In 2002 and 2003, many Chinese banks implemented reforms that delegated authority to individual loan officers. The change followed China's entrance into the WTO and offers a plausibly exogenous shock ...to loan officer incentives to produce information. We find that the bank's internal risk rating becomes a stronger predictor of loan interest rates and ex post outcomes after reform. When the loan officer and the branch president who approves the loan work together longer, the rating also becomes more strongly related to loan prices and outcomes. Our results highlight how incentives and communication costs affect information production and use.
Financing firms in India Allen, Franklin; Chakrabarti, Rajesh; De, Sankar ...
Journal of financial intermediation,
07/2012, Letnik:
21, Številka:
3
Journal Article
Recenzirano
Odprti dostop
With extensive cross-country datasets and India firm samples, as well as our own surveys of small and medium firms, we examine the legal and business environments, financing channels, and growth ...patterns of different types of firms in India. Despite the English common-law origin and a British-style judicial system, Indian firms face weak investor protection in practice and poor institutions characterized by corruption and inefficiency. Alternative finance, including financing from all nonbank, nonmarket sources, and generally backed by nonlegal mechanisms, constitutes the most important form of external finance. Bank loans provide the second most important external financing source. Firms with access to bank or market finance are not associated with higher growth rates. Our results indicate that bank and market finance is not superior to alternative finance in fast-growing economies such as India.
We evaluate the efficiency of capital deployment for acquiring firms
before
mergers and acquisitions (M&As), defined as the return on invested capital net of the cost of capital, and link this ...measure to firms’ postacquisition performance. Acquirers with higher preacquisition net returns on investment have superior long-run operating and stock performance than do acquirers with lower returns. Acquirers with low net returns on investment also underperform matching nonacquirers. The relationship between preacquisition investment return and postacquisition performance is weakened when chief executive officer turnover occurs after deal completion. These results imply that managerial ability in deploying capital and creating value for shareholders persists through M&As.
The online appendix is available at
https://doi.org/10.1287/mnsc.2017.2766
.
This paper was accepted by Wei Jiang, finance.
Implicit guarantees provided by financial intermediaries are a key component of China's shadow banking sector. We show theoretically that project screening by intermediaries, accompanied by their ...implicit guarantees to investors, can be the second-best arrangement and mitigate capital misallocation that favors state-owned enterprises (SOEs). Using a dataset of trusts’ investment products, we find, consistent with our model, that ex ante expected yields reflect borrower risks and implicit guarantee strength, and risk sensitivity is reduced by strong guarantees. Regulations in 2018 restricting implicit guarantees lead to a weaker relationship between yield spread and guarantee strength, and more credit rationing of non-SOEs.
Over the period 1994–2003, 80% of targets and 37% of acquirers obtain a third-party assessment of the fairness of a merger or acquisition. These fairness opinions do not affect deal outcomes when ...used by targets, but they affect deal outcomes when used by acquirers. The deal premium is lower in transactions if the acquirer obtains a fairness opinion, and is further reduced if multiple advisors provide an opinion. However, the acquirer's announcement-period return is 2.3% lower if the acquirer has a fairness opinion, especially if the acquirer pays a high premium, indicating that investors are skeptical of these transactions.
Initial yields on both AAA-rated and non-AAA rated mortgage-backed security (MBS) tranches sold by large issuers are higher than yields on similar tranches sold by small issuers during the market ...boom years of 2004 to 2006. Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004 to 2006. These results suggest that investors price the risk that large issuers received more inflated ratings than small issuers, especially during boom periods.
This paper investigates the African financial development and financial inclusion gaps relative to other peer developing countries. Using a set of variables related to financial development and ...inclusion, we first estimate the gaps between African countries and other developing countries with similar degrees of economic development. Then, we explore the determinants of financial development and inclusion. We find that population density is considerably more important for financial development and inclusion in Africa than elsewhere. Finally, we show evidence that a recent innovation in financial services, mobile banking, has helped to overcome infrastructural problems and improve financial access.
ABSTRACT
Domestically listed Chinese (A‐share) firms have lower stock returns than externally listed Chinese, developed, and emerging country firms during 2000 to 2018. They also have lower net cash ...flows than matched unlisted Chinese firms. The underperformance of both stock and accounting returns is more pronounced for large A‐share firms, while small firms show no underperformance along either dimension. Investor sentiment explains low stock returns in the cross‐country and within‐A‐share samples. Institutional deficiencies in listing and delisting processes and weak corporate governance in terms of shareholder value creation are consistent with the underperformance in stock returns and net cash flows.
Corporate bond mutual funds increased their selling of credit protection in the credit default swaps (CDS) market during the 2007–2008 financial crisis. This trading activity was primarily in ...multi-name CDS, greater among larger and established funds, and directed toward counterparty dealers in financial distress. Funds that sold credit protection during the crisis experienced greater credit market risk and superior post-crisis performance, consistent with higher expected returns from liquidity provision. Funds using Lehman Brothers as a counterparty experienced abnormal outflows and returns of –2% immediately following Lehman's bankruptcy, suggesting that funds’ opportunistic trading in CDS exposed investors to counterparty risk.
A Review of China's Institutions Allen, Franklin; Qian, Jun "QJ"; Qian, Meijun
Annual review of financial economics,
11/2019, Letnik:
11, Številka:
1
Journal Article
Recenzirano
The spectacular economic growth in China during the past four decades has inspired a great deal of research to understand China's unconventional growth path. This review focuses on recent ...developments in China's institutions, financial markets, innovations, and government-business relations in the context of their roles in supporting China's growth. The government's role in finance and the economy has advantages and disadvantages in comparison to developed markets in the West. Alternative financing channels and governance mechanisms, rather than markets and banks, continue to promote growth in the most dynamic sectors of the economy, despite the fact that China has passed the early-development stage. More research is needed to understand the Chinese experience and determine whether similar mechanisms are behind the growth of other economies.
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