Bank-Firm Relationships and International Banking Markets
Hans Degryse, Steven Ongena
International Journal of the Economics of Business,
No. 3,
2002
Abstract
This paper reviews how long-term relationships between firms and banks shape the structure and integration of banking markets worldwide. Bank relationships arise to span informational asymmetries that are endemic in financial markets. Firm-bank relationships not only entail specific benefits and costs for both the engaged firms and banks, but also directly affect the structure of banking markets. In particular, the sunk cost of screening and monitoring activities and the 'informational capital' collected by the incumbent banks may act as a barrier to entry. The intensity of the existing firm-bank relationships will determine the height of this barrier and shape the structure of international banking markets. For example, in Scandinavia where firms maintain few and strong relationships, foreign banks may only be able to enter successfully through mergers and acquisitions. On the other hand, Southern European firms maintain many bank relationships. Therefore, banks may consider entering Southern European banking markets through direct investment.
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Are the Central and Eastern European Transition Countries still vullnerable to an Financial Crisis? Results from the Signals Approach
Axel Brüggemann, Thomas Linne
IWH Discussion Papers,
No. 157,
2002
Abstract
The aim of the paper is to analyse the vulnerability of the Central and Eastern European accession countries to the EU as well as that of Turkey and Russia to a financial crisis. Our methodology is an extension of the signals approach. We develop a composite indicator to measure the evolution of the risk potential in each country. Our findings show that crises in Central and Eastern Europe are caused by much the usual suspects as in others emerging markets. In particular an overvalued exchange rate, weak exports and dwindling currency reserves have good predictive power for assessing crisis vulnerabilities.
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Financial fragility and exchange rate arrangements of EU candidate countries
Hubert Gabrisch
IWH Discussion Papers,
No. 156,
2002
Abstract
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Prospects for 2002: Waiting for the cyclical change
Wirtschaft im Wandel,
No. 1,
2002
Abstract
This article updates the complete analysis and forecast of the economic developments in the World and Germany in particular for 2002, as published in Summer. After six quarters of downturn, the beginning of 2002 does not show signs of a revival in economic activity. Neither internal nor external forces are currently strong enough to reverse the underlying downward trend. It is assumed that by spring time the recession in the USA will have faded. Resulting is a stimulus for the World Economy. This initiating impulse will revive production in Germany and the Euro Area, which by the second half of 2002 will gain pace. The increase in exports, as induced by the upturn in the US-Economy will positively affect domestic demand. With the usual time lag this development will also strengthen the job market. Monetary Policy will remain expansive and begins to show its full effect. Fiscal Policy, on the other hand, due to the need for consolidation, will remain restrictive.
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Supraregional sales markets: Development chances for companies in the East German manufacturing sector
Brigitte Loose, Udo Ludwig
Wirtschaft im Wandel,
No. 16,
2001
Abstract
In this paper the export activities of the East German manufacturing industry are studied where exports are defined in a broad sense including both sales abroad and in West Germany. Survey data for 1998 and 1999 are used to reveal the relationship between technical as well as institutional characteristics of the companies and their exports. The following questions are discussed: Which companies participate in the export activities? What are the main regions of their business? Which in-house factors influence the export activities? What are the financial outcomes for the companies engaged in exports? Hypotheses are built on the basis of the market transaction costs theory. Bivariate and multivariate approaches are applied. The data are taken from the “Establishment Panel” of the Institute for Employment Research at the Federal Employment Services (IAB) in Nuremberg (Germany).
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Rating Agency Actions and the Pricing of Debt and Equity of European Banks: What Can we Infer About Private Sector Monitoring of Bank Soundness?
Reint E. Gropp, A. J. Richards
Economic Notes,
No. 3,
2001
Abstract
The recent consultative papers by the Basel Committee on Banking Supervision has raised the possibility of an explicit role for external rating agencies in the assessment of the credit risk of banks’ assets, including interbank claims. Any judgement on the merits of this proposal calls for an assessment of the information contained in credit ratings and its relationship to other publicly available information on the financial health of banks and borrowers. We assess this issue via an event study of rating change announcements by leading international rating agencies, focusing on rating changes for European banks for which data on bond and equity prices are available. We find little evidence of announcement effects on bond prices, which may reflect the lack of liquidity in bond markets in Europe during much of our sample period. For equity prices, we find strong effects of ratings changes, although some of our results may suffer from contamination by contemporaneous news events. We also test for pre-announcement and post-announcement effects, but find little evidence of either. Overall, our results suggest that ratings agencies may perform a useful role in summarizing and obtaining non-public information on banks and that monitoring of banks’ risk through bond holders appears to be relatively limited in Europe. The relatively weak monitoring by bondholders casts some doubt on the effectiveness of a subordinated debt requirement as a supervisory tool in the European context, at least until bond markets are more developed.
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Germany: Cyclical Improvement not Until the End of the Year
Wirtschaft im Wandel,
No. 12,
2001
Abstract
During the second quarter of 2001 German overall production stagnated. Weak global development muddied the economic prospects of firms and prevented them from rising their output and their investment activities. In 2001 gross national product will only increase by 1%; the number of unemployed will be higher than expected. Nevertheless, we advise against an increase in public expenditure that aims at stimulating the economy. Anyhow, growing public deficits, caused by cyclical movements, should be accepted. In order to increase employment labour market reforms become more urgent.
In East Germany, currently even a decline in gross national product cannot be excluded. After the first period of restructuring, which has been accompanied by structural problems, cyclical movements become more important. In addition, economic stagnation burdens labour markets. Nonetheless trying to stimulate the East German economy by government spending programmes does not seem to be a viable strategy. From the cyclical point of view they are not very efficient and concerning structural problems they are no solution.
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System change in statutory pension insurance does not solve the intergenerational distribution conflict
Olaf Fuchs
Wirtschaft im Wandel,
No. 16,
2000
Abstract
The present German pension system needs to be reformed. The alternative to the present pay-as-you-go pension system is a fully funded system. This retirement system offers a higher rate of return to the now young. Nevertheless, the paper argues, that a transition to a fully funded system will not solve the fundamental problem of the German pension system, because the hidden debt of the present system would requires a tax rate which equalizes the burden of both systems.
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Die Region Halle-Leipzig im Wandel vom Industriestandort zum modernen Dienstleistungsstandort
Martin T. W. Rosenfeld
Wirtschaftsstandort Halle,
2000
Abstract
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Foreign banks in economic development: Experiences from the regulated financial system of South Korea
Ralf Müller
IWH Discussion Papers,
No. 110,
2000
Abstract
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