Contemporary Issues in Banking (eBook)

Myriam García Olalla is professor of Finance and Accounting at the University of Cantabria, Spain. She holds a PhD in Economics and Business from the University of Oviedo, Spain and has been professor at the University of Oviedo and visiting researcher at Berkley University, USA and Bangor University, UK. She has carried out several positions at her university and UCEIF Foundation. Her main research interests are banking and corporate finance and she has published scientific books and articles in relevant international economics and finance journals.Judith Clifton is professor of Applied Economics at the University of Cantabria, Spain. She holds a DPhil in Political Economy from the University of Oxford, UK and has lectured at Oxford, Leeds, Oviedo, Cornell and Cantabria universities. She has published widely in international journals and is Editor of the Journal of Economic Policy Reform and the Cambridge Journal of Regions, Economy and Society. Her research interests include public policy, regulation and public services. 

Acknowledgements 6
Contents 7
Notes on Contributors 10
List of Figures 23
List of Tables 26
Chapter 1: Introduction 29
Part I: Regulation 37
Chapter 2: The Impact of Recent Regulatory Reform on the Use of Supply Chain Finance: The Case of Reverse Factoring 38
1 Introduction 38
2 The Role of Banks in International Supply Chains 40
2.1 Trade Credit, Traditional, and Reverse Factoring 41
2.2 Motives Behind Reverse Factoring 43
2.3 Quantifying the Benefits and/or Costs of Reverse Factoring 46
3 The Status of Reverse Factoring in Scandinavian Banks 50
4 Expanding Reverse Factoring into  the Pre-­shipment Phase 52
5 Concluding Remarks 54
References 56
Chapter 3: The Bank Resolution Framework in the European Union: Preliminary Evidence from Specialized and Regional Banks 58
1 Introduction 58
2 Motivation and Literature Review 60
3 The Bank Resolution Framework in the European Union 62
4 Sources of Resolution Costs 65
5 The Resolution of SNS Reaal in the Netherlands 67
6 Resolution Challenges for Small Banks: The Case of Local and Regional Banks in Italy 72
7 Conclusions 76
References 77
Chapter 4: Market Risk Disclosure in Banks’ Balance Sheets and the Pillar 3 Report: The Case of Italian Banks 80
1 Introduction 80
2 Theoretical Foundations of Risk Disclosure in Banking 82
2.1 Asymmetric Information Theory 82
2.2 Agency Cost Theory 83
2.3 Transaction Cost Economics 84
2.4 Information Cost Theory 85
2.5 Resource and Knowledge-Based Theory 86
2.6 Stakeholder Theory 86
2.7 Communication Perspective 87
2.8 Efficient Market Theory and Financial Stability 87
3 Market Risk Disclosure in Banking: Definition and Regulatory Framework 89
4 An Empirical Study on Market Risk Disclosure in Banking: Research Design 92
4.1 The Scoring Model 93
4.2 A Comparison to Other Methodologies 98
5 Research Findings: Discussion and Implications 99
5.1 Key Aspects of Market Risk Disclosure 100
5.2 Backward Looking Versus Forward Looking 102
5.3 Qualitative Versus Quantitative Data 103
5.4 Fragmentary Presentation 103
5.5 Market Risk Factors, Model Risk, and Economic Capital 104
5.6 Policy Implications: Forward-Looking Disclosure 105
5.7 Policy Implications: Management Commentary 106
5.8 Policy Implications: The Adoption of a Holistic View 108
5.9 Policy Implications: Sophisticated Financial Products 109
5.10 Policy Implications: A Summary 111
6 Conclusion 113
References 114
Chapter 5: Central Banks’ Communication Strategies: Just Words? 118
1 Introduction 118
2 Literature 123
3 Methods 126
4 Results 129
4.1 Communication Strategies Time Dynamic Analysis 129
4.2 The FED and the ECB: Communication Strategies and Macroeconomic Scenario 129
5 Concluding Remarks and Research Perspectives 138
Appendix 140
References 146
Chapter 6: Complaining in Consumer Credit: Evidence from the Italian Financial System 149
1 Introduction 149
2 Literature Review 151
2.1 Complaining in the Managerial and Marketing Stream 151
2.2 Complaining in the Financial Sector 154
2.3 Complaining and ADR Schemes 158
3 Italian ADR 160
4 Analysis of Disputes Between Financial Intermediaries and Consumers 164
5 Conclusions 169
References 171
Part II: Corporate Governance and Performance 175
Chapter 7: Bank Boards in Europe: Trade-Offs in Size, Composition, and Turnover 176
1 Introduction 176
2 Bank Boards 178
3 Bank Board Size 179
4 Bank Board Composition 183
5 Bank Board Turnover 194
6 Concluding Remarks 198
References 202
Chapter 8: The Impact of Internal Corporate Governance Mechanisms on Corporate Social Performance in the Banking Industry 206
1 Introduction 206
2 The Relationship Between CG And CSR 208
3 CG Mechanisms Affecting CSR 209
3.1 External (Institutional-Level) Factors 209
3.2 Internal (Firm- and Group-Level) Factors 210
4 Methodology 212
5 Analysis of Results 214
5.1 Descriptive Statistics 214
5.2 Regression Results 215
6 Conclusions 217
References 218
Chapter 9: Bank Ownership and Firm-Level Performance: An Empirical Assessment of State-Owned Development Banks 221
1 Introduction 221
2 Development Financial Institutions 223
2.1 Mission and Activity 223
2.2 Theoretical Framework 225
3 Earlier Literature on Government Ownership and Performance 227
4 The Dataset 229
4.1 Ownership and Type of Bank 229
4.2 Characteristics of the Banks 231
5 The Empirical Research Methodology and Results 233
6 Concluding Remarks 236
Appendix 237
Pre-crisis Regressions (Period 2000–2007) 237
Post-crisis Regressions (Period 2008–2015) 238
References 239
Chapter 10: Non-financial Rating and Socially Responsible Investment Reaction to Financial Turmoil 244
1 Introduction 244
2 Theoretical Background and Hypothesis Development 246
2.1 SRI and Market Turmoil 246
2.2 ESG Rating, Performance, and Market Turmoil 248
2.3 Hypothesis Development 249
3 Methodology and Data 250
3.1 Methodology 250
3.2 Data 251
4 Main Findings 252
5 Conclusions 257
References 258
Chapter 11: What Determines Interest Margins? The Case of Chinese Banks 261
1 Introduction 261
2 Empirical Approach 263
3 Data and the Description of the Sample 264
4 Empirical Results 269
5 Conclusions 271
References 272
Part III: Firm Financing and Valuation 274
Chapter 12: How Do Banks and Investment Funds Affect Family Risk-Taking? Evidence from the Financial Crisis 275
1 Introduction 275
2 Literature Review and Set of Hypotheses 277
2.1 Risk-Taking and Performance for Family Firms in Different Legal Environments 277
2.2 The Role Played by Institutional Investors in the Profitability of Family Firms 279
2.2.1 Institutional Investors in Family Firms When Profitability Levels Are Below the Desired Target 281
2.2.2 Institutional Investors in Family Firms When Profitability Levels Are Above the Desired Target 282
3 Sample and Method 284
3.1 Sample, Variables and Empirical Model 284
3.2 Empirical Method 286
4 Results 287
4.1 Descriptive Statistics 287
4.2 Regression Analysis 290
5 Conclusions 294
References 295
Chapter 13: Does Bank Regulation Spill Over to Firm Financing? SME Financing, Bank Monitoring, and the Efficiency of the Bank Lending Channel 299
1 Introduction 300
2 Theoretical Framework 301
3 Research Methodology 305
3.1 Data 307
3.2 Empirical Strategy 309
3.3 The Negative NPV Effect 310
3.4 The Crowding Out Effect 310
3.5 The Regulatory Arbitrage Effect 311
3.6 The Monitoring Effect 311
4 Results 312
4.1 Regulatory Responses by Banks 312
4.2 Regulatory Spillover from Banks to SMEs 313
4.3 The NPV Effect 313
4.4 Crowding Out 314
4.5 Regulatory Arbitrage 316
4.6 Monitoring 317
5 Conclusions 317
References 318
Chapter 14: Earn-outs in Debt Restructuring Plans: Economics and Valuation 323
1 Introduction 323
2 Theory 325
3 Estimating Earnout Value: A Framework 330
4 A Monte Carlo Application to Earnout Valuation 339
5 Conclusions 342
References 344
Chapter 15: Book and Market Values of European Banks: Country, Size, and Business Mix Effects 348
1 Introduction 348
2 Literature Review 352
3 Bank Value 355
4 Data, Variables, and Descriptive Statistics 357
4.1 Data and Variables 357
4.2 Descriptive Statistics 359
5 Econometric Models: Results 362
5.1 First-Step Analysis: The Effect of Fundamental and Country Macroeconomic Context Variables 362
5.2 The Role and Meaning of the Intercept 366
5.3 Second-Step Analysis: Country, Size, and Business Mix Effects on the Intercept Value 369
6 Conclusions 371
Appendix 374
References 377
Part IV: Contemporary Issues 380
Chapter 16: Assessing and Measuring Banking Culture 381
1 Introduction 381
2 Context: The Debate on Banking Culture 382
3 Organizational Culture and Banking Culture 387
4 Assessing and Measuring Banking Culture 391
4.1 Risk Culture in Banking: FSB Indicators (2014) 391
4.1.1 Tone from the Top 393
4.1.2 Accountability 394
4.1.3 Effective Communication and Challenge 395
4.1.4 Incentives 395
4.2 The DNB (De Nederlandsche Bank) Approach to Culture Supervision 396
4.3 The Risk Climate 398
5 Conclusion 400
References 401
Chapter 17: A Multidimensional Approach to Equity Crowdfunding: Bridging the Equity Gap and Boosting Social Capital 406
1 Introduction 406
2 Background and Development of Research Questions 408
2.1 Social Capital in the Crowd 410
2.1.1 The Funder’s Online Social Capital 411
2.1.2 The Project’s Online Social Capital 412
3 Methods 413
3.1 Data Collection and Sample 413
3.2 Campaign Characteristics 413
3.3 Measurements 414
4 Results 415
5 Discussion and Implications for Research 417
Appendix 418
References 419
Chapter 18: Structure and Risks of the Chinese Shadow Banking System: The Next Challenge for the Global Economy? 425
1 Introduction 425
2 Determinants of the Development of Chinese Shadow Banking 427
3 The Characteristics of Chinese Shadow Banking 429
4 Inherent Risks and Impact on the Regular Financial System 435
4.1 Risks Created by WMPs 435
4.2 Risks Created by Trust Companies 437
4.3 Other Risks of the Chinese Shadow Banking System 438
5 Conclusion 439
References 440
Chapter 19: Analysis of the Main Trends in European and US Banks and Their Impact on Performance 443
1 Introduction 443
2 Literature Review 445
3 Data and Method 448
4 Results 455
5 Conclusions 457
5.1 Limitations and Directions for Further Researches 457
Appendix 458
References 465
Index 467