“Corruption premium” on municipal borrowing cost: the case of Spanish Mayors

2019 ◽  
Vol 31 (3) ◽  
pp. 392-409 ◽  
Author(s):  
Francisco Bastida ◽  
María-Dolores Guillamón ◽  
Bernardino Benito ◽  
Ana-María Ríos
Keyword(s):  
Panel Data ◽  
Interest Rate ◽  
Interest Rates ◽  
Financial Management ◽  
Generalized Method Of Moments ◽  
Significant Risk ◽  
Legal Framework ◽  
Content Type ◽  
The Interest Rate ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of mayors’ corruption on the municipal interest rate set by lenders. Design/methodology/approach The sample consists of a panel data for all the Spanish cities with population over 50,000 for 2002–2013 (130 municipalities). In line with previous literature and the structure of the panel data, the authors use a generalized method of moments equation to the main model and three robustness checks. Findings The results, robust to different specifications, indicate that banks do not take mayors’ corruption as a significant risk component of the municipal solvency. The data show a “corruption premium” ranging from −1 to 33 basis points, which aligns with the size of the “corruption premium” found by the literature, but the significance is low. This finding is connected, on the one hand, with the rigid, thorough Spanish legal framework ruling municipal financial management, and on the other hand, with the characteristics of mayors’ corruption. Robust evidence shows that key financial indicators influence interest rates: current saving, with a strong influence, and level of indebtedness, to a lesser extent. Besides, more populated cities pay lower interest rates. Research limitations/implications The main limitation stems from the calculation of interest rate, because but sharp debt changes may decrease the accuracy. Practical implications The data prove that banks value this surplus as a sign of solvency and set lower interest rates. Considering that this financial indicator is key for setting the interest rate, as a point for practitioners, current saving should be monitored by the municipal financial officer, as a way to reduce the financial cost. Besides, legislation should consider current saving as a benchmark to set balanced budget rules or to establish conditions for municipalities to get into greater indebtedness. Originality/value This is the first research on municipal interest rate premium due to corruption in Spain.

Does interest rate liberalisation affect the constancy of mean interest rates in China?

2020 ◽  
Vol 28 (4) ◽  
pp. 555-568
Author(s):  
Hui Hong ◽  
Zhicun Bian ◽  
Naiwei Chen ◽  
Chiwei Su
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Structural Breaks ◽  
Negative Impact ◽  
Financial Reforms ◽  
Inflationary Expectation ◽  
Content Type ◽  
The Mean ◽  
The Interest Rate ◽  
The Impact

Purpose This paper aims to examine the impact of interest rate liberalisation on the constancy of mean interest rates in China to test the effect of financial reforms and provide strategies for future practices. Design/methodology/approach Bai and Perron’s (1998, 2003) methodology is used to test for structural breaks in the mean of different interest rates using Chinese data, and break dates are measured against the exact dates of the interest rate liberalisation. The performance of mean interest rates across the regimes defined by liberalisation dates is also investigated. Findings The main results show that interest rates generally increase (decrease) after deregulations on lending (deposit) rates, but these changes are not significant to induce a negative impact on the domestic economy. Instead, the infrequent but important shifts (structural breaks) in mean interest rates are caused by factors other than liberalisation such as economic shocks, inflationary expectation and liquidity crunch in China. Originality/value To the best of the author’s knowledge, this paper provides unprecedented evidence on significant changes in interest rates attributable to the liberalisation within the Chinese context.

Evaluating the impact of economic factors on REITs' capital structure around the world

2014 ◽  
Vol 32 (1) ◽  
pp. 5-20 ◽  
Author(s):  
Antonios Rovolis ◽  
Andreas Feidakis
Keyword(s):  
Panel Data ◽  
Real Estate ◽  
Capital Structure ◽  
Interest Rates ◽  
Financial Management ◽  
Dynamic Panel Data ◽  
Content Type ◽  
The World ◽  
The Impact ◽  
The Capital Structure

Purpose – This paper aims to examine the determinants of the capital structure of real estate investment trusts (REITs) across the world and explore whether this structure is characterized by any common factors. Design/methodology/approach – Endogenous and exogenous factors that affect the financial management of real estate firms are identified in the analysis. “Regular” (static) panel data regression analysis, as well as dynamic panel data techniques, is applied to a panel of listed real estate firms from 2005 to 2010. Findings – Empirical results showed that factors such as tangibility, size of the company, growth opportunities, assets turnover affect positively the financial leverage of REITs; conversely, other determinants, being debit's cost, GDP, and long-term interest rates, are negatively correlated with the financial gearing of the REITs. Practical implications – This paper identifies factors that determine the capital structure of REITs around the world. Firm executives and policy makers in different countries may wish to adjust their policies (regarding capital structure) according to the empirical findings. Originality/value – This study, using a comprehensive dataset from all over the world, investigates whether there are solid and mutual factors that can characterize the capital structure of REITs.

Evidence of customer sophistication behaviour in deposit markets: the case of Qatar

2020 ◽  
Vol 47 (5) ◽  
pp. 1181-1196
Author(s):  
Noura Abu Asab
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Banking Industry ◽  
Positive Impact ◽  
Monetary Shocks ◽  
Content Type ◽  
Interest Rate Volatility ◽  
Pass Through ◽  
The Interest Rate ◽  
The Impact

PurposeThe paper investigates the interest rate policy transmission mechanism and the role of market structure of the banking industry in Qatar.Design/methodology/approachCompetitiveness indexes are used to measure the degree of market power in the banking industry in Qatar. The momentum threshold autoregressive model is applied over the monthly period from January 2005 to June 2018 to examine the magnitude of intermediation and adjustment to disequilibria in the deposit market. In addition, to model interest rate volatility and overcome the problem of heteroscedastic errors in the error correction standard models, an asymmetric EC-EGARCH-M model is applied.FindingsThe findings suggest incomplete pass-through and asymmetric response to monetary shocks. The asymmetric adjustment mechanism is found to be downward rigid which suggests a high degree of customer sophistication and an elastic supply of deposits. The results of the EC-EGARCH-M show that the impact of monetary policy shocks has a significant positive impact on deposit interest rates and that negative monetary shocks trigger more conditional interest rate volatility in the next period than positive monetary shocks for a short maturity rate.Originality/valueThe paper is the first to highlight the behaviour of the interest rate pass through channel and measures the degree of competitiveness of the banking industry for the case of a small, rich country. In addition, using recent data, the paper applies different econometric methodologies and overcomes the problem of heteroskedastic errors by modelling the interest rate volatility using the EC-EGARCH-M model.

Structured product investment behavior in low-interest rate environments

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hirotaka Fushiya ◽  
Tomoki Kitamura ◽  
Munenori Nakasato
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Investment Behavior ◽  
Underlying Asset ◽  
Content Type ◽  
Low Interest Rates ◽  
Relative Attractiveness ◽  
Investment Experience ◽  
The Interest Rate ◽  
The Impact

Purpose This study aims to investigate the impact of interest rates, the underlying asset and investment experience on the investment behavior of Japanese retail investors toward structured products (SPs). Design/methodology/approach Three treatments are constructed through internet-based survey experiments: interest rate, underlying asset framing and investment experience treatments. The interest rate treatment includes high- and low-interest rate environments. The underlying asset framing treatment includes equity and foreign exchange rates for the SP. The investment experience treatment includes experienced and inexperienced respondents for SPs. Findings The main finding of this study concerns the effect of the interaction between low-interest rates and investment experience. Specifically, SP-experienced investors tend to choose SPs in a low-interest rate environment and prefer equity-linked SPs, even though such SPs are overpriced. This finding is useful for financial regulators in formulating policies that protect retail SP investors in low-interest rate environments worldwide. Originality/value This study is the first to measure the sensitivities of investment behavior regarding the relative attractiveness of SPs to low-risk straight bonds, given interest rates, the underlying asset and investment experience. It provides evidence to support the development of SP regulations.

Corporate governance practices and capital structure decisions: the moderating effect of gender diversity

2020 ◽  
Vol 20 (5) ◽  
pp. 939-964
Author(s):  
Mohammad A.A Zaid ◽  
Man Wang ◽  
Sara T.F. Abuhijleh ◽  
Ayman Issa ◽  
Mohammed W.A. Saleh ◽  
...  
Keyword(s):  
Corporate Governance ◽  
Panel Data ◽  
Capital Structure ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Business Environment ◽  
Board Structure ◽  
Content Type ◽  
Financing Decisions ◽  
The Impact

Purpose Motivated by the agency theory, this study aims to empirically examine the nexus between board attributes and a firm’s financing decisions of non-financial listed firms in Palestine and how the previous relationship is moderated and shaped by the level of gender diversity. Design/methodology/approach Multiple regression analysis on a panel data was used. Further, we applied three different approaches of static panel data “pooled OLS, fixed effect and random effect.” Fixed-effects estimator was selected as the optimal and most appropriate model. In addition, to control for the potential endogeneity problem and to profoundly analyze the study data, the authors perform the one-step system generalized method of moments (GMM) estimator. Dynamic panel GMM specification was superior in generating robust findings. Findings The findings clearly unveil that all explanatory variables in the study model have a significant influence on the firm’s financing decisions. Moreover, the results report that the impact of board size and board independence are more positive under conditions of a high level of gender diversity, whereas the influence of CEO duality on the firm’s leverage level turned from negative to positive. In a nutshell, gender diversity moderates the effect of board structure on a firm’s financing decisions. Research limitations/implications This study was restricted to one institutional context (Palestine); therefore, the results reflect the attributes of the Palestinian business environment. In this vein, it is possible to generate different findings in other countries, particularly in developed markets. Practical implications The findings of this study can draw responsible parties and policymakers’ attention in developing countries to introduce and contextualize new mechanisms that can lead to better monitoring process and help firms in attracting better resources and establishing an optimal capital structure. For instance, entities should mandate a minimum quota for the proportion of women incorporation in boardrooms. Originality/value This study provides empirical evidence on the moderating role of gender diversity on the effect of board structure on firm’s financing decisions, something that was predominantly neglected by the earlier studies and has not yet examined by ancestors. Thereby, to protrude nuanced understanding of this novel and unprecedented idea, this study thoroughly bridges this research gap and contributes practically and theoretically to the existing corporate governance–capital structure literature.

Volatility integration of gold and crude oil prices with the interest rates in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shailesh Rastogi ◽  
Adesh Doifode ◽  
Jagjeevan Kanoujiya ◽  
Satyendra Pratap Singh
Keyword(s):  
Interest Rate ◽  
Crude Oil ◽  
Interest Rates ◽  
Global Economy ◽  
Spillover Effect ◽  
Price Volatility ◽  
Volatility Spillover ◽  
Content Type ◽  
Crude Oil Prices ◽  
The Impact

PurposeCrude oil, gold and interest rates are some of the key indicators of the health of domestic as well as global economy. The purpose of the study is to find the shock volatility and price volatility effects of gold and crude oil market on interest rates in India.Design/methodology/approachThis study finds the mutual and directional association of the volatility of gold, crude oil and interest rates in India. The bi-variate GARCH models (Diagonal VEC GARCH and BEKK GARCH) are applied on the sample data of gold price, crude oil price and yield (interest rate) gathered from November 30, 2015 to November 16, 2020 (weekly basis) to investigate the volatility association including the volatility spillover effect in the three markets.FindingsThe main findings of the study focus on having a long-term conditional correlation between gold and interest rates, but there is no evidence of volatility spillover from gold and crude oil on the interest rates. The findings of the study are of great importance especially to the policymakers, as they state that the fluctuations in prices of gold and crude oil do not adversely impact the interest rates in India. Therefore, the fluctuations in prices of gold and crude may generally impact the economy, but it has nothing to do with interest rate in particular. This implies that domestic and foreign investments in the country will not be affected by gold and crude oil that are largely driven by interest rates in the country.Practical implicationsGold and crude oil are two very important commodities that have their importance not only for domestic affairs but also for international business. They veritably influence the economy including forex exchange for any nation. In addition to this, the researchers believe the findings will provide insights to policymakers, stakeholders and investors.Originality/valueGold and crude oil undoubtedly influence the exchange rates but their impact on the interest rates in an economy is not definite and remains ambiguous owing to the mixed findings of the studies. The lack of studies related to the impact of gold and crude oil on the interest rates, despite them being essentials for the health of any economy is the main motivation of this study. This study is novel as it investigates the volatility impact of crude oil and gold on interest rates and contributes to the existing literature with its findings.

scholarly journals The impact of Musharakah financing on the monetary policy in the Islamic economy

2018 ◽  
Vol 3 (3/4) ◽  
pp. 139-152
Author(s):  
Hatem Adela
Keyword(s):  
Economic Theory ◽  
Monetary Policy ◽  
Interest Rate ◽  
Economic Activity ◽  
Methodological Framework ◽  
Mathematical Methods ◽  
Content Type ◽  
Return Rates ◽  
The Interest Rate ◽  
The Impact

Purpose This paper aims to contribute to formulating the methodological framework for a paradigm of Islamic economics, using the development of the conventional economics, theoretical and mathematical methods. Design/methodology/approach The study based on the inductive and mathematical methods to contribute to economic theory within the methodological framework for Islamic Economics, by using the return rate of Musharakah rather than the interest rate in influence the economic activity and monetary policy. Findings Via replacement, the concept of the interest rate by the return rates of Musharakah. It concludes that the central bank can control the monetary policy, economic activity and the efficient allocation of resources by using the return rates of Musharakah through the framework of Islamic economy. Practical/implications The study is a contribution to formulate the methodological framework for a paradigm of Islamic economics, where it investigates the impact of return rates of Musharakah on the money market and monetary policy, by the mathematical methods used in the conventional economy. Also, the study illustrates the importance of further studies that examine the methodological framework for Islamic Economics. Originality/value The study aims to contribute to formulating the Islamic economic theory, through the return rate of Musharakah financing instead of the interest rate, and its effectiveness of the monetary policy. As well as reformulating the concepts of the investment function, the present value and the marginal efficiency rate of investment according to the Islamic economy approach.

scholarly journals The Impact of Interest Rate Ceilings on Microfinance Industry

2015 ◽  
Vol 2 (2) ◽  
pp. 10
Author(s):  
Ali Saleh Alshebami ◽  
D. M. Khandare
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Low Income ◽  
Secondary Data ◽  
Research Subject ◽  
Access To Credit ◽  
The Poor ◽  
Good Intention ◽  
The Interest Rate ◽  
The Impact

<p>Imposing ceilings on the interest rate has recently become one of the new hottest topics in microfinance industry; various debates have been discussing this issue to know the effect of interest rate ceilings on the supply of credit in particular and on microfinance industry in general. However in spite of the good intention behind these ceilings, there was no absolute result stating that ceilings have really contributed to the improvement or protection of the poor clients, indeed, these ceilings have hurt those low income people instead of helping them, due to these ceilings most of MFIs left the market or reduced their scale due to the inability to continue operating with low interest rate leaving the very poor clients without access to credit. Thus, the purpose of this paper is to review the impact of imposing such ceilings on the interest rates and to find out what alterative solutions can be employed as substitutes for them. This paper is entirely based on the secondary data collected from various records related to microfinance such as microfinance books, official websites and reports, published papers, and other sources related to the research subject.</p>

Corporate cash flow and dividends smoothing: a panel data analysis at Bursa Malaysia

2015 ◽  
Vol 13 (1) ◽  
pp. 2-19 ◽  
Author(s):  
Apedzan Emmanuel Kighir ◽  
Normah Haji Omar ◽  
Norhayati Mohamed
Keyword(s):  
Panel Data ◽  
Cash Flow ◽  
Panel Data Analysis ◽  
Generalized Method Of Moments ◽  
Cash Flows ◽  
Payout Policy ◽  
Free Cash Flow ◽  
Content Type ◽  
Financial Firms ◽  
The Impact

Purpose – The purpose of this paper is to contribute to the debate and find out the impact of cash flow on changes in dividend payout decisions among non-financial firms quoted at Bursa Malaysia as compared to earnings. There has been renewed debate in recent finance and accounting literature concerning the key determinants of changes in dividends payout policy decisions in some jurisdictions. The conclusion in some is that firms base their dividend decisions on cash flows rather than published earnings. Design/methodology/approach – The research made use of panel data from 1999 to 2012 at Bursa Malaysia, using generalized method of moments as the main method of analysis. Findings – The research finds that Malaysia non-financial firms consider current earnings more important than current cash flow while making dividends payout decisions, and prior year cash flows are considered more important in dividends decisions than prior year earnings. We also found support for Jensen (1986) in Malaysia on agency theory, that managers of firms pay dividends from free cash flow to reduce agency conflicts. Practical implications – The research concludes that Malaysian non-financial firms use current earnings and less of current cash flow in making changes in dividends policy. The policy implication is that current earnings are dividends smoothing agents, and the more they are considered in dividends payout decisions, the less of dividends smoothing. Social implications – If dividends smoothing is encouraged, it could lead to dividends-based earnings management. Originality/value – The research is our novel contribution of assisting investors and government in making informed decisions regarding dividends policy in Malaysia.

Central bank transparency, inflation targeting and monetary policy: a panel data approach

2018 ◽  
Vol 45 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Gabriel Caldas Montes ◽  
Cristiane Gea
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Panel Data ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Content Type ◽  
Central Bank Transparency ◽  
Policy Interest

Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

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