Economics Commons^™

Korean Capital Injections: Kdic 1997, Adam Kulam

Journal of Financial Crises

After the devaluation of the Thai baht in July 1997, international banks reduced their exposures to Korean financial institutions, rating agencies downgraded Korea’s sovereign rating, and the Korean won lost half its value. The government guaranteed all financial institution deposits and provided emergency liquidity support to the financial sector, but these measures did not restore market confidence. In December, Korea sought an International Monetary Fund (IMF) Stand-by Arrangement. As part of the IMF program, the Korean National Assembly consolidated financial sector supervision into a new Financial Supervisory Commission (FSC) and broadened the scope of the Korea Deposit Insurance Corporation (KDIC). …

Japan Provision Of Subordinated Loans, Shiro Kawana

Journal of Financial Crises

During the international financial turmoil associated with the Global Financial Crisis, Japan’s financial institutions remained relatively sound because their exposure to overseas structured credit products was limited. Restructuring in the aftermath of Japan’s own banking crisis in the late 1990s also contributed to making Japanese banks resilient to external shocks. Nonetheless, Japanese banks’ profitability was at risk. Due to the large amount of stockholdings, major banks had large market risks which might significantly worsen their capital ratios. The increasing volatility of stock prices could make banks conscious of capital constraints in the future and could trigger an adverse feedback loop …

Financial Functions Stabilization Act, Vaasavi Unnava

Journal of Financial Crises

In 1990, the asset-pricing bubble in Japan peaked and began a steady decline. Over the next seven years, a series of bank failures induced the Japanese government to introduce the first of a series of capital injections in 1998, 1999, and 2004. The capital injection of 1998, authorized by the Financial Functions Stabilization Act, made ¥13 trillion ($103 billion) available to financial institutions that applied. By the end of the injection window, 21 banks and trusts applied for and received ¥1.8 trillion ($13.5 billion) in subordinated debt and loans and preferred shares. While there were no limits on compensation for …

Prompt Recapitalization Act, Vaasavi Unnava

Journal of Financial Crises

In 1997, Japan’s banks were in crisis due to hundreds of billions of dollars of non-performing real estate loans. In response, the government performed three rounds of capital injections in 1998, 1999, and the early 2000s. The capital injection of 1999, authorized by the Prompt Recapitalization Act, made as much as ¥25 trillion ($208 billion) available to financial institutions that applied, regardless of their capitalization. By the end of the injection window, 32 banks and trusts applied for and received ¥8.6 trillion ($71.6 billion) total in preferred shares and subordinated debts. The Act required banks to submit and adhere to …

Italy (2008) Capital Injections, Manuel León Hoyos

Journal of Financial Crises

In response to the 2007–09 Global Financial Crisis, in October 2008, the Italian government announced urgent measures to guarantee financial stability and the flow of credit. The Italian government targeted three areas of support: (1) bank recapitalizations, (2) liquidity access, and (3) expansion of guarantees on bank deposits. This case study exclusively examines the Italian bank recapitalization scheme introduced in December 2008 in line with European Union State Aid rules.

The four Italian banks recapitalized in 2009 under the scheme were Banco Popolare (€1.45 billion), Banca Popolare di Milano (€500 million), Credito Valtellinese (€200 million), and Banca Montepaschi di Siena …

Israeli Bank Shares Arrangement (Hesder Hamenayot Habankayot), Natalie Leonard

Journal of Financial Crises

From 1980 to 1983, Israeli consumer prices more than doubled every year and the shekel lost more than 50% of its value annually. This high inflation and currency devaluation posed an extraordinary challenge for Israel’s biggest banks. They needed to grow their capital bases to keep up with the rising market value of their assets, but investors needed protection against the continually declining value of the local currency. Banks’ solution was to regularly issue new, nonvoting shares in extraordinary amounts while ensuring investors a high return by regularly buying their own shares to manipulate prices. The government tacitly supported the …

Ireland 2009 Recapitalization Program For Financial Institutions, Steven Kelly

Journal of Financial Crises

At the November 2008 height of the Global Financial Crisis, Ireland’s Department of Finance announced a willingness to inject capital into the six largest banks. This announcement followed the issuance of a blanket guarantee of those banks’ liabilities in September 2008. After broadly designing the potential investments in 2008, the Irish government came to agreements with Bank of Ireland and Allied Irish Banks in February 2009 to inject €3.5 billion ($4.5 billion) in each bank in exchange for preferred equity stakes. The government funded the investments from the funds of the National Pensions Reserve Fund, something it would secure the …

Indonesia Joint Recapitalization Of 1999, Vaasavi Unnava, Ariel Smith

Journal of Financial Crises

The Indonesian government implemented a joint recapitalization program in 1999 to aid some of its private banks struggling with the effects of the Asian Economic Crisis. Nine banks were eligible, and seven ultimately participated. The program was voluntary; in order to participate, bank managers had to pass a test proving that they were competent enough to run their bank and create a three-year plan for the bank’s operations subject to independent assessment. All of the bank participants were able to return to the 4% minimum capital adequacy ratio by the end of the program.

Hungary Recapitalization Scheme, Alec Buchholtz

Journal of Financial Crises

In the midst of the global financial crisis in October 2008, the Magyar Namzeti Bank (MNB), the Hungarian national bank, noticed a selloff of government securities by foreign banks and a large depreciation in the exchange rate of the Hungarian forint (HUF) in FX markets. Hungarian banks experienced liquidity pressure due to margin calls on FX swap contracts, prompting the MNB and Minister of Finance to seek assistance from the International Monetary Fund (IMF), European Central Bank (ECB) and the World Bank. The IMF and ECB approved the Hungarian government’s (the State) requests in late 2008 to create a €19 …

The Hungarian Bank Recapitalization Program, Junko Oguri

Journal of Financial Crises

Hungary implemented a number of new policies from the late 1980s to the early 1990s, shifting from a centrally planned economy to a market economy. Despite the top-down market reforms, Hungary lacked the knowledge to build a fully functional financial system. Eventually, an economic turmoil caused by the collapse of eastern markets and fragility in the financial system led to the banking crisis of 1992–1993, revealing the undercapitalization of the financial system. The government implemented the recapitalization, or “bank consolidation,” as part of a stabilization program. It injected capital into banks in three stages—in December 1993, May 1994, and December …

Hong Kong Contingent Bank Capital Facility (Cbcf), David Tam, Steven Kelly

Journal of Financial Crises

On October 14, 2008, Hong Kong’s financial secretary announced the Hong Kong Monetary Authority (HKMA) would use Hong Kong’s Exchange Fund to provide standby capital to banks if needed. The Contingent Bank Capital Facility (CBCF) was available until the end of 2010 to shore up depositor and investor confidence in the local banking sector and commenced in parallel with a broader set of announced measures including a consumer bank deposit guarantee. Twenty-three locally incorporated “Authorized Institutions” were eligible to access CBCF capital upon request. The provisioning of CBCF capital would be accompanied by enhanced oversight from the HKMA. The Hong …

Greece (2008) – Capital Injections, Manuel León Hoyos

Journal of Financial Crises

In October 2008, in the midst of the Global Financial Crisis (2007–09), the Greek government announced a €28 billion ($36 billion) government package. Greek Law 3723/2008, “Enhancement of Liquidity in the Economy in Response to the Impact of the International Financial Crisis,” was passed and approved under European Union State Aid rules. The Greek law provided for three voluntary programs: recapitalizations (€5 billion), guarantees (€15 billion), and securities (€8 billion). This case study exclusively examines the recapitalization program. In this program, the Greek government acquired convertible preferred shares in banks in order to build and maintain banks’ Tier 1 capital …

Germany Soffin Capital Injections, Priya Sankar

Journal of Financial Crises

The insolvency of Lehman Brothers in September 2008 and the subsequent global liquidity crisis spurred the German state to pass the Financial Market Stabilization Fund Act (Finanzmarktstabilisierungsfondsgesetz, “FMStFG”) establishing the Federal Agency for Financial Market Supervision (Bundesanstalt für Finanzmarktstabilisierung), or FMSA. Created in October 2008, it provided government support to ailing financial institutions. The FMSA supported German banks and maintained the stability of the German banking system, in part by establishing the Financial Market Stabilization Fund (Sonderfunds Finanzmarktstabilisierung), or SoFFin. SoFFin could provide capital injections and risk shield measures of €80 billion and also possessed a guarantee provision of up …

France Société De Prise De Participation De L’État (Sppe), Devyn Jeffereis

Journal of Financial Crises

As the Global Financial Crisis deepened, the bankruptcy of Lehman Brothers on September 15, 2008, and ensuing contagion began affecting the French economy and financial system. France experienced declines in major economic indicators such as GDP, household consumption, and investment. In addition, the ensuing credit crunch in financial markets resulted in the seizing up of various lending markets. Due to conservative business practices, a consolidated market structure, and a sound regulatory framework, the French banks were relatively better situated than their European counterparts to weather the crisis. However, the French authorities instituted a precautionary recapitalization scheme in order to “restore …

Finland’S 1992 Capital Injection, Kaleb B. Nygaard

Journal of Financial Crises

Following a large-scale deregulation of the financial sector during the 1980s and subsequent massive credit expansion, a banking crisis in Finland caused a sharp contraction in the economy in the early 1990s. To prevent the collapse of the banking system, the government offered FIM 8 billion in capital injections. Parliament appropriated the funds in the spring of 1992 and terms were defined in June 1992. The program was open to all banks, in proportion to their size, regardless of their solvency. In the fall of 1992, FIM 7.9 billion was deployed to 56 cooperative banks and 22 savings banks of …

Danish Capital Injections Scheme 2009 (Dk Gfc), Priya Sankar

Journal of Financial Crises

Both the international financial system and Denmark were experiencing challenges in 2007 and 2008, and they came to a head in Denmark when Roskilde Bank experienced liquidity pressures in June 2008. As it became clear that Roskilde Bank was insolvent and no private solutions would be found, and as the global financial crisis worsened leading to the bankruptcy of Lehman Brothers, the Danish government decided to take stronger action. To ensure the short-term survival of Roskilde Bank, the national bank issued a non-limited credit facility. After it passed a deposit guarantee scheme in 2008 and established a Financial Stability Company, …

Austria: Finanzmarktstabilitätsgesetz (Finstag), Claire Simon

Journal of Financial Crises

Following the adoption of a joint framework by euro area countries in response to the intensifying financial crisis in October 2008, Austria enacted a package of measures including the Financial Market Stability Act (Finanzmarktstabilitätsgesetz, or FinStaG). In addition to permitting nationalization under certain circumstances, FinStaG allowed the Austrian government to use six specific measures to recapitalize credit institutions operating in Austria and Austrian insurance companies. According to FinStaG, €15 billion ($22 billion) could be used for this purpose, though this amount was later increased. Eight institutions received support through FinStaG, and the government granted capital and liquidity support totaling €21 …

The Coronavirus Pandemic And International Trade, E. Wesley F. Peterson

Cornhusker Economics

The Coronavirus pandemic has disrupted economic activities around the world. Many businesses had to cease operations and furlough or lay off their workers. The World Bank (2021) has reported that global economic output fell by 3.4% in 2020. The good news is that the massive infusion of financial support from many governments in high-income countries meant that the worst economic effects of the pandemic were mitigated, and a rapid recovery has begun to make up for the pandemic-related losses. The International Monetary Fund (IMF) predicts that the global economy will grow by 5.9% in 2021 recovering the 2020 losses and …

Income Inequality And Consumption Pattern Among Bop Consumers In India, Sarath Sennimalai, S D. Sivakumar

International Review of Business and Economics

Marketing discipline has evolved through the context of the industrialized or developed world. However, the largest groups of consumers are also the poorest (Bottom of the Pyramid category) and economic inequality is still persisting among BOP consumers. Using the Gini co-efficient, economic inequality was measured with the help of World Bank report. The main aim of this paper is to know about the trends that took place in income inequality and consumption pattern among BOP consumers based on household surveys (from NSSO and World Bank). It shows that income inequality among BOP consumers has been increasing simultaneously with increase in …

Consumer Attitude And Their Purchase Intention: A Review Of Literature, Venkatesh S. Shastry, Anupama

International Review of Business and Economics

The objective of the paper is to bring spotlight on literature related to consumer attitude and purchase intention. The Paper attempts to identify and segregate factors which are vital and critical antecedents to formation of consumer attitude consequently “Intention to purchase”. For this purpose over 200 Journal articles were scrutinized on pre-set parameters, while 25 of them that are relevant research papers presented here. The factors considered include social media, traditional media, Word of mouth, message process involvement and trust. The findings of the study include a gamut of research objectives and aims, host of pertinent scales, commonly adopted methodologies, …

Application Of Fmea In Solving The Financial Inclusion Issue In India, Chandravadan Shrihari Goritiyal, Shreya Surve

International Review of Business and Economics

Failure mode and effect analysis (FMEA) is an operational tool which systematically, proactively evaluates the method to spot where the potential failure might occur and identify the potential causes, which would help to reduce the relevant impact of various failures in the process. Financial inclusion generally understood to mean the method of ensuring access to appropriate financial products and services needed by all sections of society including vulnerable groups at an economical cost. It's an immediate impact on the expansion of the economy of the country. This paper analyses the effect of Indian citizen participation in financial inclusion and identifies …

Optimum Commodity Taxation When Employment Matters, P. Nandakumar Warreir

International Review of Business and Economics

Ramsey's inelasticity rule for optimum commodity taxation has been criticized for indicating tax rates for basic necessities which have lower elasticities of demand than luxury consumption items. However, it is noted that skilful marketing techniques tend to lower the demand elasticities of luxury items so that it is not evident that the Ramsey rule is inequitable. In this paper equity concerns from a macroeconomic viewpoint are introduced, modifying the Ramsey rule approach by including total employment in the decision-maker's utility function. Then it is seen that the relative tax rate of the product which is more labour-intensive in production is …

Do Black-Owned Banks Substitute For Payday Lenders? An Exploratory Study, James R. Barth, Richard J. Cebula, Jiayi Xu

American Business Review

The annualized interest rate charged on payday loans can reach 1,950 percent, whereas similar rates charged by banks are typically less than 25 percent. Also, persons borrowing from payday lenders and paying the higher interest rates are disproportionately lower-income Blacks. This provides an incentive for Blacks seeking loans to turn to banks rather than payday lenders. This may be more likely to happen when there are Black-owned banks in communities with greater percentages of Blacks. Indeed, offices of such banks may substitute for payday loan stores, providing a greater opportunity for Blacks to avoid the higher interest rates associated with …

A Data Envelopment Analysis Approach To Portfolio Selection: An Application To The Blue Chip Stocks In The Philippine Stock Exchange (2010-2019), Vishal Bhagia, Colleen Monica K. Chiu, Paulynne J. Castillo, Roberto B. Raymundo, Joel Q. Tanchuco

Angelo King Institute for Economic and Business Studies (AKI)

There has been a growing interest in the application of data envelopment analysis (DEA) as a nonparametric approach in portfolio optimization due to its flexibility in overcoming the limitations of the conventional mean-variance portfolio (MVP) model. Therefore, this study aims to validate the allocative efficiency of the DEA cross-efficiency model using blue chip stocks in the Philippine Stock Exchange from 2010 to 2019. This study finds that the proposed model is able to distinguish a unique set of best-performing stocks across each holding period and outperforms the MVP more consistently. The results of this study suggest that the proposed DEA …

“Lord, Mr. Ford!" The Overall Estimated Economic Impacts Of The New Blueovalsk Battery Park In Glendale, Kentucky, Thomas E. Lambert

Faculty and Staff Scholarship

No abstract provided.

Algorithmic Transparency, Jian Sun

Research Collection Lee Kong Chian School Of Business

I study the optimal algorithmic disclosure in a lending market where lenders use a predictive algorithm to mitigate adverse selection. The predictive algorithm is unobservable to borrowers and uses a manipulable borrower feature as input. A regulator maximizes market efficiency by disclosing information about the statistical properties of variables embedded in the predictive algorithm to borrowers. Under the optimal disclosure policy, the posterior belief consists of two disjoint regions in which the borrower feature is more relevant and less relevant in predicting borrower quality, respectively. The optimal disclosure policy differentiates posterior lending market equilibria by the equilibrium data manipulation levels. …

Stock Return Prediction Using Financial News: A Unified Sequence Model Based On Hierarchical Attention And Long-Short Term Memory Networks, Haoling Chen, Peng Liu

Research Collection Lee Kong Chian School Of Business

Stock return prediction has been a hot topic in both research and industry given its potential for large financial gain. The return signal, apart from its inherent volatility and complexity, is often accompanied by a multitude of noises, such as other stocks’ performance, macroeconomic factors and financial news, etc. To better characterize these factors, we propose a new model that consists of two levels of sequence: an NLP-based module to capture the sequential nature of words and sentences in the financial news, and a time-series-based module to exploit the sequential nature of adjacent observations in the stock price. In this …

Volatility Timing Under Low-Volatility Strategy, Poh Ling Neo, Chyng Wen Tee

Research Collection Lee Kong Chian School Of Business

The authors show that the slope of the volatility decile portfolio’s return profile contains valuable information that can be used to time volatility under different market conditions in the United States. During good (bad) market conditions, the high- (low-) volatility portfolio produces the highest return. The authors proceed to devise a volatility timing strategy based on statistical tests on the slope of the volatility decile portfolio’s return profile. Volatility timing is achieved by being aggressive during strong growth periods and conservative during market downturns. Superior performance is obtained, with an additional return of 4.1% observed in the volatility timing strategy, …

Socially Responsible Corporate Customers, Rui Dai, Hao Liang, Lilian Ng

Research Collection Lee Kong Chian School Of Business

Corporate customers are an important stakeholder in global supply chains. We employ several unique international databases to test whether socially responsible corporate customers can infuse similar socially responsible business behavior in suppliers. Our findings suggest a unilateral effect on corporate social responsibility (CSR) only from customers to suppliers, an evidence further supported by exogenous variation in customers’ close-call CSR proposals and by product scandals. Customers exert influence on suppliers’ CSR through positive assortative matching and their decision-making process. Enhanced collaborative CSR efforts help improve operational efficiency and firm valuation of both customers and suppliers but increase only the customers’ future …

Oil Price Fluctuations Impact On The Lebanese Economic Well Being, Hanadi Taher

BAU Journal - Health and Wellbeing

This paper investigates the impact of oil price fluctuation on the Lebanese economic well being during the period from 1988 to 2018 using multivariable ordinary least square method with annual time series. taking the Lebanese GDP per capita as proxy for the economic wellbeing as dependent variable and the crud oil average annual prices as proxy for oil price fluctuations with Labor and gross fixed capital formation as two control variables. The test results show a significant and positive impact for the oil price fluctuations on the Lebanese economic well being and the significant results for control variables. In testing …