Bank Liquidity Hoarding Strategies in Uncertain Times: New Evidence from an Emerging Market with Bank-level Data

The paper explores the impact of uncertainty on bank liquidity hoarding, particularly providing new insights on the nature of the impact by bank-level heterogeneity. We consider the cross-sectional dispersion of shocks to key bank variables to estimate uncertainty in the banking sector and include all banking items to construct a comprehensive measure of bank liquidity hoarding. Using a sample of Vietnamese banks during 2007–2019, we document that banks tend to increase total liquidity hoarding in response to higher uncertainty; this pattern is still valid for on- and off-balance sheet liquidity hoarding. Further analysis with bank-level heterogeneity indicates that the impact of banking uncertainty on liquidity hoarding is significantly stronger for weaker banks, i. e., banks that are smaller, more poorly capitalized, and riskier. In testing the “search for yield” hypothesis to explain the linkage between uncertainty and bank liquidity hoarding, we do not find it to be the case. Our findings remain extremely robust after multiple robustness tests.

Bank Liquidity Hoarding and the Financial Crisis: An Empirical Evaluation

I test and find supporting evidence for the precautionary motive hypothesis of liquidity hoarding for U.S. commercial banks during the global financial crisis. I find that banks held more liquid assets in anticipation of future losses from securities write-downs. Exposure to securities losses in their investment portfolios and expected loan losses (measured by loan loss reserves) represent key measures of banks’ on-balance sheet risks, in addition to off-balance sheet liquidity risk stemming from unused loan commitments. Furthermore, unrealized securities losses and loan loss reserves seem to better capture the risks stemming from banks’ asset management and provide supporting evidence for the precautionary nature of liquidity hoarding. Moreover, I find that more than one-fourth of the reduction in bank lending during the crisis is due to the precautionary motive.

FINANCIAL STABILITY AS A FINANCIAL SECURITY INDICATOR OF AN ENTERPRISE

The system diagnostics of enterprise financial security developed by the authors are based on taking into account the combined effect of the main elements of the financial stability management process. On the basis of the justification of the interdependence of the main components of an enterprise’s financial security (on the one hand, the types of financial stability and the liquidity of the balance sheet, on the other hand, their correlative effect on the level of financial security) the authors proposed a model for its evaluation. It has been proposed that the type of financial stability of an enterprise should be determined on the basis of the identification of the financial situation in accordance with the scale developed on the basis of the values of the main financial stability ratios. The type of liquidity on the balance sheet is based on a comparison of liquidity-based items of assets with maturities. The unified impact of types of financial stability and balance sheet liquidity on the level of financial security became the basis for the development a matrix for diagnostics the general position of financial security of the enterprise. Based on the established relationship between the degrees of financial stability and liquidity of an enterprise on the one hand, and the level of financial security of operating activities on the other, a model has been developed to assess the level of financial security of the enterprise’s operating activities. It has been proposed that the financial stability and liquidity of an enterprise should be determined on the basis of a three-tiered indicator by classifying financial situations within the established indicator scale: depending on the priority of selecting funds to finance the tangible portion of a negotiable asset and the sufficiency and composition of a negotiable asset to meet current liabilities. On this basis, a diagnostic matrix of the financial security position of the enterprise’s operational activities has been developed. The interconnection of the positions of the financial security of the enterprise and the unification of its level enabled the authors to develop a matrix of zones of the general position of the financial security of an enterprise where, depending on the combination of financial security levels, zones are distinguished from absolute financial security to financial danger. The testing of each element of the proposed enterprise financial security diagnostic’s system on the materials of a selected group of enterprises of the oil-and-fat industry confirms the practical significance of the developed tools in the process of managing their general financial security. Keywords: financial security, financial security level, financial security position, financial security of operating activities, financial stability, liquidity, oil-and-fat enterprises. JEL Classification G30, M20, Q14 Formulas: 14; fig.:5; tabl.: 4; bibl.: 22.

Risk-taking Channel of Bank Liquidity Creation Affecting Real Economy: Recommendation to tobacc industry

Objection: We investigate whether risk-taking channel exsits in the interaction of monetary policy, macroprudential regulation, liquidity creation and enterprise output. Methods: We adopt the mediating effect model with stepwise regression, Sobel and Bootstrap test to identify risk-taking mechanism of liquidity creation impact on real economy. Results: We find that pricing tools of monetary policy and macroprudential tools can inhibit the changes of risk-taking and liquidity creation caused by quantitative tools. In particular, the increasing systemic risk arises the off-balance-sheet liquidity creation. Consequently, risk-taking is an important channel for regulating affect liquidity creation. We also find that liquidity creation can increase business income through credit line. Conclusions: Reducing the internal conflict between monetary policy and macroprudential regulation and improving the banks’ soundness is beneficial to liquidity creation, further stimulating the sustainable development of enterprises. In particularly, bank should innovate credit products, for example tobacco loan in Yunnan or Gui Zhou, to support of regional economic growth.

The Concept of Assessing the Level of the Enterprise Economic Security

Several problems can be identified in assessing the economic security of organizations. Most of the developed techniques in this area involve the assessment of the financial component of economic security using methods for assessing the probability of the bankruptcy of the enterprise. At the same time, there are no unambiguously recommended evaluation methods; often enterprises are limited to any one complex methodology. Any evaluation of the financial component of the security is reduced to the cost-benefit analysis and evaluation of balance sheet liquidity and the financial stability of the organization, without the formation of an integral indicator. This approach does not consider the nature of internal processes and assesses the final impact of these “processes” on the indicators of financial statements (based on which the assessment of the financial component of economic security is formed). Also, one of the problems of assessing economic security using mathematical models is the complexity of mastering these models and the lack of the programs for performing calculations. It should be noted that it is a characteristic of the largest number of studied methods that usually assess the current state of the enterprise, the complex methodology does not consider threats, the maximum that can be considered is a possible prevented damage. Nevertheless, working with threats in the assessment system allows us to predict the possible negative impact on the state of economic security. And timely prevent these situations or “take the risk”, since it is advisable to assess threats through risk indicators. Assessment of economic security is as important as any other economic analytical information needed for the timely decision-makin and the formation of proactive measures.

International Real Estate Review

This paper is about investigating how different bank liquidity creation activities affect housing markets. Using data of 401 metropolitan statistical areas/metropolitan statistical area divisions (MSAs/MSADs) of the U.S. between 1990 and 2018, we show that not all bank liquidity creation activities boost the housing markets. In particular, unlike assetside and off- balance sheet liquidity creations, funding-side liquidity creation dampens housing markets. The relationships between liquidity creation activities and housing markets are stronger in regions with inelastic house supply, but flip when banks face external liquidity shocks. We also find that housing markets dominated by large banks are more sensitive to off-balance sheet liquidity creation activities. Finally, as expected, asset-side and off-balance sheet liquidity creations boost housing markets by driving house prices away from fundamental values. Our results offer a more thorough explanation of how bank liquidity creation fuels the momentum of housing markets.

LIQUIDITY OF THE COMPANY’S BALANCE SHEET AND THE METHOD OF ITS DETERMINATION

The article explores the theoretical and methodological basis of the analysis of the liquidity of the company’s assets and liabilities. The economic essence of the liquidity of the balance sheet for the enterprises has been determined. The most common methods of analyzing the liquidity of the company's balance sheet have been clarified and analyzed. The main shortcomings of traditional ways of determining the level of liquidity of economic assets and sources of their formation in the enterprise have been revealed. An alternative concept has been proposed to determine the level of liquidity of the company's assets and liabilities, which contains weighting factor for each group of assets and liabilities, depending on their level of liquidity, using the final integrated liquidity indicator. An alternative method of determining the level of liquidity of the balance sheet has been tested on the example of the Company “Conti” during 2016-2019. Balance sheet liquidity is the ability of the enterprise to convert its assets into payment means to repay current and long-term liabilities in an acceptably short period of time. The level of liquidity of the balance sheet of the enterprise is determined by some liquidity ratios. According to the standard methodology, the final liquidity indicator is the general liquidity indicator, the calculation of which involves the grouping of assets on the basis of liquidity; liabilities – the urgency of payment. However, this indicator doesn’t take into account the degree of liquidity of asset groups and the urgency of paying groups of liabilities, which leads to distortions in its values. An alternative methodology for determining the level of liquidity of the company’s balance sheet is the calculation of the single integral liquidity indicator. The principle of calculating this indicator is based on the calculation of the general liquidity indicator with the introduction of additional groups of assets and liabilities, as well as weight coefficients for each group. The main advantage of using an alternative technique is a higher accuracy of determining the level of liquidity of the enterprise balance sheet, the main drawback is the increase in the complexity of calculations.

Assessment of the Financial Performance of PJSC “FosAgro” Using the Methods of Financial Mathematics

The article deals with the aspects of assessing the financial performance of the company using the example of PJSC “PhosAgro”. The analysis of balance sheet liquidity, financial stability of the company was carried out using a number of coefficients. The financial leverage ratio and profitability indicators were calculated. Using the methods of financial mathematics, conclusions were drawn about the financial position and development prospects of the company.

Methodological Tools for Diagnosing Insolvency (Bankruptcy) of Organizations in the Anti-Crisis Management System

Introduction. Bankruptcy is the most important element of legal regulation of modern market relations. National economy has to be able to predict a potential default in the general system of anti-crisis management. Therefore, it needs advanced techniques and tools of anti-crisis diagnostics for the timely management solutions. Study objects and methods. The analytical information presented in this work is multi-tiered and reflects the all-Russian, industrywide, regional, regional-industry, and corporate levels. The research featured agricultural enterprises of the Kemerovo region. The information underwent three types of formatting: legislative, statistical, and diagnostic. Results and discussion. During the first stage, the authors assessed external factors and trends in individual components of anti-crisis diagnostics in a given economy sector against the background of all-Russian and industry-wide trends. Enterprises appeared sensitive to bankruptcy risk; the trend decreased in 2014–2018. The second stage involved developing of a selective-indicative model for diagnosing insolvency of Russian organizations. The model took into account regional and industrial traits and focuses on large and medium-sized agricultural enterprises in the region. The model selected general indicators from a set of studied parameters, formed from fifty financial ratios presented in twenty-two of the most well-known methods of anti-crisis analysis. Bankruptcy was diagnosed on the basis of preference matrix, according to the criterion of the active use of coefficients in analytical practice. A comparative analysis of bankruptcy criteria and indicators made it possible to define the degree of adequacy of the set of indicators. Four analytical vectors were defined after thematic grouping of the identified indicators: balance sheet liquidity (current liquidity ratio), property and capital structure (financial dependence and asset mobility ratios), security (working capital ratio with own circulating assets), efficiency (economic profitability, or loss ratio, and the ratio of business activity in the market). The equation of rating assessment of the insolvency probability demonstrated the total impact of these indicators, taking into account their individual “equity participation” in the aggregate of key parameters. Conclusion. The final set of general exponents of the diagnostic model can be qualified as a neuro-analogue of “classical” models that ignores the values of the regression coefficients, which are usually not adapted to Russian realities. The model built on the basis of bankruptcy indicators, taking into account their individual “equity participation” in the rating number, can be used as a flexible methodological tool for diagnosing bankruptcy in the national economy of Russia.