Modeling the Behavior of Banks in Instability Conditions

The analysis of models of activity of banking structures in the conditions of perfect and imperfect competition is carried out. Production functions for financial companies are considered. Models of the bank's work as an institution of delegated monitoring are described. Models of dynamics of financial resources are analyzed, allow to describe processes of evolution of own capital of bank depending on dynamics of the involved resources and the policy of accumulation realized by it. The considered models and methods are based on the definition of a bank (a financial company) as some abstract object, which is characterized by input and output parameters, as well as the function that connects them. This approach to some extent allows adapting traditional models of research of industrial enterprises and organizations to the analysis of the activities of banking structures. Therefore, one of the main tasks is to optimize internal functioning. Under such conditions, it is especially important to consider the bank as a holistic complex dynamic system operating in an unstable transition economy and the use of economic and mathematical methods and models to study the processes taking place in the bank, assess its effectiveness, identify areas and ways to improve management banking activities. Based on the analysis of the main economic and mathematical models of behavior of financial companies in a monopolistic market, we can conclude that each model characterizes a certain aspect of financial market development by the situation. Production functions for a bank (financial firm) are built, where the problem of classification of these factors into input and output is significant. A wide class of economic and mathematical models is considered, in which the activity of financial and banking institutions is treated as financial intermediaries. The theory of delegated monitoring is generalized, which in the general case assumes that in conditions when there is an effect of the growth of income from scale, individual lenders prefer to delegate functions of control (monitoring) of the behavior of entrepreneurs in whose projects they have invested to special intermediary firms. banks. The analysis of the development of the banking sector of Ukraine showed that a further gradual slowdown in its pace is expected due to changes in conditions in global financial markets and market saturation.

Integration of Financially Intermediated Services for Firm Growth A Micro Level Analysis form Pakistan

Financial intermediation services offered by financial institutions facilitate the firms in smoothening their operations. This study considers the role of the intermediaries beyond the traditional savings and pooling of funds. It takes into account multiple intermediary services offered by financial institutions. These are inclusive of transaction cost reduction services, assurance of liquidity services, information sharing function, and facilitation for delegated monitoring. Firms benefit from these services. This study testifies the impact of financially intermediated functions on firm growth. The sample of the study includes 130 listed companies in the PSX. The analysis employs the Panel Data Analysis (PDA) technique. The results of Transaction Cost Reduction Services, Liquidity Assurance Services, and Information Sharing Services are found to have a statistically significant impact while the proxy for Delegated Monitoring Services offered by intermediaries is found to have an insignificant impact on firm growth. The significance of the integrated intermediation services reflects that firms utilizing the offered intermediary services are benefitted and firm growth is observed as a Fixed Effect.

Banks Intermediation and Stock Prices of Deposit Money Banks in Nigeria: VECM and Variance Decomposition Approach

This study adopts the Vector Error Correction Model (VECM) and the variance decomposition techniques in testing the financial acceleration theory in banks intermediation. The bank intermediation variable is categorized into variable deposit mobilization, loan administration, delegated monitoring and risk diversification. Using cointegration analysis and quarterly secondary data between 2009 and 2016, this study assessed the short and long run influence of the categorized bank activities on their stock prices. The results indicate that banks intermediation exact influence on both the short and long run stock prices of DMBs in Nigeria as the ECM (-0.1420) result showed a significant speed of adjustment towards equilibrium while the overall model fitness showed that there is a long run causality running from banks intermediation measures and stock prices. Similarly, the result of the variance decomposition of stock prices shocks indicate that over time a significantly increasing proportion of stock prices is explained by loans and capital (delegated monitoring).

Theoretical and Conceptual Framework of Access to Financial Services by Farmers in Emerging Economies: Implication for Empirical Analysis

This paper presents a discussion on the theoretical and conceptual framework on issues relating to access to financial services. The discussion begins by providing details of various theories that underpin the demand and supply side of access to financial services. The supply dimension of access to financial services is guided by the information asymmetry theory and the transaction cost theory, while the key demand dimension theories are the delegated monitoring theory and the rational choice theory. In the later sections, a conceptual framework was developed for the empirical evaluation of access to financial services and its impact on productivity with particular reference to farmers in emerging economies. The last section provides the concluding remarks, which recommends the use of empirical analyses to access factors influencing access and the impact of the access to farmers’ productivity.

Allocating production risks through credit cum insurance contracts: the design and implementation of a fund for small cotton growers to access market finance

Collateral requirements that lenders place on small cotton producers can lead to risk rationing and to farmers’ dependence on downstream parties. This paper presents a cotton fund that consists of a set of contracts – credit, insurance, warrant and forward – that enables producers to tackle specific agricultural risks and gain access to market finance. These financial contracts proved to be successful at guaranteeing the fund as issuer of state-contingent debt securities in the capital markets. The fund, as an intermediary, lent to cooperatives to help finance small cotton producers in northern Argentina. The paper explains the experimental design of this innovative fund and presents a potential alternative to government intervention by moving away from ex post subsidies for small producers and, instead, facilitating ex ante private credit. The paper contributes to the literature on rural financial intermediation by designing a new mechanism to raise funds coming from relatively uninformed investors and creating collateral substitutes through delegated monitoring to overcome asymmetric information and limited commitment.

Bank Lending and Interest- Rate Derivatives

Using data that cover a full business cycle, this paper documents a direct relationship between interest-rate derivative usage by U.S. banks and growth in their commercial and industrial (C&I) loan portfolios. This positive association holds for interest-rate options contracts, forward contracts, and futures contracts. This result is consistent with the implication of Diamond’s model (1984) that predicts that a bank’s use of derivatives permits better management of systematic risk exposure, thereby lowering the cost of delegated monitoring, and generates net benefits of intermediation services. The paper’s sample consists of all FDIC-insured commercial banks between 1996 and 2004 having total assets greater than $300 million and having a portfolio of C&I loans. The main results remain after a robustness check.