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Internal Capital Markets And Bank Holding Company Efficiency
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Book Synopsis Internal Capital Markets and Bank Holding Company Efficiency by : Karl Weinmayer
Download or read book Internal Capital Markets and Bank Holding Company Efficiency written by Karl Weinmayer and published by . This book was released on 2018 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank holding companies and its internal capital market have been widely discussed in recent financial literature and especially since the financial crisis which posed the question for regulatory intervention in the financial markets anew. From an economic point of view, the source of financing should not affect the overall firm value or future performance, but empirical evidence suggests that bank holding companies have clear preferences on double leveraging. In this paper, we show the direct effects of equity, debt and double leverage on the firms performance measured by their overall effciency. We show that efficiency is negatively affected by equity financing from parent to subsidiaries and this effect is even more pronounced for the case of double leverage. Our findings indicate that further emphasis from regulators is necessary in order to prevent inefficient fiancing via double leverage, which could be used to circumvent regulatory capital requirements.
Book Synopsis Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks by : Ms.Yu Shi
Download or read book Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks written by Ms.Yu Shi and published by International Monetary Fund. This book was released on 2019-05-21 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using business registry data from China, we show that internal capital markets in business groups can propagate corporate shareholders’ credit supply shocks to their subsidiaries. An average of 16.7% local bank credit growth where corporate shareholders are located would increase subsidiaries investment by 1% of their tangible fixed asset value, which accounts for 71% (7%) of the median (average) investment rate among these firms. We argue that equity exchanges is one channel through which corporate shareholders transmit bank credit supply shocks to the subsidiaries and provide empirical evidence to support the channel.
Book Synopsis Diversification, Organization, and Efficiency by : Peter G. Klein
Download or read book Diversification, Organization, and Efficiency written by Peter G. Klein and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Guide to the Capital Markets Activities of Banks and Bank Holding Companies by : Michael G. Capatides
Download or read book A Guide to the Capital Markets Activities of Banks and Bank Holding Companies written by Michael G. Capatides and published by . This book was released on 1990 with total page 460 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Organizational Structure and the Diversification Discount by : Peter G. Klein
Download or read book Organizational Structure and the Diversification Discount written by Peter G. Klein and published by . This book was released on 2008 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence on organizational structure, geographic diversification, and performance at bank holding companies (BHCs). First, we show that a BHC's member banks benefit from access to the parent organization's internal capital market. Second, we ask if the benefits of internal capital markets are best realized within loosely structured, decentralized organizations or more consolidated, centralized firms. We find that BHCs with many subsidiaries are less profitable and have lower q ratios than similar BHCs with fewer subsidiaries. However, because we study multi-unit firms in a single industry, our results suggest that the valuation discount reported in the diversification literature in empirical corporate finance reflects not only industry diversification, but also organizational structure.
Book Synopsis Capital Planning at Large Bank Holding Companies by : Federal Federal Reserve
Download or read book Capital Planning at Large Bank Holding Companies written by Federal Federal Reserve and published by CreateSpace. This book was released on 2014-12-08 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Federal Reserve has previously noted the importance of capital planning at large, complex bank holding companies (BHCs). Capital is central to a BHC's ability to absorb unexpected losses and continue to lend to creditworthy businesses and consumers. It serves as the first line of defense against losses, protecting the deposit insurance fund and taxpayers. As such, a large BHC's processes for managing and allocating its capital resources are critical not only to its individual health and performance, but also to the stability and effective functioning of the U.S. financial system. The Federal Reserve's Capital Plan Rule and the associated annual Comprehensive Capital Analysis and Review (CCAR) have emphasized the importance the Federal Reserve places on BHCs' internal capital planning processes, and on the supervisory assessment of all aspects of these processes, which is a key element of a supervisory program that is focused on promoting resiliency at the largest BHCs. These initiatives have focused not just on the amount of capital that a BHC has, but also on the internal practices and policies a firm uses to determine the amount and composition of capital that would be adequate, given the firm's risk exposures and corporate strategies as well as supervisory expectations and regulatory standards. BHCs have long engaged in some form of capital planning to address the expectations of shareholders, creditors, customers, and other stakeholders. The Federal Reserve's interest in and expectations for effective capital planning reflect the importance of the ongoing viability of the largest BHCs even under stressful financial and economic conditions. Robust internal capital planning can also help ensure that BHCs have sufficient capital in a broad range of future macroeconomic and financial market environments by governing the capital actions-including dividend payments, share repurchases, and share issuance and conversion- a BHC takes in these situations. The Federal Reserve's Capital Plan Rule requires all U.S.-domiciled, top-tier BHCs with total consolidated assets of $50 billion or more to develop and maintain a capital plan supported by a robust process for assessing their capital adequacy. CCAR is the Federal Reserve's supervisory program for assessing the capital plans. In 2013, CCAR covered 18 BHCs that participated in the 2009 Supervisory Capital Assessment Program (SCAP). The Federal Reserve's assessment of a BHC's capital planning process includes an evaluation of the risk-identification, -measurement, and -management practices that support the BHC's capital planning and stress scenario analysis, an assessment of stressed loss and revenue estimation practices, and a review of the governance and controls around these practices. The preamble to the Capital Plan Rule outlines the elements on which the Federal Reserve evaluates the robustness of a BHC's internal capital planning-also referred to as the capital adequacy process, or "CAP." This publication describes the Federal Reserve's expectations for internal capital planning at the large, complex BHCs subject to the Capital Plan Rule in light of the seven CAP principles. It expands on previous articulations of these supervisory expectations by providing examples of observed practices among the BHCs participating in CCAR 2013 and by highlighting those practices considered to be stronger or leading practices at these firms. In addition, it identifies practices that the Federal Reserve deems to be weaker, or in some cases unacceptable, and thus in need of significant improvement. However, practices identified in this publication as leading or industry best practices should not be considered a safe harbor. The Federal Reserve anticipates that leading practices will continue to evolve as new data become available, economic conditions change, new products and businesses introduce new risks, and estimation techniques advance further.
Book Synopsis Impact of Bank Holding Companies on Competition and Performance in Banking Markets by : Stephen A. Rhoades
Download or read book Impact of Bank Holding Companies on Competition and Performance in Banking Markets written by Stephen A. Rhoades and published by . This book was released on 1979 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Market Effect of Diversification Mergers by Bank Holding Companies by : Mary Ruth Lindahl-Stevens
Download or read book The Market Effect of Diversification Mergers by Bank Holding Companies written by Mary Ruth Lindahl-Stevens and published by . This book was released on 1975 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Dark-Side of Banks' Nonbank Business by : Jonathan Pogach
Download or read book The Dark-Side of Banks' Nonbank Business written by Jonathan Pogach and published by . This book was released on 2019 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show a dark-side view of internal capital markets in which one segment exploits the funding advantage of another profitable segment to relax its financial constraints. Results demonstrate that bank holding companies (BHCs) shield their nonbank segments, and not their bank segments, from inflexible external dividend policies. Further, bank internal dividends are used to support nonbank segment expansion. We show that BHCs whose nonbank activity had been constrained prior to the passage of the Gramm-Leach-Bliley Act increased their bank segments' payout ratios by 12 percentage points relative to those that had not been constrained.
Book Synopsis Bank Holding Companies and the Public Interest by : Michael A. Jessee
Download or read book Bank Holding Companies and the Public Interest written by Michael A. Jessee and published by . This book was released on 1977 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Bank Competition and Financial Stability by : OECD
Download or read book Bank Competition and Financial Stability written by OECD and published by OECD Publishing. This book was released on 2011-10-05 with total page 87 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report examines the interplay between banking competition and financial stability, taking into account the experiences in the recent global crisis and the policy response to it. The report has been prepared by members of the Directorate of ...
Book Synopsis Capital Structure Adjustments of Bank Holding Companies and Subsidiary Failure by : Chi-Hsiou Daniel Hung
Download or read book Capital Structure Adjustments of Bank Holding Companies and Subsidiary Failure written by Chi-Hsiou Daniel Hung and published by . This book was released on 2017 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: A subsidiary failure may deteriorate the bank holding company's (BHC) financial conditions. BHCs' managers possess better knowledge than market investors concerning the likelihood of subsidiary failure, which gives rise to information asymmetry. We examine the effects of this information asymmetry on capital structure adjustments of BHCs in the periods surrounding subsidiary failure. We find that subsidiary failure significantly affects financial policies of the parent companies. Specifically, BHCs increase leverage ratio as early as one year prior to the failure of their subsidiaries, and substantially lower leverage after subsidiary failure. These capital structure adjustments are attributable to BHCs' internal capital risk and most importantly, the information asymmetry between BHCs and the market.
Book Synopsis Should Business Groups Be Dismantled? The Equilibrium Costs of Efficient Internal Capital Markets by : Heitor Almeida
Download or read book Should Business Groups Be Dismantled? The Equilibrium Costs of Efficient Internal Capital Markets written by Heitor Almeida and published by . This book was released on 2011 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the relationship between conglomerates' internal capital markets and the efficiency of economy-wide capital allocation, and identify a novel cost of conglomeration that arises from an equilibrium framework. Because of financial market imperfections engendered by imperfect investor protection, conglomerates that engage in quot;winner-pickingquot; (Stein, 1997) find it optimal to allocate scarce capital internally to mediocre projects, even when other firms in the economy have higher productivity projects that are in need of additional capital. This bias for internal capital allocation can decrease allocative efficiency even when conglomerates have efficient internal capital markets, because a substantial presence of conglomerates might make it harder for other firms in the economy to raise capital. We also argue that the negative externality associated with conglomeration is particularly costly for countries that are at intermediary levels of financial development. In such countries, a high degree of conglomeration, generated for example by the control of the corporate sector by family business groups, may decrease the efficiency of the capital market. Our theory generates novel empirical predictions that cannot be derived in models that ignore the equilibrium effects of conglomerates. These predictions are consistent with anecdotal evidence that the presence of business groups in developing countries inhibits the growth of new independent firms due to lack of finance.
Book Synopsis Global Banks and International Shock Transmission by : Nicola Cetorelli
Download or read book Global Banks and International Shock Transmission written by Nicola Cetorelli and published by DIANE Publishing. This book was released on 2010-11 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Global banks played a significant role in transmitting the 2007-09 financial crisis to emerging-market (EM) economies. The authors examine adverse liquidity shocks on main developed-country banking systems and their relationships to EM across Europe, Asia, and Latin Amer., isolating loan supply from loan demand effects. Loan supply in EM across Europe, Asia, and Latin Amer. was affected significantly through three separate channels: (1) a contraction in direct, cross-border lending by foreign banks; (2) a contraction in local lending by foreign banks¿ affiliates in EM; and (3) a contraction in loan supply by domestic banks, resulting from the funding shock to their balance sheets induced by the decline in interbank, cross-border lending. Charts and tables.
Book Synopsis Improving State Enterprise Performance by : Russell Muir
Download or read book Improving State Enterprise Performance written by Russell Muir and published by World Bank Publications. This book was released on 1995-01-01 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt: Living Standards Measurement Study Paper No. 120. Provides an overview of the World Bank's Living Standard Measurement Studies (LSMS) surveys and outlines how readers may find more information on specific surveys. A first reference for those interested in using LSMS data in their research.
Book Synopsis The Transmission of Liquidity Shocks by : Mr.Philippe D Karam
Download or read book The Transmission of Liquidity Shocks written by Mr.Philippe D Karam and published by International Monetary Fund. This book was released on 2014-11-19 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the transmission of bank-specific liquidity shocks triggered by a credit rating downgrade through the lending channel. Using bank-level data for US Bank Holding Companies, we find that a credit rating downgrade is associated with an immediate and persistent decline in access to non-core deposits and wholesale funding, especially during the global financial crisis. This translates into a reduction in lending to households and non-financial corporates at home and abroad. The effect on domestic lending, however, is mitigated when banks (i) hold a larger buffer of liquid assets, (ii) diversify away from rating-sensitive sources of funding, and (iii) activate internal liquidity support measures. Foreign lending is significantly reduced during a crisis at home only for subsidiaries with weak funding self-sufficiency.
Book Synopsis Do Multinational Banks Use Internal Capital Markets and How? by : Bang Nam Jeon
Download or read book Do Multinational Banks Use Internal Capital Markets and How? written by Bang Nam Jeon and published by . This book was released on 2015 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines internal capital markets between multinational banks and their foreign subsidiaries. We observe the lending behavior of more than 300 subsidiaries within 69 multinational banks from 24 home countries, which conducted banking activities in 50 emerging and developing countries during the period 1994-2008, and find robust evidence for the operation of internal capital markets. Foreign subsidiaries increase their credit in host countries when their parent banks have higher internally added funds, and the funds available from parent banks reduce the sensitivity of subsidiaries to their own internal funds. We also find that the funds from parent banks are allocated in favor of smaller and less profitable subsidiaries. Higher capitalization of subsidiaries enhances the buffering effects of parent bank internal funds on subsidiaries' own internal funds, suggesting that foreign subsidiaries could insulate the effects caused by an adverse shock upon their parent banks by raising their own capital sufficiency. Our findings have useful implications for internal capital markets in multinational banking as a channel of the contagion of the recent global financial crises from the U.S. to various other countries.
