Characteristics Of Financial System Research Articles

The Influence of the Financial System on the Puzzle of Corporate Financing Decisions: Review

The main purpose of this study is to conduct a literature review on the influence of country-specific characteristics of financial systems on corporate financing decisions, to help complete the complex puzzle on the problematic of capital structure theories. Recently, several international studies have analysed the convergence of firms’ financing decisions according to countries’ financial system, but, in terms of literature review, it becomes necessary to establish the interconnection between the explanatory theories of capital structure and empirical studies in explaining the financing behaviour of firms in different countries. Following this, the methodology of this paper was based on summarizing the empirical literature in a non-systematic way, verifying in several international studies that the capital structure is influenced by the specific characteristics of the country’s financial system, in which the efficiency of the function of financial intermediaries contributes to reducing transaction and information costs, helping to complete the understanding about the similarities and differences in the financing choices of firms in different countries.

¬¬¬¬¬¬Các nhân tố ảnh hưởng đến tính minh bạch thông tin trên báo cáo tài chính của các đơn vị hành chính tại Bạc Liêu Factors affecting the transparency of financial reports of administrative divisions in BacLieu

For this research, the author utilized both qualitative and quantitative methods to construct and inspect the research model to identify factors affecting the transparency of financial reports of administrative divisions in Bac Lieu. Based on the findings, recommendations can be given to improve the transparency of financial reports of those divisions. Results suggested that there were 6 factors directly affecting the transparency of financial reports of those administrative divisions, including Political support, Financial legislation systems, Characteristics of management system, Characteristics of financial systems, Organizational culture, and International economic integration. Keywords: transparency, financial reports, administrative divisions. JEL Classification: M40, M48, M49.

What drives credit expansion worldwide?——An empirical investigation with long-term cross-country panel data

This paper examines a broad range of driving factors of credit expansion using long-term cross-country panel data from 1994 to 2018 and the System GMM method. We discuss the role of macroeconomic fundamentals in explaining credit expansion by examining five categories of explanatory variables. Some structural patterns of weak linkages of credit expansion with macroeconomic fundamentals are identified. We further explore the possible causes that follow the theoretical logic of risk-taking in the private and public sectors. Controlling for the influence of macroeconomic fundamentals, we find the effects of various financial system characteristics, such as institutional features of the financial system, financial institutions' performance, asset markets booms, and macroeconomic and financial regulatory environment, on inducing credit expansion over the needs supported by macroeconomic fundamentals. Our study provides strong implications on regulatory policies on the rising credit during the COVID-19 Pandemic.

BANKARSKI SEKTOR U BOSNI I HERCEGOVINI IZMEĐU GLOBALNE FINANCIJSKE KRIZE I COVID-19

Stable and good operating banking sector is important for stability of financial system and development of national economy. Having on mind specific features of financial system in Bosnia and Herzegovina as banking dominated, authors will analyse changes in its banking sector in the period between global financial crisis and COVID-19. Banking sector in Bosnia and Herzegovina has been analysed through a series of indicators. Authors in this paper will analyse number of banks in banking sector, bank intermediation, total assets, loans and deposits, credit risk expose of banks and liquidity. Aim of this paper is to compare behaviour of banking sector in two crises and present impact of its activities and performance (profitability, liquidity and risk).

Ownership concentration of corporations and the level of stock market development

Introduction. The ownership structure affects the stock market liquidity. In turn, stock markets are a key lever to ensure the efficient functioning and development of the country's economy as a whole. Recently, the widespread use of securities market instruments has become of paramount importance due to the limited opportunities for self-financing of enterprises and the shortage of external sources of financing. The performance of the stock market of its functions is largely determined by its characteristics, the implementation of which leads to positive structural changes in the economy.
 Aim and tasks. The main purpose of the article is to determine the correlation between the ownership concentration of corporations and the level of stock market development in Ukraine and the world.
 Results. The comprehensive characteristics of financial systems are characterized by the measurement of four categories for one of the key components of the financial sector, namely financial markets. Such categories include the depth of the financial market, the level of use of financial markets among individuals, the efficiency of financial markets in the provision of financial services, and the volatility of financial markets. A general description of the development of financial markets is given, it is determined that developing financial systems tend to be less deep as well as somewhat less efficient, their access and stability are on par with those of developed countries. The article shows the results of correlation-regression analysis between ownership concentration and the above categories, taking into account data from different countries.
 Conclusions. To determine the depth of financial markets, the article used the capitalization of the stock market as a percentage of GDP. Increasing the level of concentration of ownership leads to a decrease in this indicator. The inverse relationship between ownership concentration and characteristics of access to financial services has been confirmed. To analyze the efficiency of financial markets, this paper uses the ratio of the total value of traded shares to the average value of market capitalization for the analyzed period. The inverse relationship between ownership concentration and characteristics of efficiency has been also confirmed. Stability has a particularly low correlation with the other three characteristics. As a result, the direct relationship between ownership concentration and characteristics of financial markets stability has been confirmed.

THE ROLE OF DERIVATIVE INSTRUMENTS IN FINANCIAL STABILITY

Globalization offers new challenges to the world economy, which becomes more depended on unprecedented in- crease of financial activity worldwide. Availability of information and development of technologies significantly increased capital flow in the world and role of capital and monetary markets in economy. Second half of 2007 and first half of 2008 faced import- ant events in the world economy. Among them especially no- table are US real estate crisis and global limitation of credits, devaluation of USD and strengthening of inflation processes. These global events have significant influence over financial stability. In the recent decade variability of stocks and interest rates, together with globalization of capital markets, in- creased demand on financial instruments with the purpose of distribution of risks. From this perspective, interest rate derivatives are most frequently marketed among OCT derivatives. Therefore, estimation of the role of financial derivatives instruments is very important in stability of international financial system. Purpose of research is to analyze influence of derivatives over financial crisis. Within frameworks of re- search 5 countries are studied for 1997-2010 quarterly. OLS regressive equation is used in research for empirical tests. Model includes following variables: crisis index (dependent variable), independent variables are: correlation rate of cur- rent account and GDP, correlation rate of domestic credit on private sector with GDP, correlation rate between foreign currency reserves and conditional amounts of market derivatives on the stock exchange. Empirical analysis shows us that influence of derivatives over financial stability is not unilateral and depends on characteristics of financial system of the country. Particularly, in Singapore and USA, where financial system is strong, influence of derivatives is positively reflected on financial stability, and empirical study conduct- ed on example of emerging markets, particularly, Argentina, Russia and Brazil revealed negative influence of derivatives on financial system.

Chaos and complexity in a fractional-order financial system with time delays

Abstract Finance and economics are complex nonlinear systems that are affected by various external factors, including of course human action, bilateral relations, conflicts, and policy. Time delays in a financial system take into account the amount of time that passes from a particular policy or decision being made to it actually taking effect. It is thus important to consider time delays as an integral part of modeling in this field. Moreover, many features of financial systems cannot be expressed sufficiently precisely by means of integer-order calculus. Fractional-order calculus alleviates these shortcomings. The aim of this paper is therefore to study the dynamics and complexity in a fractional-order financial system with time delays. We observe fascinating transitions to deterministic chaos, including cascading period doubling, as well as high levels of complexity. This is particularly true in response to variations of derivative orders, which are thus identified as key system parameters.

Capital Inflows, Credit Growth, and Financial Systems

Exploiting a granular panel dataset that breaks down capital inflows into FDI, portfolio and other categories, and distinguishes between credit to households and to corporations, we investigate the association between capital inflows and credit growth. We find that non-FDI inflows boost credit growth and increase the likelihood of credit booms in both household and corporate sectors. For household credit, the composition of inflows appears to be more important than financial system characteristics. In contrast, for corporate credit, both the composition and the financial system matter. Regardless of sectors and financial systems, other inflows are always linked to rapid credit growth. Firm-level data corroborate these findings and hint at a causal link: other inflows are related to more rapid credit growth for firms that rely more heavily on external financing. Further explorations on how capital inflows translate into more credit indicate that both demand and supply side factors play a role.

Capital Inflows, Credit Growth, and Financial Systems

ABSTRACTExploiting a granular panel dataset that breaks down capital inflows into FDI, portfolio and other categories, and distinguishes between credit to households and to corporations, we investigate the association between capital inflows and credit growth. We find that non-FDI inflows boost credit growth and increase the likelihood of credit booms in both household and corporate sectors. For household credit, the composition of inflows appears to be more important than financial system characteristics. In contrast, for corporate credit, both the composition and the financial system matter. Regardless of sectors and financial systems, other inflows are always linked to rapid credit growth. Firm-level data corroborate these findings and hint at a causal link: other inflows are related to more rapid credit growth for firms that rely more heavily on external financing. Further explorations on how capital inflows translate into more credit indicate that both demand and supply side factors play a role.

A kockázati tőke globális térnyerésének kérdése

A 2008-as pénzügyi válság a kockázati tőke iparát is negatívan érintette világszerte, így az eddig megszokott befektetési körülmények megváltoztak. A tanulmány egyik célja, hogy áttekintést adjon a változásokról és az azokra való reagálásról. A globális trendek alapján látható, hogy az éves kockázatitőke-befektetések szintje 2013-ban is éppen csak eléri a 2008 előttit. Néhány ázsiai országban – például Kínában és Indiában – a visszaesés ugyan nem volt számottevő, az európai országokban viszont annál inkább. A tanulmány másik célja megvizsgálni, van-e realitása egy egységes globális kockázatitőke-modellnek, vagy minden országban más és más a helyzet, s ha fennáll a különbözőség, akkor ez milyen magyarázó tényezőkre vezethetők vissza. A kiterjedt nemzetközi irodalom alapján azt szűrtem le, hogy egy egységes modell kialakulását számos tényező befolyásolja; a pénzügyi rendszerek jellemzői, a jogi és intézményi akadályok, valamint a kultúra egyaránt ezek közé tartozik.
 Journal of Economic Literature (JEL) kód: G24

Capital Inflows, Credit Growth, and Financial Systems

Exploiting a granular panel dataset that breaks down capital inflows into FDI, portfolio and other categories, and distinguishes between credit to the household sector and to the corporate sector, we investigate the association between capital inflows and credit growth. We find that non-FDI capital inflows boost credit growth and increase the likelihood of credit booms in both household and corporate sectors. For household credit growth, the composition of capital inflows appears to be more important than financial system characteristics. In contrast, for corporate credit growth, both the composition and the financial system matter. Regardless of sectors and financial systems, net other inflows are always linked to rapid credit growth. Firm-level data corroborate these findings and hint at a causal link: net other inflows are related to more rapid credit growth for firms that rely more heavily on external financing. Further explorations on how capital flows translate into more credit indicate that both demand and supply side factors play a role.

A dynamic stochastic frontier model to evaluate regional financial efficiency: Evidence from Chinese county-level panel data

Studies have widely used stochastic frontier models to assess financial efficiency; however, traditional static approaches do not take dynamic characteristics of financial systems into account. This article develops a dynamic stochastic frontier model to evaluate regional financial efficiency and provides an empirical test of the model by using panel data of 62 Chinese counties during the 2001–2010 period. The model measures the dynamic impact of the input–output variables and environmental variables on financial efficiency, and allows for the separation of technical change from the change in technical efficiency. The results show that the dynamic model provides a better fit to the data than the static model. In addition, a gradient difference emerges in the regional financial efficiency among the six major regions of China. The results offer practical implications for the development of regional financial services in China, as well as other developing countries and emerging economies.

Staff Guidance Note on Macroprudential Policy - Considerations for Low Income Countries

This note explores how characteristics of financial systems commonly observed in low income countries may shape the approach to the staff’s advice on macroprudential policy. It explores the implications of the ongoing process of financial and institutional development for the conduct of macroprudential policy in these countries. This note is a supplement to the Staff Guidance Note on Macroprudential Policy.

The Macroprudential Turn: From Institutional 'Safety and Soundness' to Systemic 'Financial Stability' in Financial Supervision

Since the global financial dramas of 2008-09, authorities on financial regulation have come increasingly to counsel the inclusion of macroprudential policy instruments in the standard ‘toolkit’ of finance-regulatory measures employed by financial supervisors. The hallmark of this perspective is its focus not simply on the safety and soundness of individual financial institutions, as is characteristic of the traditional ‘microprudential’ perspective, but also on certain structural features of financial systems that can imperil such systems as wholes. Systemic ‘financial stability’ thus comes to supplement, though not to supplant, institutional ‘safety and soundness’ as a regulatory desideratum. The move from primarily micro- to combined micro- and macroprudential finance-regulatory regimes is surely to be welcomed, for reasons that this author and others have offered in earlier articles. The old ‘lean versus clean’ debate is resolved once again now in favor of leaning. The victory does, however, raise certain new legal challenges to which predominantly microprudential finance-regulatory regimes are not typically subject – challenges of which regulators and other financially-oriented lawyers will wish to stay mindful. This Article aims to respond to that wish by comprehensively cataloguing and provisionally addressing the mentioned challenges, in order that interested parties might thereby be able to find full treatment of the subject in one place.

Financial sector development and access to finance. Does size say it all?

This paper analyzes what features of financial systems can strengthen the linkages between banks and economic development. We investigate whether a set of banking and capital market characteristics can improve the ability of banks to provide increased credit flows to the private sector, while simultaneously improving financial inclusion for the poor. We analyze the determinants of both macro-level lending conditions and micro-level access to finance using a set of Panel Vector Error Correction Models and GMM estimations in a panel of 138 countries for the 2002–2009 time periods. Results converge to suggest that rather than focusing solely on banking sector size, financial policy should seek to foster inter banks competition, develop appropriate macro-prudential safeguards, promote capital market development. In addition, improved access to finance requires adequate civil rights and support to entrepreneurship.

Microfinance And Poverty Reduction: Some International Evidence

Year 2005 was called international year of microcredit by United Nations. Since, micro finance has proven to be an effective tool for poverty reduction this paper argues that microfinance can be considered an important element for an effective poverty reduction strategy. It shows that access and efficient provision of microcredit can enable the poor to smooth their consumption, better manage their risks better, gradually build their assets, develop their micro enterprises, enhance their income earning capacity, and enjoy an improved quality of life. Microfinance services can also contribute to the improvement of resource allocation, promotion of markets, and adoption of better technology; thus, microfinance helps to promote economic growth and development. Also the characteristics of financial systems in developing counties will be discussed and argued that formal financial sector is not consistent with the needs and requirements of the poor and the existence of informal financial sector is a response to the shortcomings of the formal financial sector.

Role of microfinance saving in Cameroon: a neo‐structuralist analysis

PurposeThe aim of this paper is to establish an original database from fieldwork on microfinance institutions in Cameroon.Design/methodology/approachThe main method used for the research involved statistical analysis of an original survey data. The latter fieldwork analysis has enabled us to test the hypothesis of neoclassical and neo‐structuralist economists advocating a significant relationship between microfinance savings and liberalised real bank deposit interest rates.FindingsThe statistical analysis carried out indicated that microfinance savings are associated to variables other than the rate of interest. The failure of a liberalised interest rate policy to cause a significant portfolio shift from microfinance into the banking system does not support the interest responsiveness of savings as advocated by the McKinnon‐Shaw school. This paper supports, therefore, the neo‐structuralist analysis of financial development where microfinance institutions are an important structural feature of financial systems in many developing countries.Research limitations/implicationsIt would be interesting to extend statistical analysis undertaken in this paper to other African countries.Practical implicationsThe main policy issue affecting microfinance from the empirical analysis is the need to mitigate the extremely high interest rates utilised by microfinance. Banks may be encouraged to undertake a series of measures such as guaranteeing of future loans to their customer by linking savings and loans to attract microfinance members.Originality/valueThe contribution of this paper, therefore, is to provide a unique opportunity to investigate the association between microfinance institution assets and real interest rates in an African country.

Country-Specific Factors Related to Financial Reporting and the Value Relevance of Accounting Data

Using financial accounting data from manufacturing firms in 16 countries for 1986-1995, we demonstrate that the value relevance of financial reports is lower for countries where the financial systems are bank-oriented rather than market-oriented; where private sector bodies are not involved in standard setting process; where accounting practices follow the Continental model as opposed to the British-American model; where tax rules have a greater influence on financial accounting measurements; and where spending on auditing services is relatively low. Results are robust to alternative measures of value relevance of financial accounting data, including measures based on earnings (using a regression and a hedge-portfolio approach), accruals, and earnings and book value of equity combined. We show that the extent to which earnings information is reflected in leading-period returns as compared to contemporaneous returns is greater for bank-oriented than for market-oriented countries. This feature potentially induces spurious associations between value relevance measures and financial system characteristics. Our results are robust to using value relevance measures adjusted for this confounding effect.

Country-Specific Factors Related to Financial Reporting and the Value Relevance of Accounting Data

Using financial accounting data from manufacturing firms in 16 countries for 1986-1995, we demonstrate that the value relevance of financial reports is lower for countries where the financial systems are bank-oriented rather than market-oriented; where private sector bodies are not involved in standard setting process; where accounting practices follow the Continental model as opposed to the British-American model; where tax rules have a greater influence on financial accounting measurements; and where spending on auditing services is relatively low. Results are robust to alternative measures of value relevance of financial accounting data, including measures based on earnings (using a regression and a hedge-portfolio approach), accruals, and earnings and book value of equity combined. We show that the extent to which earnings information is reflected in leading-period returns as compared to contemporaneous returns is greater for bank-oriented than for market-oriented countries. This feature potentially induces spurious associations between value relevance measures and financial system characteristics. Our results are robust to using value relevance measures adjusted for this confounding effect.

Comparison Between the Financial Structure of SME Versus Large Enterprise Using the BACH Data Base

This study deals with the financial structures and the performances of small and medium-sized (SMEs) versus Large enterprises (LEs) using BACH data bank which is the most advanced available data base for comparison in this field. It covers the period 1990-1996 and concerns 9 countries (7 European countries, Japan and the United States). The main results are the following: (1) regarding profitability, there are distinctive features of SMEs compared to LEs that transcend their nationality and the gross profitability is larger for SMEs than for LEs (2) regarding financial patterns, specific national features of financial system have a strong impact on the firm behaviour, with small enterprise financial structures being more typified than larger ones (3) a given rate of profit can be achieved following distinct models of profit formation ('market-based' and 'organisation-based' models); (4) it also can be achieved with dramatically different financial patterns.