Financial Holding Companies Research Articles

The transparency of remuneration policy in financial holding companies based on the example of the UniCredit Group

This study seeks to examine the level of transparency of remuneration policy in financial holding companies (FHCs) using the example of the UniCredit Group, as well as to identify the factors that affect its level. It will also indicate to what extent international recommendations on remuneration policy transparency have been implemented into national legal regulations and codes of best practice. Using data collected on the basis of annual reports of financial institutions that belong to the UniCredit Group from 2005 to 2018, I found that the UniCredit Group’s remuneration policy has a low level of transparency. Although the dominant bank discloses all information required by international recommendations and regulations, the subsidiary banks’ disclosures are kept to a minimum. The study also showed that the level of transparency (measured by the remuneration policy transparency index) is influenced by all the governance characteristics examined (the size of the bank’s board, the appointment of independent directors in the bank’s board, the frequency of meetings of the remuneration committee, and the direct involvement of the shareholder) and firm characteristics (the size of the bank and the financial performance measured by ROE). The study also showed that not all countries have decided to implement international recommendations on remuneration policy into their legal regulations and codes of best practice (this is especially true for countries outside the European Union).

Hedging strategies and performance of the US financial holding companies: a dynamic frontier analysis

Globalisation led to dynamic developments in the area of financial innovation. The main object of this study is to shed light into the relationship between hedging strategies and operational performance. We initially employed a dynamic data envelopment analysis model to incorporate carry-over items in order to assess the long-term operating performance of the top 50 US financial holding companies (FHCs) over the period 2005-2009. We then evaluated the operating performance under four different hedging measures and eight sub-industries. Findings show that significant differences exist among sub-industries on the overall mean operating performance of the US FHCs, as the financial situation changes over time. Empirically, we also provide evidence that the choice of an appropriate hedging strategy matters when it comes to operating performance. Overall, we support that choosing a suitable hedging strategy is crucial for FHCs even after a series of structural reforms following the latest global financial crisis.

Chinese Financial Holding Companies: A Review

On 13 September 2020, the Peoples’ Bank of China issued The Trial Measure for the Supervision and Administration of Financial Holding Companies (FHCs), stipulating that firms that control two or more different types of financial institutions may need to establish FHCs. This emerging new type of organization has profound implications; however, serious research on Chinese FHCs is almost none. This study fills in this gap by conducting a comprehensive review on Chinese FHCs from three perspectives. First, from the perspective of macroeconomics and financial markets, this study reviews different types of FHCs and analyses the major source of risks on macroeconomic stability and macroprudential regulation. Second, from the perspective of regulation, based on this regulation document and other literature, this study explores Chinese authorities’ main regulatory objectives. Third, from the perspective of academics, this study also presents a future research agenda regarding Chinese FHCs.

금융지주 주식수익률과 환율 및 환율변동성간의 관계

본 연구는 KOSPI수익률, 환율 및 환율변동성이 은행업종과 금융지주의 주식수익률에 미친 영향을 살펴보았다. 2003년부터 2017년까지 은행업종 및 4대 금융지주의 주식수익률, KOSPI 수익률과 미국달러, 중국위안, 일본엔, 유럽유로, 영국파운드 등 5개 통화의 환율변동률을 이용하여 분석한 결과 KOSPI수익률이 은행업종과 4대 금융지주 주식수익률에 가장 큰 양(+)의 영향을 미친 한편 그 정도는 금융지주 별로 다르게 나타났다. 미국달러와 일본엔의 환율 변동률은 은행업종 및 금융지주 주식수익률에 부정적인 영향을 주었으며, 중국위안, 유럽유로, 영국파운드는 일부에서 유의적으로 작용하였다. 환율 변동성 영향 측면에서는 중국위안의 환율 변동성에 따라 주식수익률 변동성이 증가하였다. 표본기간을 나누어 비교한 결과는 금융위기 이전과 이후 보다 금융위기 기간 중에 환율과 환율변동성 영향이 확대되었다. 추가적으로 대외변수를 포함한 분석에서도 유사한 결과를 보였다. 본 연구의 결과는 금융지주별 환리스크 관리와 금융업종에 대한 투자 관련 의사결정에 실증자료로 활용할 수 있다.

Hedging Strategies and Performance of the U.S. Financial Holding Companies: A Dynamic Frontier Analysis

Globalisation led to dynamic developments in the area of financial innovation. The main object of this study is to shed light into the relationship between hedging strategies and operational performance. We initially employed a dynamic data envelopment analysis model to incorporate carry-over items in order to assess the long-term operating performance of the top 50 US financial holding companies (FHCs) over the period 2005-2009. We then evaluated the operating performance under four different hedging measures and eight sub-industries. Findings show that significant differences exist among sub-industries on the overall mean operating performance of the US FHCs, as the financial situation changes over time. Empirically, we also provide evidence that the choice of an appropriate hedging strategy matters when it comes to operating performance. Overall, we support that choosing a suitable hedging strategy is crucial for FHCs even after a series of structural reforms following the latest global financial crisis.

Strengthen Financial Holding Companies’ Business Sustainability by Using a Hybrid Corporate Governance Evaluation Model

While the importance of corporate governance has been broadly acknowledged in global financial markets and academic research, how to devise a practical evaluation system is relatively unexplored. This paper attempts to refine the Corporate Governance Evaluation System (CGES), constructed by the Taiwan Stock Exchange (TWSE) since 2014. The current CGES has several debatable issues in its complicated design (e.g., it comprises over 80 indicators in different types). To resolve those issues, this study invited ten senior domain experts (including several CEOs of financial holding companies) to retrieve 13 essential criteria from the CGES in four dimensions. Additionally, this study integrates several multiple criteria decision-making (MCDM) methods (i.e., decision-making trial and evaluation laboratory (DEMATEL), modified VIKOR, DEMATEL-based analytical network process (DANP)) and the fuzzy evaluation technique to rank the exemplary companies. The final ranking is consistent with the one released from the CGES in 2017. This study conducted additional experiments to ensure the robustness of the findings. The newly devised model not only assists the ranking decisions but also supports a company in discussing the plausible action plans to strengthen corporate governance based on the analytics. These findings enrich the understanding of corporate governance and contribute to gaining business sustainability for financial holding companies.

A Summary of Risks in China’s Financial Holding Companies

With the development and expansion of financial holding companies in recent years, due to the lack of clear guidance of legislation, financial holding companies currently have various irregular behaviors, and they also have financial risks while seeking the most benefits. The supervision of the holding company is necessary. This paper mainly describes the development history and current situation of financial holding companies, puts forward the remaining problems of financial holding companies, analyzes the existing financial holding company’s supervision system, and puts forward suggestions on financial holding companies’ risk supervision.

Stability and Risk of Financial Holding Companies—Taking the Chinese CITIC Group as Example

With the development of financial mixed operation, in order to enhance the financial competitiveness, more and more countries are accelerating the pace of from separate operation to mixed operation. Except bringing the advantages, financial holding company has also faced great challenges at the same time. Therefore, establishing the corresponding mixed supervision system and improving the competitiveness of the financial holding company have become the most important tasks for China’s financial industry. Taking the Chinese CITIC International Financial Holdings Limited as an example, we focus on comparing economies of scale, economies of scope as well as the study of stability and risk, based on theoretical analysis and empirical analysis methods. The results show that most of the China Financial Holding Company Limited did not reach the greatest economies of scale and scope because of the restrictions on their own management and management experience. Secondly, the higher risk of securities will not increase the risk of major financial institutions such as banks. Thirdly, the risk of subsidiaries in financial holding companies is relatively low, compared with others in separated operation. In addition, we analyze the transmission mechanism and internal transaction risk of the financial holding company, innovatively propose “Incentive Conflict Concept” in subsidiary of internal and external risk control. Finally, the paper suggests that the financial holding companies should attach great importance to internal risk control, improve their management and integrated resource ability. More importantly, the external supervision mechanism needs to improve supervision mechanism design for the mixed supervision, as much as possible to achieve regulatory objectives of incentive compatibility.

金融控股公司宣告发行可转换公司债对股票报酬影响与因素分析——以台湾地区为例

金融控股公司宣告发行可转换公司债对股票报酬影响与因素分析——以台湾地区为例

A Study on the Factors Affecting the Stock Return of the Banking Industry and Financial Holding Companies

A Study on the Factors Affecting the Stock Return of the Banking Industry and Financial Holding Companies

Cost metafrontier approach for measuring the Malmquist productivity index: An example of bank groups formed after the financial reform in Taiwan

This study attempts to provide a framework under the variable returns to scale hypothesis to account for the effect of the cost scale efficiency change in the decomposition of the cost metafrontier Malmquist productivity index (CMMPI). In addition, the meta‐cost efficiency and cost frontier gap between subordinate banks of financial holding companies (FHC) and independent banks are also examined. A total of 34 banks in Taiwan are empirically analysed from 1999 to 2012. The results indicate that the meta‐cost efficiency, meta‐technical efficiency and meta‐allocative efficiency scores of subordinate banks of FHC are better than those of independent banks. The banking industry in Taiwan is found to have an improvement in cost metafrontier Malmquist productivity. The subordinate banks of FHC are also found to exhibit positive CMMPI and decomposition components, but do not achieve a significant improvement except in the case of the technical gap ratio change. The empirical results recommend that Taiwanese banks place more policy focus on the issue of scale adjustment, which should be beneficial. Based on the CMMPI decomposed results, we can gain further understanding of the growth path to enhance operational performance.

Assessing the marketing and investment efficiency of Taiwan’s life insurance firms under network structures

This paper proposes the network stochastic frontier approach (SFA) to fill the gap in the efficiency measurement literature, splitting the entire production process of life insurers into two stages: marketing and investment. A salient feature of the method is that it can characterize technologies undertaken by a series of stages without requiring disaggregate data for individual sectors of insurers. In the context of copula methods, the simultaneous equations can be estimated by the maximum likelihood, and the parameter estimates are used to compute measures of the technical efficiency score, technical change, and scale economies in the two production stages. We find that twenty-six of Taiwan’s life insurers have a higher average technical efficiency score in the investment stage than that in the marketing stage. Scale economies and technical advancements prevail in the two production stages over the sample period 2000–2012. Findings also show that domestic, FHC (financial holding company), and new insurers outperform foreign, non-FHC, and old insurers, respectively. The traditional single production stage model neither accurately describes an insurer’s production technology nor correctly evaluates its performance.

대기업집단 내 보험지주회사의 설립에 관한 연구

본 연구는 대규모 기업집단에 속한 보험회사들을 중심으로 지주회사로의 이행 장단점 및 가능성을 검토하고 이행에 장애가 되는 규제 내용을 확인한다. 대기업집단 소속 보험회사들이 지주회사로 이행할 수 있으려면 공정거래법 및 금융지주회사법 상 지주회사가 상장자회사 30% 이상, 비상장자회사 50% 이상 소유해야 하는 자회사 주식 소유 의무와 금융(일반) 지주회사가 비금융(금융)회사의 주식을 소유할 수 없는 등의 금산분리 규정의 완화가 필요하다. 자회사 주식 소유 의무의 경우 현행 상법 상 인적분할 방식을 이용하여 대기업집단 보험회사들이 지주회사와 사업을 영위하는 회사로 분할할 경우 보험회사가 보유하고 있는 자사주를 포함한 다른 금융회사의 지분이 지주회사의 자산이 되면서 자회사 주식 소유 의무를 맞추기가 다소 용이해지지만 여전히 이행 비용을 심각하게 높이는 수준이다. 금산분리 규정의 경우 금융계열사와 비금융계열사가 공존하는 대기업집단의 경우에는 지주회사 구조 이행에 결정적 장애가 된다. 규제를 완화하여 보험회사의 지주회사 체제를 촉진하는 것이 공익에 부합할 것인지는 치열한 공론을 통해서 가려질 수 있을 테지만, 그러한 논의와 판단에 도움이 될 자료를 제공하는 것이 본 연구의 목적이다.

A Study on Relationship between Corporate Groups and its Subsidies - Focusing on the Financial Holding Company -

A Study on Relationship between Corporate Groups and its Subsidies - Focusing on the Financial Holding Company -

Impact of the Emerging Financial Holding Company Model on Small Business Borrowers' Financial Welfare: Contemporary Evidence from Nigeria Based on the Monti‐Klein Approach

AbstractThis study exploits the adequacy of the Monti‐Klein model to analyse the banking firms' lending behaviour and uses the geometric lag analytic model to detect the lifespan of bank conglomeration impacts on small business financial welfare. We find that, although the impact of emerging conglomerate banks on lending to small businesses is significantly negative (δ = −0.6897; p < 0.01), the effect reverses to a pre‐conglomerate positive status within one year. Hence, bank conglomeration does not negatively affect the financial welfare of small business borrowers in the long run. Contrary to the widespread belief and fear, the negative effects are not permanent. Large banks are feared to have no time for mid‐sized businesses. We find, however, that mere increases in size, as may be caused by economic or internal growth, do not pose a threat to small businesses. Large‐sized banking firms positively and significantly correlate with small and predictable risks (δ = 1.7935; p < 0.01). Hence, contrary to what regulators fear, there is no real issue surrounding the idea that building diversifying banks will influence small business loans negatively. What matters is the means through which large banks emerge. Therefore, regulators ought to exercise caution so that they do not discourage their emergence.

Profitability efficiency, marketability efficiency and technology gaps in Taiwan’s banking industry: meta-frontier network data envelopment analysis

ABSTRACTThe aim of this article is to measure the profitability efficiency (PE) and marketability efficiency (ME) of non-homogenous Taiwanese banks after the adoption of International Financial Reporting Standards by using the convex meta-frontier data envelopment analysis model. The model is applied to simultaneously estimate PE and ME of the banks in financial holding companies (FHCs) and the banks not in FHCs. The meta-inefficiencies in individual processes are further decomposed into group inefficiencies and technology gap inefficiencies to explore the sources of inefficiency. The empirical results indicate that the banks in FHCs can reduce more costs than the banks not in FHCs, whereas the banks not in FHCs can create greater market value than the banks in FHCs. For the banks joining and not in FHCs, technology gap inefficiency is the main source of inefficiencies in both profitability and marketability processes.

Dynamic Weighted Comprehensive Assessment Model of the Advantages of Financial Holding Companies

At the post-crisis era, financial holding company is still an inevitable trend of the development of both domestic and foreign financial industry. Researches on the six advantages of Financial Holding Companies have become a hot academic and industry issue. In this paper, we create the dynamic weighting comprehensive evaluation model by centralizing the first five advantages together into the last one, economies of scope; compare the advantages of financial holding companies on business performance and risk-control over traditional banks. Model results show that financial holding company outstrips traditional banks in terms of business performance, risk control ability.

Credit Ratings and Bank Affiliation to Financial Holding Companies: Effects of Government Ownership and Financial Crisis

ABSTRACTThis study compares credit ratings between FHC affiliated banks and independent banks using Taiwan bank and FHC data. The results show banks that join Insurance- or Security-FHCs obtain better ratings than those that join Bank-FHCs. Second, banks that join FHCs with higher activity diversification can obtain better credit ratings. Third, joining government-owned FHCs enhances bank credit ratings and mitigates bank default risk compared to joining non-government-owned FHCs. Fourth, prior to the financial crisis, banks joining FHCs can obtain better credit ratings and reduce the cost of debt. However, during the financial crisis, rating agencies stopped regarding banks joining privately owned bank-based FHCs as risk diversification and assigning better credit ratings on this basis.

Do undesirables matter on the examination of banking efficiency using stochastic directional distance functions

Abstract This paper aims to gain further insights into whether the First Financial Restructuring (FFR) policy improves the technical efficiency of Taiwan’s banks during the period 1999–2012, using the directional technology distance function (DDF). DDF simultaneously allows for the expansion of the desirables and the contraction of the undesirables, which is able to depict a bank’s true production activities. We find that the banks have a lower technical inefficiency with the preferred model compared to the other models. Before 2002, the technical inefficiency exhibits a gradual upward trend and then posts a downward trend during the FFR period, due to enhanced banking and benefits obtained from compliance with FFR. The inefficiency scores deteriorate sharply, during the “credit card and cash card crisis” in 2006 and “the subprime mortgage crisis” in 2008. Public and financial holding company (FHC) banks are respectively more efficient than private and non-FHC banks.

Antecedents and Consequences of Perceived Corporate Social Responsibility on Financial Holding Companies - Finance Students’ Perceptions

<p>Consumers consider various factors when purchasing because of consumer awareness. Increasingly, consumer behaviors are influenced by corporate social responsibility (CSR) activities. This study comprehensively investigates the relationships of antecedents and consequences of CSR from consumer perceptions. CSR ethics statements and financial performance are the antecedents in this study. The effects of the relationships among consumers’ perception of CSR and consumer satisfaction, perceived corporate reputation, perceived risk, as well as consumer loyalty are the consequences. The findings suggest that perceived CSR was affected by perceived quality of ethics; therefore, corporations should emphasize an internal ethics statement and establish their CSR image to increase consumer satisfaction, enhance the corporate reputation, reduce perceived risk, and form a positive link between corporations and consumers. In addition, the findings reveal that significant relationships were observed among consumer satisfaction, corporate reputation, and perceived risk, which affect consumer loyalty.</p>