that bank failures can be contagious unlike earlier work where contagion stems from depositor panics or contractual links between banks we argue that bank failures can shrink the common pool of liquidity creating or exacerbating aggregate liquidity shortages this could lead to a contagion of failures and a total meltdown of the system given the costs of a meltdown there is a possible role for government intervention unfortunately liquidity and solvency problems interact and can cause each other making it hard to determine the cause of a crisis we propose a robust sequence of intervention banks are often found at the center of systemic financial crises the causes of these crises have long been debated do they stem from depositor panics or do they arise because bank balance sheets are exposed to common factors if it is the latter then is there any sense in which bank failures can be contagious can anything be done to prevent these crises or stop them from propagating once they begin our purpose in this paper is to reexamine whether bank failures can start and propagate systemic crises even if we assume that depositors do not panic that is even if depositors actions are coordinated and they do not run simply because they fear others will run our focus is not because we think that panics are empirically unimportant the jury is still out on that instead we show that contagion can stem from an underlying real general equilibrium problem rather than just from lack of coordination among depositors from a policy perspective attempts to reassure investors through confidence building measures will not work if panic and lack of coordination are not the reasons for a crisis we begin in this paper with a model of a bank that we developed in diamond and rajan 2001 assets in this model are illiquid they cannot be borrowed against or sold for the full value of resources they will generate in their best use because the human capital necessary to generate that full value cannot

to steal or not to steal firm attributes legal environment and valuation data on corporate governance and disclosure practices reveal wide within country variation that decreases with the strength of investors legal protection a simple model identifies three firm attributes related to that variation investment opportunities external financing and ownership structure using firm level governance and transparency data from 27 countries we find that all three firm attributes are related to the quality of governance and disclosure practices and firms with higher governance and transparency rankings are valued higher in stock markets all relations are stronger in less investor friendly countries demonstrating that firms adapt to poor legal environments to establish efficient governance practices

banks and liquidity banks perform valuable activities on either side of their balance sheets on the asset side they make loans to difficult illiquid borrowers on the liability side they provide liquidity on demand to depositors but there seems to be a fundamental incompatibility between the two activities the demands for liquidity by depositors may arrive at an inconvenient time and force the fire sale liquidation of illiquid assets furthermore because depositors are served in sequence the prospect of fire sales may precipitate self fulfilling runs that further jeopardize bank activities is this an aberration stemming from historical accident and enshrined by deposit insurance or is there logic hitherto unnoticed for the bank s choice of activities our recent work suggests that the answer to the latter question is yes in order to describe why a bank s fragile capital structure allows it to create liquidity and to explain why bank loans are illiquid we present a simple example based on diamond and rajan 2001a

airports and tourism in mozambique abstract this paper analyses airport efficiency in mozambique from 2000 to 2012 estimating a cost function with random and fixed effects stochastic frontier models a robustness test is undertaken with a bayesian stochastic frontier model the airports are ranked according to their technical efficiency te the policy implication is that mozambique should upgrade its managerial procedures to cope with the frontier of best practices

does risk aversion affect bank output loss the case of the eurozone abstract we propose a new model to infer the evolution of bank specific output losses due to the uncertainty in bank output prices losses are based on bank risk aversion with micro foundations tethered to the uncertainty regarding prices our model allows us to measure time varying bank specific output losses and risk aversion while taking into account all bank cross sectional heterogeneity we employ a panel data set to estimate the input and output elasticities with both parametric and non parametric techniques we are the first to document that increasing risk aversion among eurozone banks during the financial crisis resulted in sizable output losses although subdued thereafter losses have been resurging in recent years both conventional and unconventional monetary policy responses by the european central bank ecb mitigated uncertainty in bank output prices though unequally so across countries certain measures of unconventional monetary policy may have even enhanced bank risk aversion and thereby output losses but mainly so for large countries

who borrows from the lender of last resort understanding why banks borrow from the lender of last resort lolr during a nancial crisis is crucial to understanding the macroeconomic impact of such largescale interventions we document a strong divergence among banks take up of lolr assistance during the nancial crisis in the euro area as banks which borrowed heavily also used increasingly risky collateral we propose four explanations for this divergence

the corporate social performance financial performance link strategic managers are consistently faced with the decision of how to allocate scarce corporate resources in an environment that is placing more and more pressures on them recent scholarship in strategic management suggests that many of these pressures come directly from sources associated with social issues in management rather than traditional arenas of strategic management using a greatly improved source of data on corporate social performance this paper reports the results of a rigorous study of the empirical linkages between financial and social performance corporate social performance csp is found to be positively associated with prior financial performance supporting the theory that slack resource availability and csp are positively related csp is also found to be positively associated with future financial performance supporting the theory that good management and csp are positively related 1997 by john wiley sons ltd