Linbo Fan and Sherrill Shaffer
This paper studies the profit efficiency of a sample of large U.S. commercial banks and explores how this performance varies with selected measures of bank risk reflecting aspects…
Abstract
This paper studies the profit efficiency of a sample of large U.S. commercial banks and explores how this performance varies with selected measures of bank risk reflecting aspects of credit risk, liquidity risk, and insolvency risk. We use a standard profit function and the stochastic frontier approach, and compare two standard functional forms – Cobb‐Douglas and translog – to assess the tradeoff between precision and parsimony. We find that profit efficiency is sensitive to credit risk and insolvency risk but not to liquidity risk or to the mix of loan products.
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Using an event study approach, this analysis examines whether or not intracompany mergers of subsidiary banks by multibank holding companies result in significant, positive…
Abstract
Using an event study approach, this analysis examines whether or not intracompany mergers of subsidiary banks by multibank holding companies result in significant, positive, abnormal stock returns. Such a result implies that investors expect this type of merger will improve future profitability, presumably by permitting efficiencies to be realized or revenues to increase. The analysis of the stock returns for a sample of 39 consolidating companies indicates that this is the case. These findings appear to be quite robust. Furthermore, the findings imply that permitting holding companies with interstate operations to consolidate their banking units across state lines could yield efficiencies as proponents of interstate branching claim.
A thick cost frontier methodology is used to estimate pre‐ and postmerger X‐inefficiency in 348 mergers approved by the OCC in 1987/88. Efficiency improved in only a small…
Abstract
A thick cost frontier methodology is used to estimate pre‐ and postmerger X‐inefficiency in 348 mergers approved by the OCC in 1987/88. Efficiency improved in only a small majority of mergers, and these gains were unrelated to the acquiring bank's efficiency advantage over its target. These results are not consistent with the traditional market for corporate control story, in which well‐managed firms acquire poorly managed firms and subsequently improve their performance. Rather, the results suggest motivations other than cost efficiencies were driving U.S. bank mergers in the late 1980s. Efficiency gains were concentrated in mergers where acquiring banks made frequent acquisitions, suggesting the presence of experience effects.
There has been a financial revolution lead by technology firms over the past decade. Many large established technology giants, from Google, Apple to Amazon in the US are entering…
Abstract
There has been a financial revolution lead by technology firms over the past decade. Many large established technology giants, from Google, Apple to Amazon in the US are entering the financial service industry. Smaller start-ups, in particular robotic advisors, a.k.a. Robo-Advisors, have been taking market shares from traditional asset management firms. In China, firms like Tencent and Alibaba have created a whole new field of online finance. At the center of our study is a critical examination of the key components of the financial innovation over the past 10 years. Mobile banking was the beginning, followed by trading, investment, and insurance business. We study innovation through several cases. Due to the size and number o firms in Financial technology (FinTech) space, the US and China are the focus of the chapter. Artificial intelligence (AI) and machine learning are included for discussion in this chapter. We emphasize a market approach in our study, albeit, incorporating the historical and cultural perspectives in our analysis. Our goal is to develop a thorough understanding of the art and science of financial innovation, from both bottom-up market indicators and a top-down holistic view. We want to demonstrate that the technological changes are just the beginning of a new world of financial services. Unprecedented changes are still yet to come and it is crucially important to be prepared and even embrace the changes. A special discussion was devoted to the phenomenon of FinTech boom in Asia. Lastly, many new technologies are being developed to combat fraudulent activities in the FinTech space.
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There has been a financial revolution lead by technology firms over the past decade. Many large established technology giants, from Google, Apple to Amazon in the US are entering…
Abstract
There has been a financial revolution lead by technology firms over the past decade. Many large established technology giants, from Google, Apple to Amazon in the US are entering the financial service industry. Smaller start-ups, in particular, robotic advisors, a.k.a. robo-advisors have been taking market shares from traditional asset management firms. In China, firms like Tencent and Alibaba have created a whole new field of online finance. The center of our study is a critical examination of the essential components of the financial innovation over the past 10 years. Mobile banking was the beginning, followed by trading, investment, and insurance business. Artificial intelligence and machine learning are included for discussion in this chapter. Our goal is to develop a thorough understanding of the art and science of financial innovation, from both bottom-up market indicators and a top-down holistic view. Then, we apply to the situation in Russia. We want to demonstrate that the technological changes are likely to have a significant impact on Russia’s sustainable finance and banking development.
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The effects of bank lending specialization are unclear. To explore this issue, we contrast the performance effects of general lending specialization and agricultural…
Abstract
Purpose
The effects of bank lending specialization are unclear. To explore this issue, we contrast the performance effects of general lending specialization and agricultural specialization. The latter is important given small or community banks account for a significant share of all agricultural lending, while the number of such banks continues to shrink.
Design/methodology/approach
This article develops a novel measure of general lending specialization for the percentage of loans that could be shifted across seven categories to mimic market allocations. Using US government data, we analyze small-, medium- and large-sized banks for four performance indicators in random effects regressions for 2011–2019, with four sets of subsidiary analyses.
Findings
Results suggest specialized lending reduces risk for small, community banks, and that large-sized banks face a risk-reward trade-off such that general specialization improves returns, but increases risk. Agricultural lending is associated with improved returns and lower risk for small-sized banks, particularly in rural locations, but with poorer performance for large-sized banks. Analyses of bank performance around the global financial crisis and COVID-19 pandemics suggest these were black swan events. Overall results suggest that both general lending specialization and agricultural specialization warrant separate analytical treatment and that small, community banks continue to play a crucial role in the US economy.
Originality/value
This is the first article to contrast general and agricultural lending, and across small-, medium- and large-sized banks, finding distinct effects. Future studies of other types of lending specialization are warranted.
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R. Glenn Richey, Mert Tokman, Robert E. Wright and Michael G. Harvey
This manuscript develops a reverse logistics monitoring system for controlling reverse flows of materials through marketing channels in emerging economies. Institutional theory is…
Abstract
This manuscript develops a reverse logistics monitoring system for controlling reverse flows of materials through marketing channels in emerging economies. Institutional theory is incorporated to show that both positive and negative impacts on environmental sustainability can be predicted. A partner control framework and scales are then developed for use by managers and researchers in furthering their understanding of the effective management of global reverse logistic networks
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Russell D. Kashian, Ran Tao and Robert Drago
The purpose of this paper is to identify bank deserts in the USA in 2009 and 2015, separately for inner city, suburban, and rural areas. It also identifies correlations between…
Abstract
Purpose
The purpose of this paper is to identify bank deserts in the USA in 2009 and 2015, separately for inner city, suburban, and rural areas. It also identifies correlations between bank deserts, population characteristics, market competition, and payday lending restrictions, both cross-sectionally and over time.
Design/methodology/approach
FDIC data on bank office locations are used to identify bank deserts, defined as the 5 percent of census tracts with the greatest distance from the centroid to the nearest office. Those data are matched to both American Community Survey data to identify population characteristics, to a list of states with payday lending prohibitions, and to levels of market competition. An alternative measure of bank deserts corrects for population density. Geography is analyzed, mean characteristics compared, and random effects regressions capture static and dynamic correlates.
Findings
Population density explains approximately half of bank distance variance. Bank deserts appear more often in southern and western states, and expanded significantly in inner cities while contracting in rural areas. Regression results suggest that African Americans were overall and increasingly likely to live in bank deserts and Native Americans were overall more likely to live in rural bank deserts. Rural poverty is linked to bank deserts, and the effects of competition are complex.
Practical implications
The space for policy intervention exists in African American inner cities and Native American rural communities.
Originality/value
The relative measure of bank deserts is novel, as are dynamic estimates and random effects analysis of correlates.
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There is a current argument that “national security” and “national defense” are no longer synonymous terms-that there is a new and broader definition for the activities that…
Abstract
There is a current argument that “national security” and “national defense” are no longer synonymous terms-that there is a new and broader definition for the activities that contribute to “the common defense.“ A whole of government approach is suggested as a means for integrating and coordinating national security policies and programs. To support this approach, recommendations have been made for an integrated national security budget. Focusing on the executive budget process, three approaches to an integrated national security budget are examined: organization-based, program-based and function-based. Though there are questions about the importance of budget structure and the effectiveness of program budgeting, a whole of government integrated unified national security budget could facilitate the fiscal trade-offs required between alternative means of pursuing national security objectives in the executive budget.
Ashrafee Tanvir Hossain and Lawrence Kryzanowski
The purpose of this paper is to review the relevant literature on the causes of and regulatory reactions to the financial crisis of the last decade, popularly known as the “Global…
Abstract
Purpose
The purpose of this paper is to review the relevant literature on the causes of and regulatory reactions to the financial crisis of the last decade, popularly known as the “Global Financial Crisis (GFC)” or the “Housing Crisis” in the USA.
Design/methodology/approach
This review primarily focuses on the four main causes of the crisis, namely, excessive household leverage, securitization, corporate governance and credit ratings. The main reaction vis-à-vis recovery measures taken by most governments were quantitative easing (QE), bailouts and more stringent regulations of banks, though the discussion mainly focuses on QE.
Findings
In this paper, the authors summarize the literature on the causes and regulatory reactions to the GFC and propose future avenues of research for various topics.
Originality/value
Research on the GFC spans multiple disciplines as well as multiple facets of financial economics. A review paper such as this should help future researchers in generating ideas and gathering information for their research. Given that no review uncovers all worthy papers, the authors apologize in advance to the authors of any papers that the authors have inadvertently not reviewed in this paper.