Ex ante, ex post risk and bank capital ratios: an empirical investigation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Faisal Abbas ◽  
Adnan Bashir
Keyword(s):  
Generalized Method Of Moments ◽  
Regulatory Capital ◽  
Content Type ◽  
Ex Post ◽  
Ex Ante ◽  
Capital Ratios ◽  
Cooperative Banks ◽  
The Impact ◽  
Practical Implications ◽  
Tier I

PurposeThe purpose of this study is to investigate the impact of leverage, regulatory capital and tier-I capital ratios on the ex ante and ex post risk of Japanese banks.Design/methodology/approachTo test the hypotheses, the authors have implemented a panel of 507 commercial and cooperative banks of Japan over the period extending from 2001 to 2020, using a two-step system Generalized Method of Moments (GMM) framework.FindingsThe overall sample banks' results show that the impact of leverage, regulatory capital and tier-I capital ratios on ex ante and ex post risk is positive. The findings reveal that the effects of regulatory and tier-I capital ratios on ex post risk are negative (positive) for commercial (cooperative) banks, high-liquid, low-liquid and high-growth banks in Japan. In addition, the regulatory capital ratio is more beneficial for risk due to its power to absorb losses. The lagged coefficient indicates that banks require more time to adjust their ex post and ex ante risk during crisis period than during normal economic conditions.Practical implicationsThe heterogeneity in results has practical implications for regulators, policymakers and bank managers in formulating the capital requirement guidelines with respect to ex ante and ex post risk across different categories and characteristics of banks.Originality/valueTo the best of the authors' knowledge, this is the first study investigating the impact of leverage, regulatory capital and tier-I capital ratios on the ex ante and ex-post risk of Japanese commercial and cooperative banks over the period from 2001 to 2020. The insights into the impact of leverage, regulatory capital and tier-I capital ratios on the ex ante and ex post risk of well-capitalized, under-capitalized, high and low-liquid banks are new in the context of Japan.

The impact of guaranteed bailout assistance on bank loan overstatement

2016 ◽  
Vol 12 (2) ◽  
pp. 177-210
Author(s):  
Alejandro Hazera ◽  
Carmen Quirvan ◽  
Salvador Marin-Hernandez
Keyword(s):  
Financial Crisis ◽  
Emerging Market ◽  
Balance Sheet ◽  
Bank Loan ◽  
Content Type ◽  
Put Options ◽  
Regulatory Policies ◽  
Ex Post ◽  
Ex Ante ◽  
The Impact

Purpose – The purpose of this paper is to highlight how the basic binomial option pricing model (BOPM) might be used by regulators to help formulate rules, prior to financial crisis, that help prevent loan overstatement by banks in emerging market economies undergoing financial crises. Design/methodology/approach – The paper draws on the theory of soft budget constraints (SBC) to construct a simple model in which banks overstate loans to minimize losses. The model is used to illustrate how guarantees of bailout assistance (BA) (to banks) by crisis stricken countries’ financial authorities may encourage banks to overstate loans and delay the implementation of IFRS for loan valuation. However, the model also illustrates how promises of BA may be depicted as binomial put options which provide banks with the option of either: reporting loan values on poor projects accurately and receiving the loans’ liquidation values; or, overstating loans and receiving the guaranteed BA. An illustration is also provided of how authorities may use this representation to help minimize bank loan overstatement in periods of financial crisis. In order to provide an illustration of how the option value of binomial assistance may evolve during a financial crisis, the model is generalized to the Mexican financial crisis of the late 1990s. During this period, Mexican authorities’ guarantees of BA to the nation’s largest banks encouraged those institutions to overstate loans and delay the implementation of (previously adopted) international “best practices” based loan valuation standards. Findings – Application of the model to the Mexican financial crisis provides evidence that, in spite of Mexico’s “official” 1997 adoption of international “best accounting practices” for banks, “iron clad” guarantees of BA by the country’s financial authorities to Mexico’s largest banks provided those institutions with an incentive to knowingly overstate loans in the late 1990s and early 2000s. Research limitations/implications – The model is compared against only one country in which the BA was directly infused into banks’ loan portfolios. Thus, as conceived, it is directly applicable to crisis countries in which the bailout took this form. However, the many quantitative variations of SBC models as well as recent studies which have applied the binomial model to other forms of bailout (e.g. direct purchases of bank shares by authorities) suggest that the model could be modified to accommodate different bailout scenarios. Practical implications – The model and application show that guaranteed BA can be viewed as a put option and that ex-ante regulatory policies based on the correct valuation of the BA as a binomial option might prevent banks from overstating loans. Social implications – Use of the binomial or similar approaches to valuing BA may help regulators to determine the level of BA that will not encourage banks to overstate the value of their loans. Originality/value – Recent research has used the BOPM to value, on an ex-post basis, the BA which appears on the balance sheet of institutions which have been rescued. However, little research has advocated the use of this type of model to help prevent, on an ex-ante basis, the overstatement of loans on poor projects.

International comparative evidence of e-government success and economic growth: technology adoption as an anti-corruption tool

2020 ◽  
Vol 14 (5) ◽  
pp. 713-736
Author(s):  
Amari Mouna ◽  
Baklouti Nedra ◽  
Mouakher Khaireddine
Keyword(s):  
Economic Growth ◽  
Technology Adoption ◽  
Generalized Method Of Moments ◽  
Control Level ◽  
Content Type ◽  
Ict Development ◽  
Government Efficiency ◽  
International Comparative ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to explore the impact of information communication technology (ICT) use and government efficiency on the economic growth. It assesses empirically the impact of government success in ICT promotion and government efficiency to enhance economic growth and catalyzing corruption control through technology adoption. Design/methodology/approach This paper examines the relationship between ICT and economic growth in a large sample of 149 countries for the period 2012–2016. The empirical evidence is based on the generalized method of moments. Findings There is a significant relationship between e-government development, ICT development and institutional quality, and not ICT development and corruption. The empirical results show that a negative value of the interaction suggests that the impact of corruption on economic growth is smaller for countries with a higher level of technology adoption. Practical implications The differences in e-government success across countries in the world are influenced by the digital divide due to income and corruption control level. Originality/value The efficiency of technology adoption and promotion will ensure stronger effects of corruption control on economic growth. Relevant practical implications derive from the research that can guide public policy in the area of e-government.

Shari’ah supervisory board’s size impact on performance in the Islamic banking industry

2020 ◽  
Vol 11 (1) ◽  
pp. 110-129 ◽  
Author(s):  
Naji Mansour Nomran ◽  
Razali Haron
Keyword(s):  
Risk Taking ◽  
Empirical Studies ◽  
Generalized Method Of Moments ◽  
Maximum Size ◽  
Optimal Size ◽  
Content Type ◽  
Islamic Financial Institutions ◽  
Method Of Moments Estimator ◽  
The Impact ◽  
Practical Implications

Purpose This study aims to empirically examine whether there is any optimal Shari’ah supervisory board’s (SSB) size that maximizes performance of Islamic banks (IBs). Apparently, IBs adopt different SSB size based on their different regulations across jurisdictions, and then it is still questionable whether there is any optimal SSB size that can fit all and be recommended to IBs. Design/methodology/approach The paper investigates the impact of different SSB size on IBs performance using a sample of 113 banks over 23 countries for the period 2007-2015 based on the generalized method of moments estimator. Findings The empirical evidence documented in this study strongly highlights the importance of small SSB size in enhancing the performance of IBs as compared to the large board size. The findings confirm that the SSB size of IBs should neither be lesser than three nor greater than six. More specifically, it is found that the optimal SSB size seems to be five. Research limitations/implications First, the study does not investigate whether the findings are constant during crisis and non-crisis periods. Second, the optimal SSB size in IBs should be confirmed from the risk-taking perspective besides performance. Practical implications For both the IBs and the regulators, they should give due importance to small SSB size as an important element for improving the IBs performance. It is strongly recommended for the IBs to have a SSB size between three and six, and five is the most recommended. The Accounting and Auditing Organization for Islamic Financial Institutions also should revise their existing standards that only suggest the minimum SSB size of three to include the maximum size of six and the optimal size of five. Originality/value Despite the SSB size plays an important role in affecting the performance of IBs, it seems there are no empirical studies attempting to address whether there is any optimal SSB size that can enhance the IBs performance so far.

Performance vs prospectus = transparency in German closed-ended real estate funds?

2018 ◽  
Vol 36 (2) ◽  
pp. 158-170 ◽  
Author(s):  
Michael Nadler
Keyword(s):  
Real Estate ◽  
Private Equity ◽  
Global Financial Crisis ◽  
Variance Analysis ◽  
German Market ◽  
Content Type ◽  
Fund Managers ◽  
Ex Post ◽  
Ex Ante ◽  
The Impact

Purpose The purpose of this paper is to close the transparency gap by comparing ex ante and ex post performance disclosure, thus providing important conclusions regarding the transparency of this important German market segment. Design/methodology/approach Closed-ended real estate funds (CEREFs) are one of the biggest segments of unlisted private equity funds in Germany. CEREFs have a central “profitability promise” that is based on ex ante forecasts given in the prospectus. Typically, equity is tied to these investments for up to 20-30 years, leaving investors highly insecure whether their expectations will be fulfilled and fund managers actually achieve prospected performances ex post. Findings The performance variance analysis of all German CEREFs outstanding during the global financial crisis reveals that prospect-performance disclosures as well as prospect-performance variances cause substantial problems in Germany due to overestimation biases of many fund managers. Research limitations/implications As typical for the recent scholarly debate, also the past disclosure practice in Germany prohibits a long-term performance analysis, unless researchers apply instruments of modern investment analysis like comprehensive financial plans (“Visualisation of Financial Implications)”. Practical implications The transparency developments in CEREF-reporting of the last decade deliver precise recommendations regarding the internal and external performance variance analysis, risk-profiles and stress tests for the future fund management. Social implications The introduced methodology would increase transparency in the segment of CEREF and, thus, improve investor protection. Since private households in Germany mainly acquire these funds, this is a contribution to sustainability in private asset management. Originality/value The paper develops a new methodological framework for performance measurement of unlisted funds. It then assesses for the first time the impact of transparency and trust on fund performances by applying a performance variance analysis.

Impact of special regime generation management on electricity prices: the Portuguese case

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Carlos Francisco Alves ◽  
Pedro Diogo Pinto
Keyword(s):  
Negative Impact ◽  
Generalized Method Of Moments ◽  
Wholesale Price ◽  
Spot Market ◽  
Spot Price ◽  
Renewable Electricity ◽  
Electricity Prices ◽  
Content Type ◽  
Ex Post ◽  
The Impact

Purpose The ex-post literature, which evaluates the real impact of renewable generation, is scarce. Most studies are simulations and therefore are not based on real data. This study aims to further this goal using a unique database of the Portuguese spot market, where there are powerful incentives for renewable electricity. Design/methodology/approach This paper analyses ex-post the impact of energy produced in special regime on the wholesale hourly spot market prices of Portuguese electricity during the period 2009–2016. This paper uses standard, two stage least squares and generalized method of moments multivariate regressions and other energy econometrics techniques. Findings It is found that special regime generation has a negative impact on the wholesale price. This impact is higher than that found in other markets. This paper also concludes that using special regime generation to supply the future growth of demand will decrease wholesale electricity spot prices more intensively than using other technologies. Originality/value This paper uses a unique database based on ex-post for the Portuguese spot market. The Portuguese case is particularly interesting, not only because of its strong incentives policy on renewable energy but also because its spot market is interconnected with the Spanish market. This paper contributes to the debate about the sustainability of current renewable electricity support schemes. The decreasing trend in electricity prices, with the introduction of new renewable capacity, can be incompatible with the required payments for non-renewable producers. This paper also shows that even if the price reduction on spot markets is transferred to final consumers, given that it is relatively small (8% spot price which represents 45% of the final price), compared with the cost of incentives (35% of the final price), consumers probably will not be able to support a new investment pipeline with a similar framework.

Cross-border equity flows and market volatility: the case of Qatar Exchange

2016 ◽  
Vol 11 (3) ◽  
pp. 395-418 ◽  
Author(s):  
Walid M.A. Ahmed
Keyword(s):  
Capital Market ◽  
Capital Flows ◽  
Institutional Investors ◽  
Foreign Capital ◽  
Generalized Method Of Moments ◽  
Market Volatility ◽  
Individual Investors ◽  
Content Type ◽  
Ex Post ◽  
The Impact

Purpose – Extending the extant literature and using Qatar’s equity market as a case study, this paper aims to look into the potential impacts of foreign investor groups’ trading activities on market volatility in comparison with those of Qatar’s domestic investor counterparts. Design/methodology/approach – The dataset is comprised of daily aggregated values of stock purchases and sales made separately by four investor groups, namely, foreign individual investors, foreign institutional investors, domestic individual investors, and domestic institutional investors. An ex post measure of volatility introduced by Rogers and Satchell (1991) is employed. Four proxies for investor trading are considered separately in the analysis. The objective of the study is empirically addressed in the context of the Generalized Method of Moments estimation technique. Findings – In general, there exists substantial contemporaneous price impact associated with foreign equity investment in the Qatari capital market, despite the fact that foreigners’ buy and sell trades are not as large as those of their domestic counterparts. More specifically, foreign institutional sales (purchases) tend to increase (reduce) market volatility. Like those of foreign institutions, the sell trades by foreign individuals have a positive impact on volatility. On the other hand, domestic institutional purchases are significantly negatively related with market volatility, whereas the sell trades by the same category have no impact on volatility. Finally, surprises in foreigners’ trading volumes turn out to be responsible for adding to volatility. Practical implications – Although a sudden reversal of foreign capital flows can pose a real threat to the stability of the Qatari capital market, such capital flows are deemed to be an indispensable vehicle for enhancing the liquidity and efficiency of the market. Accordingly, policy makers in Qatar should overhaul the current foreign investment legislation to make it even more streamlined and better suited to achieving the country’s strategic vision for the market. Foremost in these reforms is relaxing the stringent 25 percent foreign ownership restriction. Such a relaxation process is highly recommended to be phased in only gradually, in order to weigh its pros and cons. In this regard, the authorities concerned should consider embarking on a range of procedures intended to ward off the adverse ramifications of foreign capital outflows. Originality/value – To the author’s best knowledge, no study about the impact of foreign equity flows on domestic markets has been so far conducted using trading data from the Qatari market. This work presents one such attempt.

Financial freedom, market power and bank margins in sub-Saharan Africa

2019 ◽  
Vol 28 (2) ◽  
pp. 283-299 ◽  
Author(s):  
Emmanuel Sarpong-Kumankoma ◽  
Joshua Abor ◽  
Anthony Quame Q. Aboagye ◽  
Mohammed Amidu
Keyword(s):  
Market Power ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Content Type ◽  
Interest Margins ◽  
Sub Saharan ◽  
The Impact ◽  
The Relationship ◽  
Practical Implications

Purpose This paper examines the effect of financial (banking) freedom and market power on bank net interest margins (NIM). Design/methodology/approach The study uses data from 11 sub-Saharan African countries over the period, 2006-2012, and the system generalized method of moments to assess how financial freedom affects the relationship between market power and bank NIM. Findings The authors find that both financial freedom and market power have positive relationships with bank NIM. However, there is some indication that the impact of market power on bank margins is sensitive to the level of financial freedom prevailing in an economy. It appears that as competition intensifies, margins of banks in freer countries are likely to reduce faster than those in areas with more restrictions. Practical implications Competition policies could be guided by the insight on how financial freedom moderates the effect of market power on bank margins. Originality/value This study provides new empirical evidence on how the level of financial freedom affects bank margins and the market power-bank margins relationship.

Perceived workplace gender-bias and psychological impact

2019 ◽  
Vol 43 (3/4) ◽  
pp. 339-353 ◽  
Author(s):  
Siham Lekchiri ◽  
Cindy Crowder ◽  
Anna Schnerre ◽  
Barbara A.W. Eversole
Keyword(s):  
Gender Bias ◽  
Critical Incident ◽  
Psychological Impact ◽  
Working Women ◽  
Content Type ◽  
Treatment Bias ◽  
Male Dominated ◽  
The Impact ◽  
Organizational Mechanisms ◽  
Practical Implications

Purpose The purpose of this paper is to explore the experiences of working women in a male-dominated country (Morocco) and unveil the unique challenges and everyday gender-bias they face, the psychological impact of the perceived gender-bias and, finally, identify a variety of coping strategies or combatting mechanisms affecting their motivation and retention in the workplace. Design/methodology/approach Empirical evidence was obtained using a qualitative research method. The Critical Incident Technique (CIT) was used to collect incidents recalled by women in the select institution reflecting their perceptions of their managers’ ineffective behaviors towards them and the impact of these behaviors. The critical incidents were inductively coded, and behavioral statements were derived from the coded data. Findings The qualitative data analysis led them to structure the data according to two theme clusters: The perceived gender-bias behaviors (Covert and evident personal and organizational behaviors) and Psychological impacts resulting from the perceived bias. These behavioral practices included abusive behaviors, unfair treatment, bias and lack of recognition. The psychological impact elements involved decreased productivity, depression, anxiety and low self-esteem. Practical implications Understanding these experiences can facilitate the identification of strategies geared towards the retention of women in the workforce, and Moroccan organizations can develop and implement strategies and policies that are geared towards eliminating gender-bias in the workplace and to retaining and motivating women who remain ambitious to work in male-dominated environments and cultures. Originality/value This paper provides evidence that sufficient organizational mechanisms to support women in male-dominated environments are still unavailable, leaving them to find the proper coping mechanisms to persevere and resist.

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

2020 ◽  
Vol 20 (5) ◽  
pp. 939-964
Author(s):  
Mohammad A.A Zaid ◽  
Man Wang ◽  
Sara T.F. Abuhijleh ◽  
Ayman Issa ◽  
Mohammed W.A. Saleh ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Capital Structure ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Business Environment ◽  
Board Structure ◽  
Content Type ◽  
Financing Decisions ◽  
The Impact

Purpose Motivated by the agency theory, this study aims to empirically examine the nexus between board attributes and a firm’s financing decisions of non-financial listed firms in Palestine and how the previous relationship is moderated and shaped by the level of gender diversity. Design/methodology/approach Multiple regression analysis on a panel data was used. Further, we applied three different approaches of static panel data “pooled OLS, fixed effect and random effect.” Fixed-effects estimator was selected as the optimal and most appropriate model. In addition, to control for the potential endogeneity problem and to profoundly analyze the study data, the authors perform the one-step system generalized method of moments (GMM) estimator. Dynamic panel GMM specification was superior in generating robust findings. Findings The findings clearly unveil that all explanatory variables in the study model have a significant influence on the firm’s financing decisions. Moreover, the results report that the impact of board size and board independence are more positive under conditions of a high level of gender diversity, whereas the influence of CEO duality on the firm’s leverage level turned from negative to positive. In a nutshell, gender diversity moderates the effect of board structure on a firm’s financing decisions. Research limitations/implications This study was restricted to one institutional context (Palestine); therefore, the results reflect the attributes of the Palestinian business environment. In this vein, it is possible to generate different findings in other countries, particularly in developed markets. Practical implications The findings of this study can draw responsible parties and policymakers’ attention in developing countries to introduce and contextualize new mechanisms that can lead to better monitoring process and help firms in attracting better resources and establishing an optimal capital structure. For instance, entities should mandate a minimum quota for the proportion of women incorporation in boardrooms. Originality/value This study provides empirical evidence on the moderating role of gender diversity on the effect of board structure on firm’s financing decisions, something that was predominantly neglected by the earlier studies and has not yet examined by ancestors. Thereby, to protrude nuanced understanding of this novel and unprecedented idea, this study thoroughly bridges this research gap and contributes practically and theoretically to the existing corporate governance–capital structure literature.

Embedding employability within higher education for the profession of policing

2019 ◽  
Vol 9 (3) ◽  
pp. 319-328
Author(s):  
Ian Pepper ◽  
Ruth McGrath
Keyword(s):  
Higher Education ◽  
Design Methodology ◽  
Research Study ◽  
Longitudinal Research ◽  
Evidence Base ◽  
Content Type ◽  
Educational Provision ◽  
Professional Body ◽  
The Impact ◽  
Practical Implications

Purpose The purpose of this paper is to evaluate the impact of an employability module, the College of Policing Certificate in Knowledge of Policing (CKP), on students’ career aspirations, their confidence and wish to join the police along with the appropriateness of the module. This will inform the implementation of employability as part of the College of Policing-managed Police Education Qualifications Framework (PEQF). Design/methodology/approach A three-year longitudinal research study used mixed methods across four points in time to evaluate the impact on students studying the employability module. Findings The research suggests that the employability-focussed CKP was useful as an introduction to policing, it developed interest in the police and enhanced the confidence of learners applying to join. Lessons learnt from the CKP should be considered during the implementation of the PEQF. Research limitations/implications The ability to generalise findings across different groups is limited as other influences may impact on a learner’s confidence and employability. However, the implications for the PEQF curriculum are worthy of consideration. Practical implications As the police service moves towards standardised higher educational provision and evolution of policing as a profession, lessons can be learnt from the CKP with regards to the future employability of graduates. Originality/value Enhancing the employability evidence base, focussing on policing, the research identified aspects which may impact on graduates completing a degree mapped to the PEQF. The research is therefore of value to higher education and the professional body for policing.

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