Bank Consolidation, Interest Rates, and Risk: A Post-Merger Analysis Based on Loan-Level Data from the Corporate Sector

The productivity slowdown in European countries is among the major stylised facts of the last two decades. Several explanations have been proposed: some focus on demand-side effects, working through Kaldor’s second law of economic growth (also known as Verdoorn’s law), others on supply-side effects determined by a misallocation of the factors of production, caused either by labour market reforms or by perverse effects of financial integration (in Europe, related to the adoption of the euro). The latter explanation is put forward by some recent studies that stress how low interest rates brought about by the monetary union may have lowered productivity by inducing capital misallocation. The aim of this paper is to investigate the robustness of the latter empirical findings and to compare them with the alternative explanation offered by the post-Keynesian growth model, which instead emphasises the relation between foreign trade and productivity, along lines that go back to Adam Smith. To do so, we use a panel of industry-level data extracted from the EU KLEMS database, comparing these alternative explanations by panel cointegration techniques. The results shed some light on the role played by the single currency in the structural divergences among euro area member countries.

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UK Monopoly Capitalism: Applying a North American Brand to Britain

Monthly Review ◽

10.14452/mr-068-03-2016-07_8 ◽

2016 ◽

Vol 68 (3) ◽

pp. 98

Author(s):

David Matthews

Keyword(s):

Economic Theory ◽

Interest Rates ◽

Substantial Proportion ◽

Productive Capacity ◽

Corporate Sector ◽

British Economy ◽

Monthly Review ◽

The Past ◽

Investment Opportunities ◽

The Uk

During the past decade, persistent excess productive capacity, at levels exceeding at times 25 percent, has blighted the British economy, along with rates of unemployment not experienced for two decades, with the result that a substantial proportion of the economy's productive resources remain underutilized. Orthodox economic theory often ascribes such phenomena to a lack of capital for investment. However, in the same period, interest rates have been historically low, and the UK corporate sector has accumulated increasing reserves of surplus capital. Clearly, there has been no shortage of capital for investment. The failure to invest stems not from the supply of capital, but instead from the paucity of investment opportunities, suggesting that British capitalism is mired in stagnation.Click here to purchase a PDF version of this article at the Monthly Review website.

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An Empirical Investigation of Oil-Macro-financial Linkages in Saudi Arabia

Review of Middle East Economics and Finance ◽

10.1515/rmeef-2017-0018 ◽

2017 ◽

Vol 13 (2) ◽

Author(s):

Ken Miyajima

Keyword(s):

Saudi Arabia ◽

Interest Rates ◽

Banking System ◽

Oil Prices ◽

Feedback Loops ◽

Lower Growth ◽

Policy Makers ◽

Balance Sheets ◽

Level Data ◽

Bank Balance Sheets

AbstractAgainst the backdrop of low oil prices, oil-macro-financial linkages in Saudi Arabia are analyzed by applying panel econometric frameworks (multivariate and vector autoregression) to macro- and micro-level data for 9 banks spanning 1999–2014. Lower growth of oil prices and nonoil private sector output leads dampen credit and deposit growth and lift nonperforming loan ratios. Positive feedback loops within bank balance sheets in turn dampen economic activity. U.S. interest rates are not found to be a key determinant. The banking system remains strong at present, but policy makers should monitor its health with the important macro-financial feedback loops in mind.

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SMEs debt financing in the EU: on the eve of the coronacrisis

Banks and Bank Systems ◽

10.21511/bbs.15(3).2020.08 ◽

2020 ◽

Vol 15 (3) ◽

pp. 81-94

Author(s):

Yevheniia Polishchuk ◽

Anna Kornyliuk ◽

Inna Lopashchuk ◽

Alina Pinchuk

Keyword(s):

Interest Rates ◽

Financial Stability ◽

Banking Sector ◽

Debt Crisis ◽

Debt Financing ◽

Bank Loans ◽

Eu Countries ◽

Credit Lines ◽

Level Data ◽

Governmental Support

SMEs are the main drivers of economic development. As the debt crisis and coronavirus crisis show, despite their importance, they are extremely sensitive to economic downturns. Therefore, SMEs need to be supported through various tools. The paper is aimed at evaluating the SMEs’ bank and governmental support in the northern and southern EU countries in two crisis periods and assessing the financial state of SMEs on the eve of coronacrisis using micro-level data. It was proved that bank loans and credit lines remain the main sources of SMEs’ financing. After the debt crisis, banks are becoming more loyal to SMEs.It was proved that SMEs from the northern EU countries suffered less from the previous crisis and therefore started their recovery earlier than the southern ones in terms of profitability, liquidity and debt burden. In addition, it was shown that both groups on the eve of the new turbulence period were in better financial state compared to the previous debt crisis. The southern EU countries suffered more from both crises. At the same time, due to effective governmental support and bank loyalty, their SMEs entered the coronacrisis at the same level of financial stability as the northern ones. Since the new support measures are concentrated primarily in the banking sector through loan guarantee schemes and reduced interest rates, it is essential to provide debt financing to high-quality borrowers and avoid the debt crisis in southern counties.

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How Do Individuals Choose Banks? An Application to Household Level Data from Turkey

The B E Journal of Economic Analysis & Policy ◽

10.2202/1935-1682.2077 ◽

2009 ◽

Vol 9 (1) ◽

Author(s):

Oya Pinar Ardic ◽

Uygar Yuzereroglu

Keyword(s):

Interest Rates ◽

Banking Sector ◽

Emerging Market ◽

Probit Model ◽

Study Groups ◽

Bank Failures ◽

Structural Factors ◽

Data Set ◽

Level Data ◽

Private Banks

Abstract This paper uses a multinomial probit model to analyze individuals' choice of banks based on the types of banking services they use, their own characteristics, and their own perceptions about important factors in banking. Previous studies on this topic, which are limited in number, concentrate on the U.S. where financial markets are well-developed. This analysis uses a unique individual level data set from a nation-wide survey implemented after the 2001 crisis in Turkey, of which one major component was bank failures. Hence, it provides the first set of econometric evidence on the topic in an emerging market context. The study groups banks into three categories: public, large private and small private banks, among which the latter is perceived to be the potentially risky group. Investigating individuals' choice among these three types, the paper uncovers that while individuals tend to prefer small private banks on the basis of high interest rates, they tend to avoid them on the basis of trust. Additionally, the paper finds that the choice between public and large private banks mainly depends on structural factors. These results could be of potential use to policymakers in regulating the banking sector and to bank management in channeling marketing effort.

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An Examination of Uncovered Real Interest Rate Parity In 18 Distinct U.S. Manufacturing Industries

Journal of Business Strategies ◽

10.54155/jbs.29.1.57-78 ◽

1970 ◽

Vol 29 (1) ◽

pp. 57-78

Author(s):

Wan Shin Moh ◽

Masha Rahnamamoghadam ◽

Victor Valcarcel

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Real Interest Rate ◽

Manufacturing Industries ◽

Interest Rate Parity ◽

Real Interest Rate Parity ◽

Level Data ◽

Inflation Rates ◽

Micro Level ◽

Rate Parity

In a departure from the standard literature, we consider micro-level data todraw inferences about the uncovered real interest rate parity in 18 distinct manufacturingindustries across 25 countries. The real interest rates are computed based ontrade weights at the industry level. We examine the time series properties of real interestdifferentials by employing a battery of unit root tests. Using industry-specificquarterly observations on deposit and inflation rates, we find robust and statisticallysignificant evidence in support of the uncovered real interest rate parity (UIP) inevery industry we consider across all 25 countries.

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Zmiany oprocentowania i wolumenu kredytów dla przedsiębiorstw a zmiany stóp procentowych NBP w latach 2008–2015

Zarządzanie Finansami i Rachunkowość ◽

10.22630/zfir.2017.5.1.04 ◽

2017 ◽

Vol 5 (1) ◽

pp. 45-52

Author(s):

Sławomir Juszczyk ◽

Rafał Balina

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Strong Relationship ◽

Corporate Sector ◽

Statistical Tools ◽

The Relationship

The aim of this study was to determine the evolution of the basic NBP interest rates and their impact on the change in the volume of loans to the non- -financial corporations granted in Poland in the years 2008–2015. The analysis shows formation of the relationship between selected NBP interest rates, the volume of loans to non-financial corporations and the average interest rate on these loans. In the research were used statistical tools to establish relationships between variables. The results indicated presence of a strong relationship between changes in NBP interest rates and interest rate on loans to non-financial corporations. In addition, studies have shown that changes in interest rates has corresponded whit inadequate level of changes in the volume of loans to non-financial corporate sector.

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To Lend or Not to Lend

Start-Ups and SMEs ◽

10.4018/978-1-7998-1760-4.ch001 ◽

2020 ◽

pp. 1-22

Author(s):

Traci L. Mach ◽

Courtney M. Carter ◽

Cailin R. Slattery

Keyword(s):

Logistic Regression ◽

Interest Rate ◽

Small Business ◽

Interest Rates ◽

Small Businesses ◽

Peer To Peer ◽

Business Loan ◽

Level Data ◽

Small Business Loans

The current paper examines loan-level data from Lending Club to look at peer-to-peer borrowing by small businesses. We begin by looking at characteristics of loan applications that were and were not funded and then take a more in-depth look at funded applications. Summary statistics show an increasing number of small business loan applications over time. Beginning in 2010—when consistent measures of loan purpose were recorded for all applications—loan applications for small businesses were on average less likely than loans for other purposes to have been funded. However, logistic regression results that control for the quality of the application show that, holding all else constant, applications for a loan for a small business were almost twice as likely to have been funded as loans for other purposes. Focusing on funded applications, we note that funded business loans were slightly larger on average than loans funded for other purposes but paid similar interest rates. However, relative to small business loans from traditional sources, peer-to-peer small business borrowers paid an interest rate that was about two times higher. Regression results that control for application quality show that peer-to-peer loans for small businesses were charged almost a percentage point interest rate premium over non-business loans. Logistic regression results that look at loan performance indicate that loans for small businesses were much more likely to be delinquent or charged off.

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Corporate Vulnerabilities in Vietnam and Implications of COVID-19

IMF Working Papers ◽

10.5089/9781513561820.001 ◽

2020 ◽

Vol 20 (260) ◽

Author(s):

Thilo Kroeger ◽

Anh Thi Ngoc Nguyen ◽

Yuanyan Sophia Zhang ◽

Pham Dinh Thuy ◽

Nguyen Huy Minh ◽

...

Keyword(s):

Policy Support ◽

Financial Health ◽

Corporate Sector ◽

Firm Level ◽

Substantial Impact ◽

Regional Comparison ◽

Employment Share ◽

Level Data ◽

Firm Level Data ◽

Policy Measures

The paper uses firm-level data to assess the financial health of the Vietnamese non-financial corporate sector on the eve of pandemic. Our analysis finds that smaller domestic firms were particularly vulnerable even by regional comparison. A sensitivity analysis suggests that the COVID-19 shock will have a substantial impact on firms’ profitability, liquidity and even solvency, particularly in the hardest hit sectors that are dominated by SMEs and account for a sizeable employment share, but large firms are not immune to the crisis. Risks of default can propagate more broadly through upstream and downstream linkages to industries not directly impacted, with stresses potentially translating into an increase in corporate bankruptcies and bank fragility. Policy measures taken in the immediate aftermath of the crisis have helped alleviate liquidity pressures, but the nature of policy support may have to pivot to support the recovery.

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