Ex-ante Determination Research Articles

Why do Moroccan banks securitize?

PurposeThis paper analyzes the ex-ante determinants of asset securitization in Moroccan banks, providing a detailed exploration of factors influencing securitization in the Moroccan banking sector.Design/methodology/approachThe study focuses on funding, performance, risk transfer and regulatory capital arbitrage hypotheses. By employing a probit model, we examined all Moroccan banks that securitized their assets from 2002 to 2022. Additional analyses were conducted with alternative variables and by splitting the sample into two periods, 2002–2013 and 2014–2022, to assess the impact of the regulation law 119-12 implemented in 2013 on the Moroccan securitization market.FindingsThe results indicate that the search for alternative funding sources and bank size emerge as significant factors driving securitization in Morocco. Additionally, there is limited evidence that loan portfolio quality is a decisive factor to securitize. Meanwhile, there is no evidence that securitization is driven by performance and regulatory capital arbitrage. Robustness tests further support these findings, while also suggesting that banks may engage in securitization to enhance their performance and, to a lesser extent, reduce regulatory capital.Originality/valueThis paper contributes to the empirical literature by identifying the determinants that drive Moroccan banks to securitize, addressing a research gap in the relatively understudied Moroccan securitization market. The findings provide valuable insights for bankers, investors and policymakers, highlighting the potential benefits of securitization and suggesting policy changes to foster a robust securitization market while ensuring financial stability.

Ex-ante determinants to delist or not delist targets after an M&A

Ex-ante determinants to delist or not delist targets after an M&A

‘Born this Way’? Prenatal exposure to testosterone may determine behavior in competition and conflict

It is documented that fetal exposure to sexual hormones has long lasting effects on human behavior. The second-to-fourth digit ratio (DR) is a putative marker for prenatal exposure to testosterone (compared to estrogens) while in uterus, with higher relative exposure to testosterone resulting in a lower DR. Although the existing literature documents the correlation of DR with various decisions, and testosterone has been related to competitive behaviors, little research has studied the effect of DR on competition in conflict situations where skills do not matter. We investigate this question in the laboratory. Based on a previously obtained large sample of student subjects, we selectively invite subjects to the laboratory if their right-hand DR is in the top (High type) or bottom (Low type) tercile for their gender. Unbeknownst to the subjects, we perform a controlled match of High and Low types as opponents in a 2-person Tullock contest. We find that Low type (higher exposure to testosterone) males expend significantly higher conflict effort than High type males, that is, they are more aggressive, which reduces their opponents’ earnings. Among females, however, everyone is more aggressive against the High type (who respond less aggressively). These results can partially be explained through high joy of winning and/or spitefulness for Low type males, and high spitefulness for Low type females. This investigation sheds light on the importance of biological aspects in the ex-ante determinants of conflict, and on contest design.

Disparity between evacuation intention and actual evacuation behavior during a heavy rain induced disaster event in Japan: Exploring the role of everyday awareness of disaster preparedness

The purpose of this study was to identify the ex-ante determinants of disaster preparedness in daily life, termed everyday awareness of disaster preparedness, which influence evacuation behavior during heavy rainfall events. A panel survey was conducted among residents of flood- and landslide-prone areas in Ehime Prefecture before and after heavy rainfall. A pre-survey explored a wide range of variables related to participants’ everyday awareness of disaster preparedness prior to heavy rains, followed by a post-survey that examined their actual evacuation behavior when evacuation warnings were issued during subsequent heavy rains. By analyzing the survey data, we identified prior variables related to disaster preparedness that were associated with evacuation choice. The participants had a high level of disaster preparedness, including evacuation intentions, but many of them did not actually evacuate even when evacuation warnings were issued due to heavy rains. Furthermore, only prior contemplation of evacuation criteria (associated with the commitment to evacuate) was directly related to evacuation behavior. Finally, mediation analysis indicated that prior contemplation mediated the relationship between evacuation intentions and actual evacuation. The implications of these findings for education and communications to reduce disaster risk are discussed.

Suppliers' collusion in public procurement: ex-ante determinants in zero initial contract price decrease auctions (the case of Russian healthcare)

Suppliers' collusion in public procurement: ex-ante determinants in zero initial contract price decrease auctions (the case of Russian healthcare)

Paradox of Real Interest Rate as Macroeconomic Equilibrating Price When Savings are Equated to ‘New’ Money

We evaluate classical macroeconomic theory IS-LM model and expose the paradox of real interest rate (r) which equilibrates S (real goods and services produced and saved in the domestic economy) and I (investments) if the loanable capital is not coming only from real savings but investments can be financed through the money creation or 'money capital' generated either through the credit expansion in the banking system due to fractional reserves banking or through the open market operations by the government. If r is exogenous and lowered through monetary policy, I is expanded beyond S, which paradoxically require higher r to correct for these disbalances in macroeconomic sense. Economic and financial system should eliminate this exogenous influence on r, by separating money creation from r, so that r is left to play its equilibrating role in macroeconomic sense. Separation of r from interest rate on money is in line with prescribed prohibition of setting any fixed reward on money per se, and in general ex-ante setting of reward in productive endeavors which is also forbidden in Islamic jurisprudence. We show that classic macroeconomic theory does not expose the effect that fresh money has on saving and capital markets from the perspective of macroeconomic balance. Therefore, macroeconomic policy should concentrate on achievement of macroeconomic targets without lowering r as it is paradox to lower the return on capital and savings to promote economic growth as higher r on capital promotes investment. This is possible if ex-ante determination of reward on borrowed funds is adopted. However, the phenomena of fresh capital creation in the form of new money and its use in financing of investments should be rethought from macroeconomic perspective and overall social justice as real savings are not of equal opportunity cost as new money (capital)?

Suppliers’ collusion in public procurement: ex-ante determinants in zero initial contract price decrease auctions (the case of Russian healthcare)

Suppliers’ collusion in public procurement: ex-ante determinants in zero initial contract price decrease auctions (the case of Russian healthcare)

‘Born this Way’? Prenatal Exposure to Testosterone May Determine Behavior in Competition and Conflict

It is documented that fetal exposure to sexual hormones has long lasting effects on human behavior. The second-to-fourth digit ratio (DR) is a putative marker for prenatal exposure to testosterone (compared to estrogens) while in uterus, with higher relative exposure to testosterone resulting in a lower DR. Although the existing literature documents the correlation of DR with various decisions, and testosterone has been related to competitive behaviors, little research has studied the effect of DR on competition in conflict situations where skills do not matter. We investigate this question in the laboratory. Based on a previously obtained large sample of student subjects, we selectively invite subjects to the laboratory if their right-hand DR is in the top (High type) or bottom (Low type) tercile for their gender. Unbeknownst to the subjects, we perform a controlled match of High and Low types as opponents in a 2-person Tullock contest. We find that Low type (higher exposure to testosterone) males expend significantly higher conflict effort than High type males, that is, they are more aggressive, which reduces their opponents’ earnings. Among females, however, everyone is more aggressive against the High type (who respond less aggressively). These results can partially be explained through high joy of winning and/or spitefulness for Low type males, and high spitefulness for Low type females. This investigation sheds light on the importance of biological aspects in the ex-ante determinants of conflict, and on contest design.

Why Do Banks Securitise Their Assets? Bank-Level Evidence from Over One Hundred Countries in the Pre-Crisis Period

We investigate the causes and consequences of securitisations using a large data set of banks from over 100 world countries between 1991 and 2007, when the financial crisis caused the market to collapse. Our results show that banks were more likely to securitise their assets when they faced binding capital requirements and when the direct and indirect costs of these operations were lower (e.g., administrative expenses or the loss implied in the sale of opaque assets in an imperfect information environment). We also find evidence that banks securitised their assets to contain credit risk and reduce the exposure to liquidity shocks. The ex-post effects of securitisations are consistent with these ex-ante determinants. After the securitisation, banks improved their capital ratios and did not increase their riskiness. More important, they increased their credit supply. These results suggest that if properly used, these techniques can provide additional flexibility in managing banks’ activities and risk, and can foster credit supply. But, as the crisis has made well clear, provisions must be taken to avoid that some banks may use these new techniques in a way that increases individual and especially systemic risk.

The Behaviorally-Enlightened Fiduciary: Addressing Moral Dilemmas Through a Decision-Theoretic Model of Moral Value Judgment

A fiduciary has an ethical obligation to act in the best interests of her client. In this paper, I argue that this obligation demands that a fiduciary advise her client from a behaviorally-informed perspective. However, this obligation creates new moral dilemmas, complicating ex-ante determination and ex-post evaluation of the fulfillment of fiduciary duties. I argue that a prima facie duty to disclosure is only overridden when the potential upside of the non-disclosed option to the beneficiary is small, the potential downside of the non-disclosed option to the beneficiary is large, and the fiduciary is epistemically justified in her beliefs regarding the potential outcomes. I present a decision-theoretic model for evaluating these dilemmas, as well as practical guidance for fiduciaries facing these trade-offs.

Predicting the results of a referendum on urban road pricing in France: “the cry of Cassandra”?

Abundant literature now exists on the acceptability of the new pricing measure represented by urban tolls. However, this literature contains few examples providing a “political” analysis of their introduction. Here, our aim is to study how the political behavior of individuals, identified on the basis of general attitudes regarding the principles of regulation and pricing, influences, or does not influence, attitudes with respect to urban tolls. We study the ex-ante determinants of a vote on urban tolls. We use the results of a survey performed in France in the framework of the European Project ExpAcc (Explanatory Factors of Road User Charging Acceptability). We process the data using a Principal Components Analysis (PCA) then perform ordered logit estimation. Regarding the specific question to the referendum, we show that it would be rejected by electors. We also show that there is a significant link between general attitudes to regulation by legislation, tax or pricing policies in transport on the one hand, and the vote in the referendum on tolls on the other. We confirm that individual self-interest matters a lot in political behaviour but that other types of motives also matter strongly As a consequence, a real-life political analysis cannot be limited to classical “economic” variables, even if they matter too obviously. Lastly, our results should be placed in relation with those concerning the more global issue of the acceptability of a new pricing measure through, for example, that of the compensation to be implemented.

Connectedness of Stress in EMU Bank and Sovereign CDS: The Role Policy Measures 2008-2014

This paper measures the connectedness in European Economic and Monetary Union (EMU) sovereign and bank CDS between April 2008 and December 2014, in order to understand the transmission of stress during the euro crisis. To this end, we perform a connectedness analysis using the framework proposed by Diebold and Yilmaz (2014). Second, we make use of a dynamic analysis to evaluate the net directional connectedness for each country and bank. Finally, we interpret the policy conclusions that stem from the results. We find that core countries' contribution to stability was particularly significant since Draghi's 'whatever it takes' speech. Bank risk played a role in enhancing sovereign risk. However, the systemic impact of banks changes rapidly once a crisis strikes, rendering the ex-ante determination of which banks are systemic and which banks will have a higher impact on the sovereign difficult.

Applicability of Church Autonomy and Religious Question Doctrines to the ShariiAh Board in Islamic Financial Institutions

Shari’a is the divine law of Islam. The Islamic Finance Industry provides financial products in accordance with Shari’ah, i.e. Shari’ah-compliant products. In 2010, financial experts estimated the worth of Shari’ah-compliant assets at almost 1 trillion dollar globally. Islamic finance practice is not limited to Sharia-based legal systems. UK is ranked as 9th country in holding Shari’ah-compliant assets while United States is home of at least nine financial institutions that provide Shari’ah-compliant products. It means that a large portion of Islamic finance transactions is conducted in a non-Islamic legal environment. Hence, Islamic financial institutions use a business model which is based on reference to Islamic legal norms that are not enforced as the law of the state. Under this model, a Shari’ah board — consisting of Islamic scholars — verifies compliance of the financial products with Shari’ah, and its verification is a required condition prior to the contract. However, since Shari’ah is arguably a governing law of the contract— along with a law of financial centers e.g. New York or London — the contract can be challenged on the ground that it does not comply with Shari’ah before a court; a concept referred to as “Sharia risk”. This paper examines the interplay between the ex-ante determination of compliance of an Islamic finance transaction by Shari’ah board and its ex-post determination by a court in the United States where the religious question and church autonomy doctrine bar the court from adjudicating a religious question.

Light handed regulation–Can it play a role in the developing world?

The private sector has become essential for the development of airport infrastructure worldwide, but ICAO maintains that all governments ultimately are responsible for protecting users from the abuse of market power and therefore they need to establish appropriate regulatory arrangements. Nevertheless, economic regulation is difficult, it involves risk of failure, it can be costly, and careful analysis might well suggest that presumptions of significant market power are not supported by the facts. Developing countries, in particular, face challenges in providing necessary financial and (qualified) human resources for their regulatory authorities, but such regulation also has to function in a sub-optimal framework.We review less ‘intrusive’, less ‘prescriptive’, and potentially less costly models of regulation that have been applied in some developed countries. Such “light-handed regulation” does not involve direct ex-ante determination of airport prices or other terms and conditions by an external regulator. In particular we consider Australian and New Zealand experiences with light-handed approaches to regulating airports including price and quality of service monitoring, information disclosure, and negotiate-arbitrate-regulation. The various forms of light-handed regulation are examined in terms of their need for regulatory intervention and the extent to which they offer the prospect of a reduced need to maintain regulatory “infrastructure”. The paper concludes that negotiate-arbitrate regulation, or a variant of it, offers the potential of a light-handed form of economic regulation which could be applied to airports in developing countries taking account of the institutional setting in which such regulation has to function.

Ex-ante Determinants of Volatility in the Crude Oil Market

This paper examines the causes and behavior of price volatility in the US crude oil market. Although crude oil prices are among the most volatile, they have received limited academic scrutiny heretofore. This study shows that (1) the crude oil market is characterized by volatility persistence, (2) a negative shock has more impact on future volatility than an equal positive shock, (3) crude oil volatility is lower at higher prices, (4) OPEC meeting announcements and the Petroleum Status Report releases cause increased volatility, and (5) there is a day-of-the-week pattern in this market. I develop and employ an improved procedure for testing and quantifying the hypothesized volatility determinants within GARCH type model.

Ex-Ante Determination of the Capacity of Field Tests to Detect Effects of Genetically Modified Corn on Nontarget Arthropods

Field trials may be required to assess risks of genetically modified crops (GMCs) for nontarget arthropods. One critical point of these trials is their capacity to detect differences between the density of one taxon in the GMC and that in the comparator. The detection capacity of a trial depends on the abundance and variability of the taxon, the values assumed for type I (alpha) and II (beta) errors, and the characteristics of the trial and statistical design. To determine the optimal trial layout and statistical analysis, 20 field trials carried out in Spain from 2000 to 2009 to assess risks of GMCs on nontarget arthropods were examined with alpha and beta fixed at 0.05 and 0.20, respectively. Under the experimental conditions tested, taxon variability is the most influential component determining test detection capacity; the maximum acceptable values of taxon variability to achieve a certain detection capacity were calculated for different numbers of replicates (blocks), treatments, and years. A close relationship between taxon variability and mean abundance in visual counts, pitfall traps, and yellow sticky traps allowed minimal critical abundance thresholds to be estimated to guarantee a certain detection capacity and to establish abundance criteria for selecting focal taxa. The number of replications (blocks), treatments, sites, and years has a lesser influence on detection capacity once minimal values in taxon abundance in field trials are ensured. Conclusions reached on the detection capacity of field trials with the experimental data obtained under Mediterranean conditions should be contrasted with those of other regions.

The Entrepreneurs Random Walk

The issues of entrepreneurial ex-ante determination and managerial intent are discussed as applied to the ex-post organizational result. Possible errors in over-attribution of success to the celebrity-entrepreneur and the tendency to disregard the impact of endogenous market conditions, randomness on success due to creative destruction free-market mechanisms are discussed.Humans inherently look for correlation as correlations produce useful knowledge. Specifically, investors seek to create cause-effect knowledge in order to enhance returns. Students and researchers of business also attempt to tie causation to effects. Fundamental attribution error psychology posits a tendency to over-weight personality-based explanations and under-value situational factors when assessing what factors are responsible for the ex-post-facto outcome of an organization. In the field of entrepreneurship, this trait of human psychology may manifest in the tendency to credit the leader him/herself of a successful organization vis-a-vis more important external factors which contributed to success such as the temporal status of market demand conditions.The existence of fundamental attribution error may likewise lead to over-weight emphasis of a leaders input to organizational failure, however, the sample of entrepreneurs linked to successful organizations is self-selected as the unsuccessful entrepreneurs are usually not locatable. Therefore, stakeholders show strong tendencies to link the focus-entrepreneur with a resultant successful enterprise. This tendency is observable in the general culture as most students of entrepreneurship believe the knowledge and actions of Ray Kroc were a prime factor in the economic success of McDonalds. The question explored within the present study is to what extent is such ex-post-facto success attributable to the ex-ante entrepreneurial intent appropriate?Most people familiar with business strongly identify; Steve Jobs with Apple, Thomas Watson with IBM, Dave Thomas with Wendys, Bill Gates with Microsoft, Howard Schultz with Starbucks, Harland Sanders with KFC, and Fred Smith with FedEX. Instructors of entrepreneurship teach with these stories. More importantly, researchers of entrepreneurship use these leaders and their associated knowledge and behavior as independent variables when regressing these variables onto the ex-post dependent outcome of the organization. The investing and finance community also correlate these success story celebrity-entrepreneurs with the resulting rate of return on equity. This paper explores a series of archive-based recollections of the entrepreneurs ex-ante thoughts to demonstrate that many legendary-business entrepreneurs did not expect the organizations extraordinary rates of growth and the ex-post-facto market successes. Hence, cause-effect attribution questions arise.One important research question addressed within is; if the entrepreneur did not know of, or expect growth before the growth, then the resulting growth may not be fully attributed to the person as valid intent. More generally, then to what extent can the resulting organizational success be attributed to the identified behavior of entrepreneurship? Are the successes normally attributed to individual-entrepreneurs really organizational successes or even random-walk phenomenon? Are fundamental attribution errors over-weighing the construct of entrepreneurship and obscuring other, organizational-based, effective causes of economic success?The rise of the media-driven, celebrity-entrepreneur leads to a recent strengthening of attribution of organizational success to that leader. Conclusions within the current study lead to a more distinct focus on the time-limited tasks of entrepreneurship that are very limited in proportional impact to a firms total life-span and resulting economic value. We then can attribute much more of the resulting economic value to the impact of organizational dynamics and organizational development.

Governance of preventive Health Intervention and On time Verification of its Efficiency: the GIOVE Study

ObjectivesThe GIOVE Study was aimed to the achievement of allocative efficiency of the budget allocated to the prevention of human papillomavirus (HPV)-induced diseases. An ex-ante determination of the most efficient...

Why Do (or Did?) Banks Securitize Their Loans? Evidence from Italy

This paper investigates the ex-ante determinants of bank loan securitization by using different econometric methods on Italian individual bank data from 2000 to 2006. Our results show that bank loan securitization is a composite decision. Banks that are less capitalized, less profitable, less liquid and burdened with troubled loans are more likely to perform securitization, for a larger amount and earlier.

Are Domestic and Cross-Border M&As Different? Cross-Country Evidence From the Banking Sector

Are the drivers of domestic and cross-border M&As in the banking sector different? Despite the intense research on bank M&As in the last decade, the attention paid to this issue is surprisingly limited. We fill this gap studying the ex-ante determinants of national and international acquisitions in the banking sector in an unbalanced panel of nearly 1,000 banks from 50 world countries, from 1992 to 2007. Our results show that size and profitability have a stronger impact on the probability that a bank is a bidder in a cross-border deal than in a domestic deal. Consistent with the findings of the literature on the determinants of the internationalization of manufacturing firms, international expansion in the banking sector is therefore easier for countries with a number of large “national champions”, that are more capable to overcome the fixed costs of internationalization and have a stronger incentive to diversify the idiosyncratic risks of their domestic activities.