Capital Injections Research Articles

Management of public sector records in Ghana: a descriptive survey

Purpose – The purpose of this paper is to survey and evaluate the management of public sector records in Ghana with a view to making constructive recommendations to ensure efficiency in public administration. Design/methodology/approach – Published and unpublished works, in addition to institutional reports, acts and conference materials, were used for the survey and evaluation. Findings – Public sector records management has been a very topical issue in Africa and Ghana. It has remained a very fundamental subject in Ghana since the institution of public sector reforms in the 1990s. Before the institution of the reform programme, critical records were inaccessible due to unstructured records systems in the ministries, departments and agencies and other government establishments. It was found out that the reform programme had brought on board immense capital injection into the records management sector which enabled an overhaul of the system. All registries in the public sector were restructured, a new legislative framework was put in place, a functional records centre was established, an omnibus retention schedule was developed and a number of records staff were trained and re-trained. It was however found out that Act 535, having been in operation for 17 years, the needed regulation to make it more operational has not yet been put in place. It is the hope that with adequate funding and structural support, the new system will be sustained to the benefit of efficiency and productivity of the Ghana public sector. Research limitations/implications – Being a descriptive survey, the research engaged in very little evaluation of the impact of the new system put in place on the levels of efficiency and productivity in the public sector. This should be the focus of further research to be carried out. Practical implications – This paper has established the importance of how structures must be sustained and systems continuously re-tooled to accommodate changing trends in records management for good governance. Originality/value – The paper is a descriptive survey of literature, manuals reports and some degree of personal observations. It is more of a situation paper and its value resides in the precedence and the evidential value of system intervention and re-tooling.

Generating Employment in Poor and Fragile States: Evidence from Labor Market and Entrepreneurship Programs

The world's poor -- and programs to raise their incomes -- are increasingly concentrated in fragile states. We review the evidence on what interventions work, and whether stimulating employment promotes social stability. Skills training and microfinance have shown little impact on poverty or stability, especially relative to program cost. In contrast, injections of capital -- cash, capital goods, or livestock -- seem to stimulate self-employment and raise long term earning potential, often when partnered with low-cost complementary interventions. Such capital-centric programs, alongside cash-for-work, may be the most effective tools for putting people to work and boosting incomes in poor and fragile states. We argue that policymakers should shift the balance of programs in this direction. If targeted to the highest risk men, we should expect such programs to reduce crime and other materially-motivated violence modestly. Policymakers, however, should not expect dramatic effects of employment on crime and violence, in part because some forms of violence do not respond to incomes or employment. Finally, this review finds that more investigation is needed in several areas. First, are skills training and other interventions cost-effective complements to capital injections? Second, what non-employment strategies reduce crime and violence among the highest risk men, and are they complementary to employment programs? Third, policymakers can reduce the high failure rate of employment programs by using small-scale pilots before launching large programs; investing in labor market panel data; and investing in multi-country studies to test and fine tune the most promising interventions.

Fair value disclosure, liquidity risk and stock returns

This paper aims to investigate the impact of company liquidity risk on the stock prices of financial and non-financial companies by analyzing investors’ reactions to 106 crisis events over the period from 2008 to 2010. Companies’ liquidity risk shows up in the three levels of fair value information (level 1-mark to market, level 2-market observable input and level 3-mark to model) disclosed in their balance sheets, with level 3 illiquid assets representing a greater liquidity risk and resulting in a greater company liquidity risk. The role played by liquidity risk information in investors’ decision-making is explored by analyzing their reactions to liquidity-constraining events, capital injections and bank bailouts for 313 European companies. The empirical evidence is based on the fixed effects model and Partial Least Squares regressions. These findings demonstrate that investors’ reactions to the crisis events are affected by the liquidity risk conveyed by the levels of fair value hierarchy in both financial and non-financial firms. During liquidity-constraining events, investors have stronger negative reactions to companies with more level 3 illiquid assets and liabilities on their balance sheets. During liquidity-expanding events, investors react more positively to companies with more illiquid assets.

Technology choice and bank performance with government capital injection under deposit insurance fund protection

The barrier option theory of corporate security valuation is applied to the two-stage contingent claims of a regulated bank during a financial turmoil. This paper examines the relationships among government capital injection, regulatory deposit insurance fund protection, bank interest margin, and technology choice of investment in human resource relative to information technology. An increase in human resource results in an increased interest margin, and further a decreased default risk when the bank adopts a relatively high level of information technology. We also show a positive effect of government capital injection on human resource investment and a negative effect on bank default risk. Regulatory deposit insurance fund protection weakens the increased human resource investment, but reinforces the decreased default risk. Both the government capital injection and the regulatory deposit insurance fund protection may stabilize the distressed bank explicitly considering technology choice.

The Impact of Bakery Industry Supply Chain on the Pricing of Bread in Zimbabwe

The paper sets out to carry an exploratory study for improving supply chain activities in an effort to reduce the bread retail price. The price of bread in Zimbabwe is more than that of most African countries such as Zambia, Namibia and Malawi whose prices range from US$0.50 to US$0.75 per loaf of bread. The major problem with the bread industry today is that there seems to be a hiking of raw materials prices, labour and production costs. The major question then is why bread costs 30 cents more in Zimbabwe than in other African countries. Data was collected using100 consumer questionnaires, 100 bakery/retailer and 5 in-depth interviews. Convenience, judgemental, quota and stratified random sampling methods were used to select the respondents. Purchasing side findings were that 59% to 65% of the bakeries stated the shortage of flour in the country as the major cause behind the high price of bread Most of the flour being used by bakeries is import flour. The second purchasing side problem is that of expensive suppliers of flour. Electricity shortages and untimely stoppages of power were sited by 76% of the production side players as the major impediment to the efficient production of bread. Their assertion was that the power cuts led to low production which inturn led to high inefficiencies in the production line. Fortytwo percent (42%) of customers said that bread needed improvement in quality issues such as packaging and ingredients used. They agreed that if the quality improved they would pay more for it. The paper therefore concluded that the high price of bread in Zimbabwe as compared to other countries is a result of the use of expensive suppliers along the line coupled with low capacity machinery that has led to lowered output. In the long run the lowered output has resulted in sub-optimal operations in bread factories. The researchers recommended a Government intervention through policy change in terms of reduction in duty and tariffs levels on imported raw materials. Government could also intervene through capital injection into the supply chain. Other recommendations include business to business (B2B) collaboration and partnerships between wheat suppliers, marketing boards, millers, bakeries and retailers. Backward integration and rationalisation of the supplier base by bakeries is likely to lower the price of producing bread and hence its retail price.

Should zombie lending always be prevented?

It has been argued that zombie lending might have been one of the main culprits behind the sluggish Japanese recovery in the so-called “lost decade”. Among others, zombie lending may lead to misallocation of capital, reduction of profits for healthy firms, and lower employment. The only remaining question is: Why do banks engage in zombie lending practices? Is it due to wrong incentives for bank managers, or perhaps misguided government policies? Using a simple model, the paper exposes a strong link between collateral value and the strategic importance of zombie lending. The author shows that zombie lending may be an optimal strategy for a bank in some cases as it leads to greater lending ex-ante and prevents further losses from fire sales. Consequently, it can be argued that zombie lending is a side effect of market incompleteness and is ex ante welfare improving, so that it may not be possible or even desirable to prevent its occurrence. Another policy implication is that capital injection into the banks would not solve any problem. However, direct purchase of the collateral on the market would certainly alleviate the problem of zombie lending.

Should bank loan portfolio be diversified under government capital injection and deposit insurance fund protection?

The barrier option theory is applied to the contingent claims of a regulated bank under multiple loan portfolio diversifications and government capital injections. An increase in capital injection increases the bank's interest margin and decreases the default risk. With increased government capital injection, profitability is increased and stability is reduced when the diversification degree increases. The increased return and the reduced risk are attenuated as the deposit insurance fund protection increases. Although the bank faces the two conflicting capitalization policies, we may suggest that loan portfolio should be as diversified as possible, producing better profitability and greater safety for the bank.

Effective regulatory regimes: a comparative analysis of GCC financial regulators

Purpose– The purpose of this study is to investigate the effects of the global financial crisis on Gulf Cooperation Council (GCC) bank regulation and the impact on the region and the policies adopted by the regulators to avoid financial panic and contagion.Design/methodology/approach– The author examines GCC countries’ financial soundness indicators in terms of capital adequacy, non-performing loans and provisioning rates, including central bank liquidity support, deposit guarantees, capital injections and monetary easing and policies to mitigate risk assessment, and the monitoring and elimination of practices promoting excessive risk. GCC compliance regimes through multinational organizations and the exposure of the region to cross-border financial linkages to test for financial soundness are assessed.Findings– Overall, results indicate that comprehensive regulatory oversight exists in the GCC in conformity with international standards, and Basel capital adequacy requirements, and that the GCC regulators have acted prudently to establish high coverage in all measures but that gaps exit concerning cross-border surveillance and a need for imposition of capital surcharges on banks deemed high systemic risk. The supervision of Islamic financial institutions and a lack of inter-GCC liquidity support mechanism for this segment are highlighted.Practical implications– The paper shows that the GCC regulators need to address cross-border surveillance, as local banks branch internationally and foreign banks operate in the region.Originality/value– The author is not aware of any similar work that compares the regulatory policies of the GCC.

Optimal Dividend and Capital Injection Strategies in the Cramér-Lundberg Risk Model

We discuss the optimal dividend and capital injection strategies in the Cramér-Lundberg risk model. The value functionV(x)is defined by maximizing the discounted value of the dividend payment minus the penalized discounted capital injection until the time of ruin. It is shown thatV(x)can be characterized by the Hamilton-Jacobi-Bellman equation. We find the optimal dividend barrierb, the optimal upper capital injection barrier 0, and the optimal lower capital injection barrier-z*. In the case of exponential claim size especially, we give an explicit procedure to obtainb,-z*, and the value functionV(x).

Optimal dividend problems for a jump-diffusion model with capital injections and proportional transaction costs

In this paper, we study the optimal control problem for a company whosesurplus process evolves as an upward jump diffusion with random return on investment. Three types of practical optimization problems faced by a company that can control its liquid reserves by paying dividends and injecting capital. In the first problem, we consider the classical dividend problem without capital injections.The second problem aims at maximizing the expected discounted dividend paymentsminus the expected discounted costs of capital injections over strategies with positive surplus at all times. The third problem has the same objective as the second one, but without the constraints on capital injections. Under the assumption of proportional transaction costs, we identify the value function and the optimal strategies for any distribution of gains.

Old Boy Network and Capital Injection: Evidence from Japanese Banks

Old Boy Network and Capital Injection: Evidence from Japanese Banks

Productivity efficiency of the systemic banks: Evidence from Greece

This study delves into the productivity efficiency of Greek systemic banks for the years 2013 and 2014, that is, the two years following the recapitalization process of the Greek banking system. Greece’s ongoing debt crisis has severely inflicted domestic banks by causing significant losses in their bond portfolio through the PSI scheme. The immediate consequences were loan portfolio restructurings and capital injections from the Hellenic Financial Stability Fund (HFSF) in order to rebuild the banking system. Employing Data Envelope Analysis to test banking efficiency, we calculate the Malmquist productivity indices for the post-recapitalization period. Our results display that all Greek systemic banks enjoy a remarkable productivity increase of 17.3% according to the geometric mean approach and 18% according to the weighted mean approach.

Credit Risk Analysis of Local Government Financing Platform – An empirical study based on KMV model

The local government financing platform is set up by local government through state-owned assets, real estate and equity capital. The functions of these companies are financing, construction, operation, the repaying debts. The local government financing platform can broaden the financing channels of local government in a great extent; alleviate the pressure of capital requirement. But at the same time, with the gradual expansion of the scale of debt, a series of problems has arisen: the amount of financing platform companies is huge, debt repayment depends too much on real estate price, the integration of government administration with enterprise, capital injection, and accounts of these companies are not well exposed. Once these problems outbreak, it may cause a series of financial crises, thereby threaten the entire banking industry even the healthy development of the national economy.

Dollarization and economic development in Zimbabwe: An interrupted time-series analysis

This paper examines the impact of dollarization on the performance of the Zimbabwean economy from 2003 to 2014 using an interrupted time-series analysis. In Zimbabwe’s case, dollarization was the official replacement of the Zimbabwean dollar with the U.S. dollar. Rapid dollarization in the economy was accelerated by the exogenous shock caused by the injection of cash dollars into the Zimbabwean economy, mostly from international transfers. Since the official adoption of dollarization, Zimbabwe is largely a cash-based economy, with a huge amount of U.S. dollars that are in circulation outside the banking system. A hands-off approach to currency management has served Zimbabwe well since 2009, but a number of risks are beginning to emerge as the economy has slowly regenerated itself and the need for large capital injections has increased. Macroeconomic data obtained from the World Bank and from the Reserve Bank of Zimbabwe’s Monthly Economic Review is analysed. According to the tests conducted, it was found that dollarization did introduce some macroeconomic stability in Zimbabwe although a few key macroeconomic variables showed a sustained improvement. Statistical analysis shows that increased dollarization had positively affected reversed the spiralling effects of hyperinflation that were prevalent prior to 2009, although inflationary pressures still continued, albeit at a slower pace. This research has implications not just for Zimbabwean policy makers as they grapple with decisions pertaining to re-adoption of a local currency and/or the continuation of the use of the US dollar and/or the adoption of a regional currency, for example, the South African rand. The African Union and specifically, the Southern Africa Development Community should look at these policy issues very closely in order to provide policy direction to its member states.

Analysis of Islamic Bank's Performance and Strategy After Spin-off as Islamic Full-fledged Scheme in Indonesia

This paper analyses the performance and strategy of Islamic banks after the spin-off and establishment of a full-fledged Islamic bank (separated from the parent bank). Siswantoro (2012) stated that one good strategy was to acquire a good conventional bank then convert it into a full-fledged Islamic bank. The research methodology used is descriptive with graph analysis (a) after spin- off and (b) after September 2010. The sample in this research is eight Islamic banks that were recently established as full-fledged Islamic banks. Most Islamic banks that have been converted in the full-fledged scheme could optimize some source of funding such as capital injection and increasing temporary investment deposit. Murabahah (selling activity) still dominated their loan due to low risk and fixed income.

Bank Interventions and Options-Based Systemic Risk: Evidence from the Global and Euro-Area Crisis

Using a novel dataset on government interventions into financial institutions between 2008-2013, we examine the impact of capital injection announcements on the downside correlation risk premium (DCRP), the compensation that investors demand to bear the risk of large correlated drops in banks' stock prices. We find that intervention announcements significantly reduce DCRP in the U.S., while only interventions involving multiple banks reduce DCRP in the euro area. Interventions in the euro area appear to be fragmented, as they are more effective for banks within the country intervening, especially for countries that are less fiscally constrained and have lower CDS spreads.

Bank Interest Margin and Default Risk under Basel III Capped Capital Adequacy Accord and Regulatory Deposit Insurance Fund Protection

We study the optimal bank interest margin and default risk under the capped ratio schedule of government capital instruments in the Basel III Capital Adequacy Accord and the Deposit Insurance Fund arrangement program. We show that an increase in the capped ratio (a decrease in the capped government capital injection) increases the default risk in the bank’s equity return at a reduced interest margin. Regulatory deposit insurance fund protection reinforces the reduced bank interest margin and the increased default risk. The capped ratio schedule as well as the fund protection program makes the bank more prone to loan risk-taking, thereby adversely affecting the stability of banking system. This paper suggests that the two means of government intervention in response to the recent financial crisis might be not appropriate for a bank in distress, particularly from the standpoint of bank failure.

Revisiting the Competition-Stability Nexus in the Euro Area in the Light of the Global Financial Crisis

The euro area, the countries that have adopted the euro, is converging some more towards a banking union. Starting from November 2014, the European Central Bank has become the single supervisor of euro zone banks calling for a more integrated supervision. Despite the on-going process, there are few studies that focus on the relationship between bank fragility and competition specifically for this economic block. Furthermore, it is not yet clear the extent of the relationship during a period of market turmoil and whether competition policies should account for the costs associated to systemic instability. We assess the relationship between market power and financial stability for the Eurozone banks over the period 2005-2012. We find that market power increases bank stability and it implies a net pecuniary cost after discounting for the cost of government intervention. We show that bank’s business model is significantly positively related to individual bank stability and that high market power is associated with lower stability during the recent market turmoil (2008-2012). Moreover, we advocate that capital injections and asset relief measures are effective and increase individual bank soundness.

Optimal Dividends and Capital Injections in the Dual Model with a Random Time Horizon

This paper investigates an optimal dividend and capital injection problem in the dual model with a random horizon. Both fixed and proportional costs from the transactions of capital injection are considered. The objective is to maximize the total value of the expected discounted dividends and the penalized discounted capital injections during the horizon, which is described by the minimum of the time of ruin and an exponential random variable. By the fluctuation theory of Levy processes, the optimal dividend and capital injection strategy is obtained. We also find that the optimal return function can be expressed in terms of the scale functions of Levy processes. Besides, numerical examples are studied to illustrate our results.

PORTFOLIO SELECTION BY MINIMIZING THE PRESENT VALUE OF CAPITAL INJECTION COSTS

AbstractThis paper considers the portfolio selection and capital injection problem for a diffusion risk model within the classical Black–Scholes financial market. It is assumed that the original surplus process of an insurance portfolio is described by a drifted Brownian motion, and that the surplus can be invested in a risky asset and a risk-free asset. When the surplus hits zero, the company can inject capital to keep the surplus positive. In addition, it is assumed that both fixed and proportional costs are incurred upon each capital injection. Our objective is to minimize the expected value of the discounted capital injection costs by controlling the investment policy and the capital injection policy. We first prove the continuity of the value function and a verification theorem for the corresponding Hamilton–Jacobi–Bellman (HJB) equation. We then show that the optimal investment policy is a solution to a terminal value problem of an ordinary differential equation. In particular, explicit solutions are derived in some special cases and a series solution is obtained for the general case. Also, we propose a numerical method to solve the optimal investment and capital injection policies. Finally, a numerical study is carried out to illustrate the effect of the model parameters on the optimal policies.