Business Commons^™

Small Business Policy Index Traction And Movement In Rankings Of States Update: 2000 To 2016, Pradip K. Shukla, Monica P. Shukla

Business Faculty Articles and Research

Given the volatile economic climate faced in the United States and globally since 2015, there is a desire by politicians in 2016 to increase state economic and business growth. As small businesses are the main driver of business growth in state economies, focus is placed upon the policy environment of a state to encourage state level growth in entrepreneurial activities aimed at small business creation and survival.

The Small Business and Entrepreneurship Council an advocacy and research organization dedicated to protecting small business and promoting entrepreneurship has annually prepared a “Small Business Policy Index” that ranks states according to some …

International Comparisons Of Bank Regulation, Liberalization, And Banking Crises, Puspa Amri, Apanard P. Angkinand, Clas Wihlborg

Business Faculty Articles and Research

Purpose: The recurrence of banking crises throughout the 1980s and 1990s, and in the more recent 2008-09 global financial crisis, has led to an expanding empirical literature on crisis explanation and prediction. This paper provides an analytical review of proxies for and important determinants of banking crises − credit growth, financial liberalization, bank regulation and supervision.

Design/Methodology/Approach: The study surveys the banking crisis literature by comparing proxies for and measures of banking crises and policy-related variables in the literature. Advantages and disadvantages of different proxies are discussed.

Findings: Disagreements about determinants of banking crises are in part …

Financial Liberalization And Banking Crises: A Cross-Country Analysis, Apanard P. Angkinand, Wanvimol Sawangngoenyuang, Clas Wihlborg

Business Faculty Articles and Research

Several studies indicate that financial liberalization contributes to the likelihood of a financial crisis. We focus on banking crises and argue that they are most likely to occur after an intermediate degree of liberalization. Using a recently updated dataset for financial reforms in 48 countries between 1973 and 2005, we find an inverted U-shaped relationship between liberalization and the likelihood of crisis. We ask whether the relationship remains when institutional characteristics of countries and dynamic effects of liberalization are considered. The empirical results indicate that the relationship between liberalization and banking crises depends strongly on the strength of capital regulation …

Deposit Insurance Coverage, Ownership, And Banks' Risk-Taking In Emerging Markets, Apanard P. Angkinand, Clas Wihlborg

Business Faculty Articles and Research

We ask how deposit insurance systems and ownership of banks affect the degree of market discipline on banks' risk-taking. Market discipline is determined by the extent of explicit deposit insurance, as well as by the credibility of non-insurance of groups of depositors and other creditors. Furthermore, market discipline depends on the ownership structure of banks and the responsiveness of bank managers to market incentives. An expected U-shaped relationship between explicit deposit insurance coverage and banks' risk-taking is influenced by country specific institutional factors, including bank ownership. We analyze specifically how government ownership, foreign ownership and shareholder rights affect the disciplinary …

Basel Ii And The Need For Bank Distress Resolution Procedures, Clas Wihlborg

Business Faculty Articles and Research

It is argued that without increased market discipline Basel II is not likely to resolve the regulatory problem caused by explicit and implicit guarantees of depositors and other creditors of banks. One way to enhance market discipline is to implement proposals for mandatory subordinated debt. For these proposals to achieve their objective, the non-insurance of holders of subordinated debt must be credible. Increased credibility of non-insurance of one or several groups of creditors could be enhanced if distress resolution procedures for banks were pre-specified, and if they made possible bank failures without serious disruption of the financial system. The existence …

Solving The Bargaining Democracy Problem Using A Constitutional Hierarchy Of Law, Clas Wihlborg

Business Faculty Articles and Research

In the “bargaining democracy” groups form coalitions that are able to grant benefits to themselves through legislation. These benefits may lack popular support. A constitutional hierarchy of conflicting laws is proposed to resolve this democratic problem. In the hierarchy more “rule-oriented” legislation dominate. The hierarchy would create a momentum of the political process towards more rule-oriented legislation and policy debate. The difficulty of defining a rule operationally is overcome by limiting the task of a constitutional court to simply rank conflicting policy actions in terms of criteria for rules.

The New Basel Capital Accord: Making It Effective With Stronger Market Discipline, Harald Benink, Clas Wihlborg

Business Faculty Articles and Research

In January 2001 the Basel Committee on Banking Supervision proposed a new capital adequacy framework to respond to deficiencies in the 1988 Capital Accord on credit risk. The main elements or ‘pillars’ of the proposal are capital requirements based on the internal risk-ratings of individual banks, expanded and active supervision, and information disclosure requirements to enhance market discipline. We discuss the incentive effects of the proposed regulation. In particular, we argue that it provides incentives for banks to develop new ways to evade the intended consequences of the proposed regulation. Supervision alone cannot prevent banks from ‘gaming and manipulation’ of …