Bank Market Power and Loan Contracts: Empirical Evidence
Iftekhar Hasan, Liuling Liu, Haizhi Wang, Xinting Zhen
Economic Notes,
im Erscheinen
Abstract
Using a sample of syndicated loan facilities granted to US corporate borrowers from 1987 to 2013, we directly gauge the lead banks’ market power, and test its effects on both price and non‐price terms in loan contracts. We find that bank market power is positively correlated with loan spreads, and the positive relation holds for both non‐relationship loans and relationship loans. In particular, we report that, for relationship loans, lending banks charge lower loan price for borrowing firms with lower switching cost. We further employ a framework accommodating the joint determination of loan contractual terms, and document that the lead banks’ market power is positively correlated with collateral and negatively correlated with loan maturity. In addition, we report a significant and negative relationship between banking power and the number of covenants in loan contracts, and the negative relationship is stronger for relationship loans.
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Macro-Financial Modelling of the Singapore Economy: a GVAR Approach
Alessandro Galesi, Filippo di Mauro
Monetary Authority of Singapore Macroeconomic Review,
October
2017
Abstract
Globalisation has greatly increased the degree of interdependence across countries. Macroeconomic policy must therefore take a global perspective, particularly in the case of small open economies such as Singapore. From a modeller’s point of view, this requires considering many countries, regions and markets, as well as multiple channels of transmission, including trade and financial linkages. Cross-country interdependencies are increasingly reflected in the effects of global shocks, to oil or food prices for example, as well as technology and policy uncertainty spillovers.
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Pricing Sin Stocks: Ethical Preference vs. Risk Aversion
Stefano Colonnello, Giuliano Curatola, Alessandro Gioffré
Abstract
We develop a model that reproduces the return and volatility spread between sin and non-sin stocks, where investors trade off dividends with the ethical assessment of companies. We relax the assumption of boycott behaviour and investigate the role played by the dividend share of sin stocks on their return and volatility spread relative to non-sin stocks. We empirically show that the dividend share predicts a positive return and volatility spread. This pattern is reproduced by our model when dividends and ethicalness are complementary goods and investors are sufficiently risk averse.
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Bank Overall Financial Strength: Islamic Versus Conventional Banks
Michael Doumpos, Iftekhar Hasan, Fotios Pasiouras
Economic Modelling,
2017
Abstract
A number of recent studies compare the performance of Islamic and conventional banks with the use of individual financial ratios or efficiency frontier techniques. The present study extends this strand of the literature, by comparing Islamic banks, conventional banks, and banks with an Islamic window with the use of a bank overall financial strength index. This index is developed with a multicriteria methodology that allows us to aggregate various criteria capturing bank capital strength, asset quality, earnings, liquidity, and management quality in controlling expenses. We find that banks differ significantly in terms of individual financial ratios; however, the difference of the overall financial strength between Islamic and conventional banks is not statistically significant. This finding is confirmed with both univariate comparisons and in multivariate regression estimations. When we look at the bank financial strength within regions, we find that conventional banks outperform both the Islamic banks and the banks with Islamic window in the case of Asia and the Gulf Cooperation Council; however, Islamic banks perform better in the MENA and Senegal region. Second stage regressions also reveal that the bank overall financial strength index is influenced by various country-specific attributes. These include control of corruption, government effectiveness, and operation in one of the seven countries that are expected to drive the next big wave in Islamic finance.
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Wage Bargaining Regimes and Firms‘ Adjustments to the Great Recession
Filippo di Mauro, Maddalena Ronchi
IWH-CompNet Discussion Papers,
Nr. 1,
2017
Abstract
The paper aims at investigating to what extent wage negotiation set-ups have shaped up firms’ response to the Great Recession, taking a firm-level cross-country perspective. We contribute to the literature by building a new micro-distributed database which merges data related to wage bargaining institutions (Wage Dynamic Network, WDN) with data on firm productivity and other relevant firm characteristics (CompNet). We use the database to study how firms reacted to the Great Recession in terms of variation in profits, wages, and employment. The paper shows that, in line with the theoretical predictions, centralized bargaining systems – as opposed to decentralized/firm level based ones – were accompanied by stronger downward wage rigidity, as well as cuts in employment and profits.
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From World Factory to World Investor: The New Way of China Integrating into the World
Bijun Wang, Xiang Li
China Economic Journal,
Nr. 2,
2017
Abstract
This paper argues that outward direct investment (ODI) is replacing international trade as the new way China integrates into the world. Based on two complementary datasets, we document the pattern of Chinese ODI. We argue that the rapid growth of China’s ODI is the result of strong economic development, increasing domestic constraints, and supportive government policies. Compared with trade integration, investment integration involves China more deeply in global business. As a new global investor, China’s ODI in the future is full of opportunities, risks, and challenges. The Chinese government should improve bureaucracy coordination and participate more in designing and maintaining international rules to protect ODI interests.
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Wage Bargaining Regimes and Firms' Adjustments to the Great Recession
Filippo di Mauro, Maddalena Ronchi
ECB Working Paper,
Nr. 2051,
2017
Abstract
The paper aims at investigating to what extent wage negotiation setups have shaped up firms’ response to the Great Recession, taking a firm-level cross-country perspective. We contribute to the literature by building a new micro-distributed database which merges data related to wage bargaining institutions (Wage Dynamic Network, WDN) with data on firm productivity and other relevant firm characteristics (CompNet). We use the database to study how firms reacted to the Great Recession in terms of variation in profits, wages, and employment. The paper shows that, in line with the theoretical predictions, centralized bargaining systems – as opposed to decentralized/firm level based ones – were accompanied by stronger downward wage rigidity, as well as cuts in employment and profits.
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Inflation Dynamics During the Financial Crisis in Europe: Cross-sectional Identification of Long-run Inflation Expectations
Geraldine Dany-Knedlik, Oliver Holtemöller
IWH Discussion Papers,
Nr. 10,
2017
Abstract
We investigate drivers of Euro area inflation dynamics using a panel of regional Phillips curves and identify long-run inflation expectations by exploiting the crosssectional dimension of the data. Our approach simultaneously allows for the inclusion of country-specific inflation and unemployment-gaps, as well as time-varying parameters. Our preferred panel specification outperforms various aggregate, uni- and multivariate unobserved component models in terms of forecast accuracy. We find that declining long-run trend inflation expectations and rising inflation persistence indicate an altered risk of inflation expectations de-anchoring. Lower trend inflation, and persistently negative unemployment-gaps, a slightly increasing Phillips curve slope and the downward pressure of low oil prices mainly explain the low inflation rate during the recent years.
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