Liquidity of Non-financial Corporations: Evidence from Bulgaria

The financial and economic crisis years ago put the development of enterprises in Bulgaria and around the world in an uncontrollable environment that is difficult to predict, and led to significant problems with their financial condition. As a result of a rare CoVid-19 pandemic in 2020, the economic situation has become more complicated and portends déjà vu in terms of negative effects on the economy and businesses. The numerous closures of businesses and entire sectors will undoubtedly lead to serious financial consequences related to liquidity problems and excessive indebtedness of Bulgarian enterprises. The main problem that provokes this study is the lack of summarized information on the state of corporate liquidity and the solvency levels of non-financial corporations in Bulgaria. The main purpose of the article is to examine the liquidity status of non-financial corporations in Bulgaria. This analysis is needed to prevent liquidity crises and to bring out early indicators to warn and counter the risks posed by deteriorating solvency. It will be essential for the liquidity assessment to derive average industry values of the indicators to guide the companies from the sectors regarding the recommended liquidity levels to which they should strive.

Bank Liquidity Risk: Significance of Financial Disclosure and Governance Practice

The objective of the study is to show the remedial effect of bank liquidity risk in the marketplace by disseminating financial information and practicing corporate governance mechanisms. The link between financial disclosure, corporate governance, and banks' liquidity risk management in Bangladesh is examined in this paper. The study used panel data on 32 commercial banks from the 2008 to 2018 with 346 observations collected from published annual reports. Based on the preliminary diagnosis, the study chose the two-stage least squares (2SLS) regression method to minimize the errors arising from heteroskedasticity, autocorrelation, and endogeneity issues. The study found that adequate financial disclosure and corporate governance practices minimize bank liquidity risk to maintain a stable image in the minds of investors and withstand immense regulatory pressure. To allow banks to detect issues early, they must implement changes quickly and be more robust to crises, thus risk management efficacy and excellent corporate governance implementation are required. Moreover, banks are mainly concerned about liquidity risk as it directly affects the market's performance and stability. Liquidity crises can be eradicated by proper monitoring and providing information pertaining to risks to prudent investors in a reliable and transparent corporate culture.

Corporate Social Responsibility Interventions for Namibia's Post-COVID-19 Sustainable Banking Sector

This chapter explores the role of corporate social responsibility (CSR) as a mechanism for embedding a sustainability framework within the Namibian banking sector post-COVID-19, which is currently facing a looming deterioration of asset quality and chronic liquidity crises. A qualitative research approach grounded in thematic analysis of stakeholder interviews and documentary analysis were suitable. The study assessed the foundations of CSR activities in Namibian commercial banks using institutional, legitimacy, and stakeholder theories. Overall, governance, brand image, customer loyalty, market competition, and regulatory pre-emption ranked prominently amongst internal and external institutional factors driving CSR in Namibian commercial banks. The study identified various change interventions for commercial banks, like improved CSR reporting, stakeholder engagement, and preferential pricing strategies for vulnerable people in society. Recommendations include development of a uniform CSR framework in line with international best practices contextualized to local socio-economic conditions.

Institutions, Liquidity Preference, and Reserve Asset Holding in the Eurozone Core and Periphery Before and After Crises: Some Stylized Facts

The monetary integration of the Eurozone initially accommodated endogenous money creation across its members; however, liquidity crises that followed the Global Financial Crisis (GFC) revealed structural disparities in liquidity provision in response to funding crises. By refusing to act as a lender of last resort, the European Central Bank pushed governments across the Eurozone to guarantee domestic financial liabilities. The importance of repurchase agreements to fund Eurozone banking and the predominance of European government bonds in general collateral left peripheral governments vulnerable to decreased private demand for their debt, and financially constrained by private intermediaries’ refusal of peripheral sovereign bonds in general collateral. This constraint created accelerated the sovereign debt crises driving the Eurozone crisis. This paper analyzes Eurozone banks’, National Central Banks’, and governments’ balance sheets to show how they have internalized the lessons from the GFC. We find that these entities have returned to holding larger concentrations of reserve assets, a practice that some architects of the Eurozone had hoped monetary integration at the supranational level would end. As Eurozone governments consider how to respond to the Covid-19 pandemic, liquidity crunches that hurt financial and fiscal activity across the Eurozone remain a risk.

A Financial Accelerator through Coordination Failure

This article studies the effect of liquidity crises in short-term debt markets in a dynamic general equilibrium framework. Creditors (retail banks) receive imperfect signals regarding the profitability of borrowers (wholesale banks) and, based on these signals and their beliefs about other creditors’ actions, choose whether to roll over funding, or not. The unco-ordinated actions of creditors cause a suboptimal incidence of rollover, generating an illiquidity premium. Leverage magnifies this co-ordination inefficiency. Illiquidity shocks in credit markets result in sharp contractions in output. Policy responses are analysed.