Asset Holdings Research Articles

How Does Digital Inclusive Finance Affect Household Financial Vulnerability?

ABSTRACT Based on the China Health and Retirement Longitudinal Study (CHARLS) three-wave data (2013, 2015, and 2018), this paper constructs a panel Probit model to investigate the impact of digital inclusive finance on household financial vulnerability. The empirical results show that the development of digital inclusive finance can significantly reduce household financial vulnerability. For 1% increase in digital inclusive finance, the probability of household financial vulnerability decreases by 7.0%. The results are robust after addressing endogeneity issues and altering regression models, the dependent variable, and the independent variable. Through the influencing mechanism tests, this paper finds that digital inclusive finance reduces the financial vulnerability of households by reducing credit constraints, promoting entrepreneurship, and increasing risky asset holdings. The heterogeneous effects show that the vulnerability-mitigation effect of digital inclusive finance is more significant in better-educated and younger households and in urban and developed areas.

Micro-loans, macro-impacts: Examining the reverberating gains for Habru Woreda’s small-scale agrarian households.

Background Most people in third-world countries are impoverished and rely on small-holder farming as a source of income. Due to a lack of working capital to diversify their sources of income and acquire new sources, farmers are highly dependent on financial institutions to access microcredit. Method This study utilized logistic regression and propensity score matching methods to analyze the primary data collected from a sample of 385 household heads. Results The Estimation results of the study shows that Gender, age, family size, and education, access to irrigation, extension services, dependency ratio, and distance to credit sources were among the significant determinants of access to microcredit service. Conclusion Although microcredit led to an increase in household spending, real asset holdings did not improve. In addition to the need for supplementary interventions like financial literacy training and asset-building programs to encourage asset accumulation among these small-scale agrarian households, high interest rates and repayment burdens are blamed for this uneven result.

Impact of the regional financial reform on corporate financialization: Evidence from China

This study employs the data of Chinese A–share listed companies from 2007 to 2022, considers the implementation of the regional financial reform pilot zone policy as a quasi-natural experiment, and tests the impact of this reform on the financial asset holdings of nonfinancial firms by using a difference-in-difference model. Based on the findings, the regional financial reform restrains the financialization of nonfinancial firms through two paths: 1) promoting profit equalization, which reduces the return gap between real and financial investments; and 2) balancing the allocation of credit resources, which curbs corporate participation in shadow banking. Further analysis showed that the governance effect of the regional financial reform is especially prominent for firms in regions with lower administrative, market development, and financial development levels, especially in the central and western regions. In the economic consequences test, we found that the dampening effect of the regional financial reform on corporate financialization can promote real investments, especially innovation investments. These findings not only enrich the research on the determinants of corporate financialization and the economic consequences of the regional financial reform, but they also provide insights for financial reforms in other emerging economies.

China’s public long-term care insurance and risky asset allocation among elderly households

China’s elderly households are characterized by higher holdings of cash and cash equivalents and lower holdings of stocks and bonds in their financial portfolios. We utilize the public Long-term Care Insurance (LTCI) reform and data from the China Health and Retirement Longitudinal Study (CHARLS) to examine how LTCI coverage affects risky asset holdings among newly insured elderly households. Employing a difference-in-differences methodology, our findings reveal that LTCI significantly increases the share of risky assets in the financial portfolios of older families. The increased preference for risky assets may be a result of a weakening incentive for precautionary savings. Decomposing risky assets into bonds and stocks, we find that the increase in the share of risky assets following the LTCI pilot comes mainly from bond investments rather than stocks, which indicates that LTCI has a limited effect on risk asset holdings among the Chinese elderly. Our study contributes to understanding the economic impacts of China’s public LTCI by showing that LTCI may lead to changes in asset allocation strategies among elderly households.

How motivations and costs affect financial knowledge learning? Evidence from a large-scale FinTech experiment in China

Utilizing the launch of mobile wealth management services in China in 2013 as a shock to financial education, we analyze a panel of 16,440 households through a difference-in-differences strategy to examine how learning motivations and costs affect financial knowledge learning. Results show that using mobile services encourages risky asset holdings and enhances the self-discipline to learn, which, coupled with low-cost and personalized learning tools provided through the services, increases financial knowledge. We contribute by utilizing a large-scale experiment beyond the classroom to show the role of learning motivations and costs in financial knowledge learning, therefore help clear the controversy on the effectiveness of financial education.

Job quality and institutional investors: Evidence in 17 OECD countries, 1993-2017

This article investigates the relationship between the share of assets held by different institutional investors as a proportion of GDP and a synthetic index of job quality in 17 OECD countries from 1993 to 2017. Our first contribution is to provide a new, multidimensional composite indicator of job quality based only on objective dimensions. According to this measure, a continuous decline in job quality is observed in many OECD countries. Second, the emergence of institutional investors as central financial actors since the 1980s has significantly affected labour relations. In this regard, we argue that the increasing influence of institutional investors through their effects on wages and jobs is associated with a lower level of job quality. Using fixed-effects OLS and IV regressions, we find little support that the share of asset holdings by institutional investors is correlated with a lower level of job quality, mainly due to the small magnitude of the coefficient estimates. Finally, we find that the job quality-reducing effect of the share of assets held by institutional investors is more pronounced in countries that have experienced a decline in union bargaining power, again with a small magnitude of our different estimates.

Interest rate liberalization and household investment in China

In this study, we investigate the impact of interest rate liberalization on household investment behavior in China using data from the China Household Finance Survey from 2011 to 2019. We find that financial liberalization significantly increases the likelihood of households participating in financial markets and raises their holdings of riskier assets, driven by the wealth effect. This effect is more pronounced among higher-income, higher-asset, and better-educated households, without housing mortgages, as well as urban households. Our results highlight the importance of financial liberalization policies and provide new perspectives on the “limited participation puzzle” documented in emerging economies, where relatively few households actively invest in financial assets despite high expected returns. This study underscores how interest rate deregulation incentivizes household portfolio reallocation and promotes financial inclusion across socioeconomic groups.

Capital controls in China: A necessity for macroeconomic stability

This paper investigates the crucial role of capital controls in maintaining macroeconomic stability in China. We develop an open macroeconomic model integrating capital controls within a managed floating exchange rate system. Our model shows that capital controls enhance the effectiveness of foreign exchange interventions by restricting capital outflows and providing a broader array of policy options, though they may also create discrepancies between domestic and foreign asset holdings. Simulations using quarterly time-series data reveal that capital controls are essential for the success of both sterilized and non-sterilized interventions. These results indicate that the combined use of capital controls and foreign exchange interventions can reduce macroeconomic volatility in China. Moreover, our analysis of fixed versus floating exchange rate regimes suggests that an inappropriate regime choice can increase volatility in capital flows. Therefore, China should adopt a balanced financial approach within its managed floating system to stabilize the macroeconomy.

A Proposed Framework of Islamic Inheritance and Estate Planning of Digital Assets: The Malaysian Case of Crypto Assets

Purpose — This paper aims to propose a framework of Islamic estate planning of crypto assets in Malaysia. Design/Methodology/Approach — The paper used an interview method to obtain information related to Islamic estate planning of crypto assets. Semi-structured interviews were conducted with informants of five different backgrounds including lawyers, estate planners, Sharīʿah experts, digital asset exchange (DAX) operators, and crypto owners. The data gathered was analysed using thematic analysis to construct the framework of Islamic estate planning of crypto assets. Findings — The paper identifies important prerequisites of Islamic estate planning of crypto assets. Further, a framework of estate planning of crypto assets is developed based on the information gathered from all related stakeholders. It is posited that the Securities Commission Malaysia (SC) has a vital role to play in safeguarding the financial interests of digital asset holders and their beneficiaries and that implementation of this framework would align with and uphold the objectives of Sharīʿah (maqāṣid al-Sharīʿah). Originality/Value — This paper presents a framework of Islamic estate planning of crypto assets, it being one of the first studies to do so from the Islamic perspective, which is not only useful and relevant for Malaysians (Muslims) but also for other countries. Research Limitations/Implications — The first limitation of the paper is that the framework is developed based on a qualitative method. There is no evidence of its validity, which is a gap that can be explored in the future. Second, it involves the perceptions of five types of respondents, which may be broadened to other related stakeholders such as regulators—i.e., Securities Commissions or any ministries—in future studies.

Tourism-Driven Economies and Income Disparity: Insights From a Regression Discontinuity Design

This paper aims to answer two questions: (1) Does overtourism incline countries to favorise the capital asset holder instead of workers in income distribution? (2) Does income inequality come hand in hand with overtourism? Employing Kaldor's theory of income distribution, this study adapts its theoretical framework to assess countries with a specialization in tourism. The analysis encompasses data from 115 developed countries over the period of 2000 to 2019. A Regression Discontinuity Design (RDD) methodology is utilized for the empirical investigation, categorizing key variables based on the exposure of a country's unit to a tourism-focused developmental strategy. The study reveals that adopting overtourism as a developmental strategy has led to increased inequality, characterized by a rising capital share and a declining labor share over time. Evidence supporting these findings is presented through both parametric and non-parametric Regression Discontinuity Design (RDD) analyses. Robustness checks and placebo tests corroborate these results.

Geopolitical risk and corporate innovation: Evidence from risk preference and risk-taking capacity perspectives

This paper investigates how geopolitical risk affects corporate innovation from the perspectives of corporate risk preference and risk-taking capacity. We document a significant positive impact of geopolitical risk on corporate innovation and find that corporate risk preference and risk-taking capacity strengthen the positive impact of geopolitical risk. Further analysis shows that market competition and corporate financial asset holdings are potential channels through which geopolitical risk increases corporate innovation.

Exploring Nonlinear Linkage between Corporate Financialization and Innovative Efficiency: Identification and Governance of Excessive Financialization*

AbstractThis paper investigates the underlying causes of the nonlinear link between financial asset holdings and innovative efficiency. It identifies an inverted U‐shaped pattern linking corporate financialization to innovation, with financing restrictions, agency costs, and business risk serving as some of the relationship's partial mediating factors. By categorizing financial assets into short‐term monetary and long‐term nonmonetary types, it reveals heterogeneous effects on innovative efficiency, suggesting that the impact is not solely crowding out or a pulling effect but varies based on asset type and proportion. Additionally, it argues for continual adjustment of proper corporate financialization levels based on firm‐specific factors and changing external conditions. Notably, excessive financialization appears less prevalent among Chinese firms, with internal governance and external environmental enhancements recommended to optimize financialization for innovation.

DETERMINANTS OF CUSTOMER SATISFACTION IN RETAIL BANKING: EMPIRICAL EVIDENCE FROM JAPANESE BANK CUSTOMERS

As a consumer-oriented service industry, the quality of customer service provided by banks and their customers' overall satisfaction with their services are becoming increasingly important. This study examines the factors influencing customer satisfaction with banking services provided by Japanese regional banks. Using data from the Japan Financial Institution Customer Ratings METER® of about 200,000 cases, we estimated the factors affecting customer satisfaction using an ordered probit model. The results indicate a positive correlation between direct financial services from regional banks and customer satisfaction. This relationship is solid when customers hold investment-related products. Additionally, we observed that individual customer satisfaction tends to decline with increasing financial asset holdings and increase as customers become more financially literate. Furthermore, we noticed that customer satisfaction tends to be higher for females than males, younger people than the elderly, and occupied customers than for unoccupied customers. The findings of this study suggest that customers may be more attracted to regional banks that provide investment information and advice tailored to their circumstances. It may be beneficial for regional banks to understand better factors that influence customer satisfaction, such as the age and gender of their customers, their level of financial Literacy, and the amount of financial assets they have. It would be beneficial for regional banks to consider these factors and enhance the quality of their direct interactions with customers and the customer service provided by their staff and call centers. This could help regional banks build long-term, ongoing relationships with their customers.

Balancing against geopolitical risk: Household investment portfolios during the U.S.-China trade war

Exploiting the unique context of the U.S.-China trade war, this study evaluates whether households balance their exposure to geopolitical risks with the risk of their investment portfolios. Difference-in-differences analysis reveals that Chinese households respond to the trade war by reducing risky asset holdings, and this effect is more pronounced in export-intensive cities. Additional evidence suggests that households become more risk-averse in response to the trade war. These results shed light on the implications of geopolitical risks for households’ financial decisions.

Challenges of Collecting Zakat on Digital Assets

This paper aims to investigate the challenges associated with collecting Zakat on Bitcoin, one of the digital assets in Malaysia. The study is qualitative as interviews were conducted with Zakat officers, Chief Executive Officer f MAIPs Perlis, Muftis, Scholars, and experts. The study identifies key challenges. Firstly, limited knowledge among the general population complicates determining whether specific digital assets are Zakatable. Additionally, the study highlights that technological infrastructure deficiencies hinder the efficient management of digital assets for Zakat purposes. The findings also reveal that the challenge of credit risk arises from the unpredictable nature of digital asset prices, leading to uncertainties in when to liquidate digital assets (Bitcoin) after receiving Zakat. Note that regulatory uncertainty due to the absence of clear guidelines impacts the establishment of standardized procedures. The digital assets are unstable since they are not properly regulated by Bank Negara. It was discovered that the challenge is also related to security concerns related to cybersecurity risks, including hacking and unauthorized access, which pose significant threats to Zakat funds collected as digital assets. It is expected that the findings of this research will educate Muslims on Zakat's obligations to digital assets. It will also inform policymakers, regulators, and stakeholders, guiding future initiatives and policies to foster compliance, transparency, and security in collecting Zakat from digital asset holdings.

Homeownership and household risky asset holdings: Moderating role of social security and the mediating role of subjective well-being

In the context of China's evolving urban landscape, this study examines the relationship between homeownership and the propensity for households to engage in risky financial investments, while considering the moderating role of social security and the mediating influence of subjective well-being. Leveraging data from the 2019 China Household Finance Survey (CHFS) and employing quantitative analysis, the findings reveal that homeownership positively correlates with riskier investment behaviors, a relationship nuanced by social security provisions and mediated by the homeowners' sense of well-being. These insights challenge traditional financial behavior theories by highlighting the complex interplay of socio-economic factors and personal well-being in investment decisions, suggesting significant implications for policymakers and financial advisors. The study emphasizes the importance of integrating psychological and economic security in understanding financial behaviors, opening avenues for further research into the impact of technological advancements and cross-cultural applicability.

A simple model of a central bank digital currency

We develop a general equilibrium model that highlights the trade-offs between physical and digital forms of retail central bank money. The key differences between cash and central bank digital currency (CBDC) include transaction efficiency, possibilities for tax evasion, and, potentially, nominal rates of return. We establish conditions under which cash and CBDC can co-exist and show how government policies can influence relative holdings of cash, CBDC, and other assets. We illustrate how a CBDC can facilitate negative nominal interest rates and helicopter drops, and also how a CBDC can be structured to prevent capital flight from other assets.

Information Asymmetry and Agency Problems in the Financial Market

This paper discusses that the agency problem stems from the information asymmetry between shareholders and professional managers, this comes from the fact that shareholders cannot have expertise in every aspect. Therefore, in the actual operation of the company, it is necessary to hire professional managers to manage the company. However, at the same time, the two parties with asymmetric information have different ways of income. The professional manager whose income mainly comes from a fixed salary is bound to be more interested in short-term development than like the shareholders. The reason. The main income is profiting sharing and future asset appreciation. As a result, managers will not value long-term development as much as shareholders. As well as this paper will discuss whether it can minimize the agency cost by changing the remuneration method of professional managers to equity incentive value. This paper will also discuss the feasibility and possible problems by having directors directly involved in the management of the company, or creating a regulator to oversee the professional managers.

The influence of managerial ability on corporate financialization

This study investigates the influence of managerial ability on corporate financialization level. We find that stronger managerial ability leads to more financial asset holdings owing to fewer financing constraints realized through highly capable managers' higher revenue-generating capacity and lower risks in financial asset investments resulting from their higher ability to recognize quality financial products. We further explore the influence of managerial ability on corporate financialization level in the presence of high-quality information disclosure, managers' financial institution work experience, high economic policy uncertainty, and employee stock ownership. We find that high-quality information disclosure and managers' financial institution work experience strengthen the positive correlation between corporate financialization level and managerial ability. However, high economic policy uncertainty and employee stock ownership weaken the positive correlation between corporate financialization level and managerial ability. Our findings suggest that managers who are more capable of generating revenue during operating activities tend to hold more financial assets, whereas adding constraints to corporate financing activities may hinder managers’ ability to address financial asset investment risks, thus reducing corporate financialization level.

Liquid Asset Holdings and Banking Profitability: Evidence from South Asia

Abstract Ensuring liquidity is critical for the functioning of banks. This study investigates the functional form of bank profitability and liquid asset holdings. We test for an inverted Kuznets curve-shaped quadratic polynomial relationship using generalized least square regression on an unbalanced quarterly dataset of Islamic and conventional banks of South Asia from 2016 to 2021. The study finds that profitability and liquid asset holdings have a concave nonlinear relationship suggesting a profit-maximizing level of liquidity. However, Islamic banks are less nonlinear than conventional banks, suggesting that their profitability is less responsive to changes in liquid asset holdings and needs more liquid assets to maximize profitability. Additionally, we find that the optimal level of liquidity to maximize profitability fell during Covid-19 as the relationship became more nonlinear. The study provides evidence of unique liquid management requirements for different types of banks based on how bank profitability response differs across different types of banks. The development of a one-fit-all liquidity management framework as in the case of the Basel III liquidity risk framework may not be appropriate. From a policy standpoint, the Basel III liquidity risk framework needs to be tailored especially in the context of Islamic banks.