Bank Lending, Bank Capital Regulation and Efficiency of Corporate Foreign Investment
Diemo Dietrich, Achim Hauck
IWH Discussion Papers,
No. 4,
2007
Abstract
In this paper we study interdependencies between corporate foreign investment and the capital structure of banks. By committing to invest predominantly at home, firms can reduce the credit default risk of their lending banks. Therefore, banks can refinance loans to a larger extent through deposits thereby reducing firms’ effective financing costs. Firms thus have an incentive to allocate resources inefficiently as they then save on financing costs. We argue that imposing minimum capital adequacy for banks can eliminate this incentive by putting a lower bound on financing costs. However, the Basel II framework is shown to miss this potential.
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Measurement Matters — Alternative Input Price Proxies for Bank Efficiency Analyses
Michael Koetter
Journal of Financial Services Research,
No. 2,
2006
Abstract
Most bank efficiency studies that use stochastic frontier analysis (SFA) employ each bank’s own implicit input price when estimating efficient frontiers. But at the same time, most studies are based on cost and/or profit models that assume perfect input markets. Traditional input price proxies therefore contain at least substantial measurement error. We suggest here two alternative input market definitions to approximate exogenous input prices. We have access to Bundesbank data, which allows us to cover virtually all German universal banks between 1993 and 2003. The use of alternative input price proxies leads to mean cost efficiency that is significantly five percentage points lower compared to traditional input prices. Mean profit efficiency is hardly affected. Across models, small cooperative banks located in large western states perform best while large banks and those located in eastern states rank lowest.
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The Effects of Shared ATM Networks on the Efficiency of Turkish Banks
H. Evren Damar
Applied Economics,
No. 6,
2006
Abstract
This study investigates whether forming shared ATM networks has yielded positive benefits for banks in Turkey by increasing their productive efficiency. Using a Data Envelopment Analysis (DEA) approach, pure technical and scale efficiency scores of Turkish banks are estimated and analysed for the period 2000–2003. The results suggest that although it is possible to realize positive effects through ATM sharing arrangements, there are multiple factors that determine which banks realize such benefits. The geographical distribution of shared ATMs between urban and rural markets and the level of competition between banks within urban areas are shown to be important determinants of differences in bank efficiency. This discrepancy between the gains associated with ATM sharing may have important implications concerning the adoption and sharing of new technology by banks in developing countries.
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Excess Volatility in European Equity Style Indices - New Evidence
Marian Berneburg
IWH Discussion Papers,
No. 16,
2006
Abstract
Are financial markets efficient? One proposition that seems to contradict this is Shiller’s finding of excess volatility in asset prices and its resulting rejection of the discounted cash flow model. This paper replicates Shiller’s approach for a different data set and extends his analysis by testing for a long-run relationship by means of a cointegration analysis. Contrary to previous studies, monthly data for an integrated European stock market is being used, with special attention to equity style investment strategies. On the basis of this analysis’ results, Shiller’s findings seem questionable. While a long-run relationship between prices and dividends can be observed for all equity styles, a certain degree, but to a much smaller extent than in Shiller’s approach, of excess volatility cannot be rejected. But it seems that a further relaxation of Shiller’s assumptions would completely eliminate the finding of an overly strong reaction of prices to changes in dividends. Two interesting side results are, that all three investment styles seem to have equal performance when adjusting for risk, which by itself is an indication for efficiency and that market participants seem to use current dividend payments from one company as an indication for future dividend payments by other firms. Overall the results of this paper lead to the conclusion that efficiency cannot be rejected for an integrated European equity market.
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‘Ich-AG’, bridge money and foundation allowance – more efficient promotion or simply budget recapitalization
Herbert S. Buscher
Wirtschaft im Wandel,
No. 6,
2006
Abstract
Die bislang bestehenden Förderkonzepte zur Gründung einer selbständigen Existenz aus der Arbeitslosigkeit – das Überbrückungsgeld und der Existenzgründungszuschuß – sollen zum 1. August 2006 zu einem einheitlichen Förderkonzept „Gründungszuschuß“ zusammengefaßt werden. Neben einer verbesserten Transparenz in den Förderinstrumenten erwartet die Regierung hiervon eine zielgerichtetere Förderung mit einer höheren Erfolgswahrscheinlichkeit und nicht unerhebliche Einsparungen bei den Fördermitteln. Der Beitrag überprüft auf der Grundlage der bisher veröffentlichten Informationen über das neue Förderkonzept, ob mit den erwarteten Einsparungen zu rechnen ist und welche beschäftigungspolitischen Signale hiervon ausgehen können. Die Ergebnisse einer Überschlagsrechnung zeigen, daß es voraussichtlich nicht zu den erhofften Einsparungen kommen wird, wenn nicht die Zahl der geförderten Personen deutlich abgesenkt wird. Als eindeutige „Gewinner“ der Neuregelung gelten die Empfänger von Überbrückungsgeld; für die vorherigen Ich-AGs ergeben sich keine nennenswerten Einspareffekte pro geförderte Person. Somit stellt sich die Frage, ob dieser Effekt aus arbeitsmarktpolitischen Überlegungen heraus gewünscht ist.
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Economies of Scope in European Railways: An Efficiency Analysis
Christian Growitsch, Heike Wetzel
IWH Discussion Papers,
No. 5,
2006
Abstract
In the course of railway reforms in the end of the last century, national European governments, as well the EU Commission, decided to open markets and to separate railway networks from train operations. Vertically integrated railway companies – companies owning a network and providing transport services – argue that such a separation of infrastructure and operations would diminish the advantages of vertical integration and would therefore not be suitable to raise economic welfare. In this paper, we conduct a pan-European analysis to investigate the performance of European railways with a particular focus on economies of vertical integration. We test the hypothesis that integrated railways realise economies of joint production and, thus, produce railway services on a higher level of efficiency. To determine whether joint or separate production is more efficient we apply a Data Envelopment Analysis super-efficiency bootstrapping model which relates the efficiency for integrated production to a virtual reference set consisting of the separated production technology. Our findings are that in a majority of European Railway companies exist economies of scope.
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The unemployment-growth relationship in transition countries
Hubert Gabrisch, Herbert Buscher
IWH Discussion Papers,
No. 5,
2005
Abstract
Does the disappointingly high unemployment in Central and East European countries reflect non-completed adjustment to institutional shocks from transition to a market economy, or is it the result of high labour market rigidities, or rather a syndrome of too weak aggregate demand and output? In the case of transitional causes, unemployment is expected to decline over time. Otherwise, it would pose a challenge to the European Union, particular in case of accession countries, for it jeopardizes the ambitious integration plans of, and may trigger excessive migration to the Union. In order to find out which hypothesis holds 15 years after transition has started, we analyze the unemploymentgrowth dynamics in the eight new member countries from Central-Eastern Europe. The study is based on country and panel regressions with instrument variables (TSLS). The results suggest to declare the transition of labour markets as completed; unemployment responds to output and not to a changing institutional environment for job creation. The regression coefficients report a high trend rate of productivity and a high unemployment intensity of output growth since 1998. The conclusion is that labour market rigidities do not to play an important role in explaining high unemployment rates. Rather, GDP growth is dominated by productivity progress, while the employment relevant component of aggregate demand is too low to reduce substantially the high level of unemployment.
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Structural Change during Transition: Is Russia Becoming a Service Economy?
Albrecht Kauffmann
Volkswirtschaftliche Diskussionsbeiträge der Wirtschafts- und Sozialwissenschaftlichen Fakultät, Universität Potsdam, Nr. 80,
No. 80,
2005
Abstract
This paper analyses the structural change in Russia during the transition from the planned to a market economy. With regard to the famous three sector hypothesis, broad economic sectors were formed as required by this theory. The computation of their shares at GNP at market prices using Input-Output tables, and the adjustment of results from distortions, generated as side effects of tax avoidance practices, shows results that clearly reject claims that Russia would be on the road to a post-industrial service economy. Instead, at least until 2001, a tendency of “primarisation“ could be observed, that presents Russia closer to less-developed countries.
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Distance and International Banking
Claudia M. Buch
Review of International Economics,
No. 4,
2005
Abstract
This paper asks how important distance is as a determinant of international banking and whether distance has become less important over time. If technological progress has lowered information costs and if information costs increase in distance, the importance of distance should have declined. I use data on assets and liabilities of commercial banks from five countries (France, Germany, Italy, UK, and US) in 50 host countries for the years 1983–99 to test this hypothesis. Generally, I find that banks hold significantly lower assets in distant markets and that the importance of distance for the foreign asset holdings of banks has not changed.
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Non-market Allocation in Transport: A Reassessment of its Justification and the Challenge of Institutional Transition
Ulrich Blum
50 Years of Transport Research: Experiences Gained and Major Challenges Ahead,
2005
Abstract
Economic theory knows two systems of coordination: through public choice or through the market principle. If the market is chosen, then it may either be regulated, or it may be fully competitive (or be in between these two extremes). This paper first inquires into the reasons for regulation, it analyses the reasons for the important role of government in the transportation sector, especially in the procurement of infrastructure. Historical reasons are seen as important reasons for bureaucratic objections to deregulation. Fundamental economic concepts are forwarded that suggest market failure and justify a regulatory environment. The reasons for regulation cited above, however, may be challenged; we forward theoretical concepts from industrial organization theory and from institutional economics which suggest that competition is even possible on the level of infrastructure. The transition from a strongly regulated to a competitive environment poses problems that have given lieu to numerous failures in privatization and deregulation. Structural inertia plays an important role, and the incentive-compatible management of infrastructure is seen as the key element of any liberal transportation policy. It requires that the setting of rules on the meta level satisfies both local and global efficiency ends. We conclude that, in market economies, competition and regulation should not be substitutes but complements. General rules, an "ethic of competition" have to be set that guarantee a level playing field to agents; it is complimented by institutions that provide arbitration in case of misconduct.
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