Fragile Institutions Research Articles

What Do Two Million Credit Lines Say About the FinTech Fragility?

We analyze lending by traditional as well as FinTech lenders during COVID-19. Comparing samples of FinTech and bank loan records across the outbreak, we find that FinTech companies are more likely to expand credit access to new and financially constrained borrowers after the start of the pandemic. However, this increased credit provision may not be sustainable; the delinquency rate of FinTech loans triples after the outbreak, but there is no significant change in the delinquency of bank loans. Borrowers holding both loan types prioritize the payment of bank loans. These results shed light on the benefits provided by shadow banking in a crisis and hint at the potential fragility of such institutions when delinquency rates spike.

Network Tail Risk Estimation in the European Banking System

Measuring interconnectedness in a banking system and identifying the transmission channels of systemic risk is a main issue for the analysis of financial stability. We develop a methodology based on conditional tail risk networks to assess the channels of transmission in a banking system, and to identify the most relevant and/or fragile institutions. The networks are constructed using quantile graphical models, and the proposed framework can be considered as a network extension of the ∆CoVaR approach by Adrian and Brunnermeier (2016). From the conditional tail risk networks we can then compute synthetic indices of systemic risk for each bank. An additional set of systemic risk indicators is computed by considering together the network of conditional tail risk and bank-specific indicators of credit risk (in particular we use the ratio of non-performing loans, NPL). The empirical analysis focuses on the European banking system, and considers a panel of 36 large banks. Among the main findings, we found evidence of regional clusters of interconnected banks, especially in crisis period. Moreover, in terms of interconnectedness alone, systemic risk is diffused relatively evenly across European banks, while the set of systemic indicators built using also NPL highlighted a concentration of risk in southern European countries.

Leaders do not emerge from a vacuum: Toward an understanding of the development of responsible leadership

AbstractThe worldwide problem of corruption is one that requires greater knowledge about responsible leadership. Based on the literature on responsible leadership, developmental psychology, and moral development, the purpose of our study is to understand the constructions of the motivational drivers behind the behaviors of a responsible leader. Using biographical and narrative methodologies, we analyzed the individual motivational drivers of Carlos Cavelier, a recognized responsible leaders who grew up and works in Colombia, a social/economic context characterized by institutional fragility and corruption. Our findings suggest that the coherence between the immediate environments of development of the future leader, configured optimal environments in which the leader developed the moral conscience that guides his behavior as a responsible leader. Our study points out the need not to take the development of responsible leaders for granted, and presents propositions that allow for a deeper understanding of the micro‐foundations of responsible leadership, highlighting the importance of the contexts in which leaders are raised and in which they develop. Thus, our study has the potential to be heuristic and generative of future studies.

“Imperial Folly”: Metrication, Euroskepticism, and Popular Politics in Britain, 1965–1980

AbstractEuropean integration policies inflamed anti-Europe sentiments in Britain and exposed the fragility of democratic institutions in the face of populist campaigning. This article demonstrates ...

Friend or foe: The divergent effects of FinTech on financial stability

Whether FinTech causes the fragility of financial institutions is a controversial issue. Using a panel sample of listed banks from 84 countries, we exploit the introduction of FinTech regulatory sandboxes as an exogenous shock and examine the heterogeneous effect of FinTech on the fragility of financial institutions. We find that (i) a shock to FinTech innovations has no net effect on the fragility of financial institutions when we ignore market characteristics, (ii) promoting FinTech decreases (increases) the fragility of financial institutions in emerging (developed) financial markets, and (iii) FinTech affects the fragility of financial institutions through the channel of profitability.

Coups and the consolidation mirage: lessons for stability in new democracies

ABSTRACT Many recent treatments of democratic consolidation in both the academic and policy realms rely on minimalist understandings of consolidation. Repeated elections are expected to provide sufficient stability to protect nascent democracies from reversal. However, a comparison of unexpected coups in Honduras (2009) and Mali (2012) following political crises, with Ghana and Mongolia, where similar political crises were solved in 2008 within political institutions, demonstrates the limits of such understandings lead to both academics and policymakers to unduly optimistic expectations for stability. In Ghana and Mongolia, political crises were resolved within the context of democratic institutions. However, in both Honduras and Mali, a series of elections failed to lead to democratic consolidation. Military reversal revealed that democracy in both cases rested on fragile institutions that collapsed when subjected to political stress. Instead of minimalist standards for consolidation, both academic and policy study of stability in young democracies should rely on institutional standards for consolidation that take into account institutional performance and the commitment of actors to respect institutions. Absent well-functioning institutions, a cycle of elections should not be expected to prevent the breakdown of democracy and the grave consequences for stability that so frequently accompany such breakdowns.

Policy, institutional fragility, and Chinese outward foreign direct investment: An empirical examination of the Belt and Road Initiative

The Belt and Road Initiative (BRI) is an important policy agenda undertaken by the Chinese government. We explore how the BRI – as well as an associated policy, the creation of Chinese overseas special economic zones – influences Chinese outward foreign direct investment (FDI). We find that host-country institutional fragility positively influences Chinese FDI volumes, and that the impact of institutional fragility on Chinese inward FDI to the host is amplified in the presence of the BRI. Specifically, BRI policy facilitates FDI to countries with weaker rule of law and less government accountability. We argue that, while the BRI may actively facilitate economic growth (i.e., via infrastructure development), and in turn aspects of human development, particularly in less-developed economies, its likely impacts on political rights may not be so promising.

The Accra Confession as Dangerous Memory: Reformed Ecclesiology, the Ecological Crisis, and the Problem of Catholicity

This study presents the Accra Confession as a theological response to the ecological crisis from a Reformed perspective while also addressing its critical weakness, namely the problem of universality in both Reformed ecclesiology and global approaches to ecological destruction. Because of a fragile universality, both Reformed churches and global institutions find it difficult to agree on a concrete plan to address climate change. Theologically, this difficulty arrives not primarily from disagreement with the existence or causes of climate change but how Christian theological values translate concretely to acts of justice. This study proposes a way to ground these discussions on the concept of dangerous memory by resourcing the theology of Johann Baptist Metz. Dangerous memories allow stories of the suffering vanquished to be constitutive to the construction of caritas, which in turn serves as a suitable theological foundation for addressing differing approaches to engaging climate issues. Reading the Accra Confession as dangerous memory, then, provides a valuable resource to the Reformed community by allowing the testimonies of those affected adversely by climate change to substantially inform theological discourses on climate justice.

Post-legislative Scrutiny (PLS) in the Process of Democratic Transition in Malaysia

Malaysia’s 14th general election in 2018 saw the fall of the Barisan Nasional (BN) regime after ruling the country for more than six decades. Prior to the election, Malaysia faced challenges ranging from the absence of state legitimacy, fragile institutions to corruption scandals, leaving little room to have robust discourse on legislative reforms. Promise 16 of the Pakatan Harapan (PH) election manifesto prior to the election, pledges to restore the dignity of Parliament to institutionalize the select committee system in Parliament and the Senate to enable them to function effectively. Whilst there is limited post-legislative scrutiny (PLS) in Malaysia for now, the various reforms in the phase of democratic transition to the administration of PH is a positive sign of the possibility for Malaysia to move into better law-making procedures. This paper examines the work that is currently being undertaken in the Parliament of Malaysia to assess whether the current parliamentary reforms can pave the way for the PLS mechanism to be put in place.

Fragmentação do poder e a complexidade de governar nas regiões metropolitanas

Com a maior mobilidade de serviços, capital e pessoas, a questão metropolitana ganha notoriedade. Embora a Constituição já reconhecesse as regiões metropolitanas, foi com o Estatuto da Metrópole, Lei n. 13.089, de 2015, que houve algum avanço em relação à governança interfederativa. Pretendia-se preencher as lacunas e explorar o potencial de diversos instrumentos político-urbanísticos visando à boa governança com base no fomento às iniciativas de cooperação e coordenação federativa, por longas décadas negligenciadas pelo Poder Público. Contudo, a própria fragmentação do poder e a complexidade de governar essas regiões tornam frágeis a gestão e a governança delas, pondo em xeque a viabilidade e a efetividade do Estatuto. Assim, o presente estudo, utilizando o método hipotético-dedutivo, visa analisar algumas inovações trazidas pelo Estatuto ou que deveriam ter sido disciplinadas por ele e o modo como estas se aproximam ou não dos itens essenciais para uma sólida governança e para a superação das fragilidades institucionais.

Challenges and new possibilities: african studies in Brazil and the South-South Connection

Os estudos africanos têm uma história profundamente política no Brasil, que mostra que aqui, como em outros contextos, estudar a África não e’ algo “natural”, mas o resultado de bastante engenharia social e intelectual. Este artigo analisa a originalidade dos estudos africanos no Brasil, se comparado com o Norte global, e trata de uma série de desafios e entraves que derivam da fragilidade institucional destes estudos e do clima político adverso na maior parte dos países do Brics – Brasil, África do Sul e Índia. Na última parte o artigo apresenta uma série de novos caminhos que podem ser trilhados para o desenvolvimento e a consolidação da conexão Sul-Sul nos estudos africanos realizados no Brasil.

Maladministration: the Particular Jurisdiction of the Ombudsman

The office of the ombudsman is much misunderstood. Is it better viewed as part of the executive or the judiciary? Is it a fragile institution, unprotected with security of tenure? Is it a ‘toothless tiger’? The one constant in the face of such inquiries is that ombudsmen don’t seem to care, or at least carry on with great effectiveness as though they don’t. I would argue in any case that such queries are beside the point and that the one thing that must be understood about the ombudsman is that it is an office with a particular purpose.

The influence of regional institutional setting on the performance of innovative entrepreneurship

PurposeTwo types of institutional constraints, namely, institutional voids and policy uncertainty, have been recognised and elaborated, including their influence on new venture performance. However, not enough attention has been paid to the multidimensional attribute of institutional transformation. By hinting at a relatively underexplored third type of institutional constraints, i.e. institutional fragility, this paper aims to build a comprehensive framework of institutional constraints to analyse how innovative start-up performance is influenced by institutional constraints.Design/methodology/approachUsing Chinese manufacturing firms as the empirical sample, the authors use an econometric method to test the relationship between institutional constraints and the performance of innovative start-ups.FindingsOn the basis of a uniquely constructed database from 2005 to 2007, the authors find that institutional constraints are negatively associated with innovative start-up performance proxied by return on assets, sales growth and new product sales.Originality/valueThe study offers researchers and practitioners a detailed view of institutional constraints and innovative start-up performance.

Rule of law and democracy in the Western Balkans: addressing the gap between policies and practice

ABSTRACTThree decades since the beginning of democratization processes, the Western Balkan countries have built a democratic façade by holding elections, by promulgating legal acts guaranteeing freedom of expression, or by constitutionally declaring a strict system of checks and balances. In reality, however, political elites rely on informal structures, clientelism, and control of the media to undermine democracy. Given that formal democratic freedoms are effective only to the extent that political elites are bound by the effective rule of law, the core argument of this study is that the structural weaknesses of democratic institutions are purposefully exploited by domestic regimes, which are able to misuse these fragile institutions to their advantage.

Internal Models, Make Believe Prices, and Bond Market Cornering

Exploiting position-level heterogeneity in regulatory incentives to misreport and novel data on regulators, we document that U.S. life insurers inflate the values of corporate bonds using internal models. We estimate an additional $9-$18 billion decline in regulatory capital during the 2008 crisis, i.e., a 30% greater decline than what was reported. Supervision helps dissuade misreporting, but only when close pricing benchmarks exist. Insurers, in response, strategically shift asset selection toward bonds where price verification is harder, and corner small bonds. Our findings have consequences for assessing the fragility of financial institutions and for understanding the price discovery of corporate bonds.

The Successes and Failures of Economic Reform in Nigeria’s Post-Military Political Settlement

ABSTRACT There are limitations in the explanatory power of prevailing theories on the political economy of Africa’s growth without industrialization that emphasize the resource-curse, ethnicity, neopatrimonialism, and the developmental state. This article uses a political settlements approach to explain the institutional underpinnings of Nigeria’s economic transition. It shows how external constraints on ruling elites interact with the distribution of power and institutions to stimulate episodic reforms in an ‘intermediate’ Nigerian state. Rather than a ‘developmental’ state presiding over industrial upgrading or a ‘predatory’ state operating solely on neopatrimonial basis, this intermediate state presides over selective reforms and bursts of economic growth and diversification. Thus, specific constraints in Nigeria’s post-military political settlement from 1999 generated the initial impetus for successful telecoms liberalization, while inhibiting growth in the oil sector. This article contributes to advancing the political settlements framework in applying it to resource-rich countries, by outlining the four dimensions of the distribution of power and the constraints for institutional persistence or change, and their varying economic implications. It also reclaims the concept of ‘elite bargains’ as a defining feature of the horizontal distribution of power and demonstrates its centrality to the durability or fragility of institutions, especially at critical junctures of resource booms and busts.

Ein Blick auf die russische Rechtskultur

We can observe a growing misunderstanding between the West and Russia. The transformation of the Russian legal system has come to a standstill; clearly different values are emerging. The Russian legal culture has presumably been underestimated as the cause of this development. However, it can provide important explanations for current developments. The history of Russian law may elucidate many differences, which lead to the fact that the will to observe the law is much less pronounced in Russia than in Germany, for example. This legal nihilism weakens the rule of law. Fragile institutions are becoming instruments in the hands of strong players. Weak participants of legal relations find it difficult to enforce their rights. The ideas of compromise, control and fair play suffer. At the same time, it is obvious that legal culture is changing only slowly. The focus of the legal dialogue must therefore be placed more on mutual understanding and cooperation between the legal staff. The previous concentration on the creation of new laws has been historically understandable, but has had limited success. It should be reconsidered.

Founder Personalities, Behaviors and New Venture Success in Sub-Saharan Africa

Facing heightened levels of political instability and institutional fragility, several sub-Saharan African countries have been responding with innovation policies and entrepreneurship support structures. With little scholarly knowledge on who those entrepreneurs are at an individual level, however, the ability to effectively support innovative new ventures in some of the world's most compromised regions would remain limited. Based on a sample of 232 entrepreneurs, this study attempts to enlighten the relationship between personality characteristics of entrepreneurs and their behaviors and subsequent success. This study thereby extends the entrepreneurship literature applying the Five-Factor Model of Personality to a new context while enriching knowledge on the personality-behavior relationship in entrepreneurship. Several findings and theoretical concepts are synthesized while evaluating new venture success from a behavioral lens among largely innovative, social-driven entrepreneurs in sub-Saharan countries, providing important implications for research, policy, and practice.

Regulation of Illegal Drugs: State Control and Fragile Institutional Capacity

This policy comment analyzes the risks and issues that might arise from the legal regulation of illegal narcotic and psychotropic products or substances with risks to the health or safety of citizens. We focus on reducing these risks by providing existing examples through existing state-based control mechanisms, with a focus on developing economies with fragile or corruption-sensitive institutions. We discuss the need to implement regulatory models that minimize the risk of diversion and corruption from the legal to the illegal market within a regulated framework. The primary concern is to establish legal and regulatory frameworks and policies with sufficient resilience to mitigate and reduce the risks, and that are inclusive of broad regulation stakeholders and the influence of their interactions on regulation outcomes. Importantly, we look at the integration of current players of the illegal market into the legal one in order to enhance the social, economic and legal benefits of regulation towards the most vulnerable, while at the same time undermining the illegal market. We find that state institutions, including those of LMICs, have varying institutional capacity to regulate currently prohibited drugs, with the existence of regulation frameworks of legal drugs or hazardous and controlled goods. While the technical health and judiciary mechanisms exist to allow for more effective controls of drugs through legal regulation, political will is still lacking. We reviewed regulation models using a social justice focus, thereby allowing countries to establish frameworks for the inclusion of the populations most-affected by prohibition and depriving criminal organizations of local networks of trafficking

A Critical Review of Drug Trafficking in Guinea – Conakry

The rising trend of the drug trade in Guinea-Conakry began from 2004 and the extent of the illicit trade came to limelight after the military coup in 2008. Many observers then feared that Guinea-Conakry maybe “West Africa Next Narco State”. This paper therefore critically reviewed the trend of drug trafficking in Guinea-Conakry by adopting a desk-review research approach with the reports and evaluations obtained from secondary sources of data analyzed through content analysis. The study found that the “narco-state syndrome” has remained a dangerous trend within the West African sub-region with negative impact and effects in states like Guinea-Conakry that are caught up in the drug trade. This study concluded that Guinea-Conakry is at risk of being captured by drug traffickers as crime governance was noted to be interlinked with drug trafficking with high complicity of higher level elites in the illicit drug trade. The study therefore recommended that government of Guinea-Conakry should address the fragility and weakness of state institutions by putting in place sustainable development policies directed towards improving human security. Also, counter-narcotics framework should prioritize and encourage cooperation between law enforcement agencies and relevant stakeholders to ensure that drug use and its consequences are reduced to the barest minimum.