Higher Loan Research Articles

HUMAN VALUES AND ATTITUDES TOWARDS MONEY

Spending money which is not earned becomes more available practice with help of the various types of cash loans. It causes social problem in society because easiness of getting money puts families at risk due to the high loan percent. Our study aims to understand ifhuman values are related to attitudes towards money and in what way if any.Values are motivational constructs that apply to abstract goals (Schwartz, 1992). Schwartz believes that the main aspect of value contents is the type of goal or the motivation it expresses (Schwartz, 1992). Also, values are abstract goals and do not effect decisions in specific situations they can work as the underlying assumptions for creating attitudes. Attitudes are more situation-specific and correlate with behavior at moderate level. In our study values were measured using Portrait Values Questionnaire, PVQ-21 (Schwartz, Melech, Lehmann, Burgess, Harris, 2001). Attitudes towards money were measured using modified version of Money Attitude Scale (Yamauchi Templer, 1982). Question regarding money related behavior were also asked. We surveyed one thousand and five respondents from whom 58% were female, all age groups where presented according to Latvia’s population (representative sample). Results reveal that values correlate with attitudes towards money although modestly.

Do Banks Learn from Other Financial Markets? Evidence from Loan Contract Design

This paper examines the feedback effect between trading in financial markets and bank loan contracting. We find that banks charge higher loan rates for borrowers with higher short selling activities. This result is robust to various identification tests and robustness checks. We further find that this effect is not driven by bear raid risk but rather the information content of short selling. Supporting this argument, our result is stronger when the information asymmetry between the bank and the borrowing firm is greater. Overall, our findings suggest that the information content of short selling has important implications for bank loan costs.

The Price of Integrity

This paper examines the effect of integrity culture on firms’ financing costs. Using different integrity measures at both firm and regional levels, we find that firms with a lower integrity level or firms located in regions lacking integrity have a higher bank loan spread and higher implied cost of equity. To address endogeneity, we adopt forced CEO turnovers due to personal indiscretions and Massachusetts’ Alimony Reform Law of 2011 as two exogenous shocks to firms’ integrity culture. We further identify accounting information quality and excessive risk taking as two channels through which integrity culture affects financing costs.

The Financial Transmission of Housing Bubbles: Evidence from Spain

What are the effects of a housing bubble on the rest of the economy? We show that if firms and banks face collateral constraints, a housing bubble initially raises credit demand by housing firms while leaving credit supply unaffected. It therefore crowds out credit to non-housing firms. If time passes and the bubble lasts, however, housing firms eventually pay back their higher loans. This leads to an increase in banks' net worth and thus to an expansion in their supply of credit to all firms: crowding-out gives way to crowding-in. These predictions are confirmed by empirical evidence from the recent Spanish housing bubble. In the early years of the bubble, non-housing firms reduced their credit from banks that were more exposed to the bubble, and firms that were more exposed to these banks had lower credit and output growth. In its last years, these effects were reversed.

The Default Risk of China’s Credit Market from the Perspective of Industries

Nowadays, the credit industry of China's commercial banks is highly concentrated in industries such as manufacturing, wholesale and retail, which have high non-performing loan rates and low credit asset quality, leading to poor overall credit asset quality of commercial banks. Optimizing the industrial structure of commercial bank credit can effectively improve the quality of commercial bank assets. This paper evaluates the industrial structure of China's credit market from the perspective of industry, and proposes recommendations for the credit funds of different industries based on industry evaluation.

Disaggregation Quality of Accounting Data and Bank Loan Pricing

We analyze whether the disaggregation quality (DQ) of a borrower’s financial statement is associated with its bank loan pricing. We find that firms with low DQ have high bank loan spreads and total cost of borrowing. These results are more pronounced for risky and poorly governed firms. Moreover, a low DQ is associated with a high likelihood of requiring collateral, low credit rating, and high bond issuing spreads. Overall, our results suggest that DQ conveys valuable credit quality information to bank loan lenders.

The Effects of Spatial Distance on Loan Pricing in Relationship Lending

The spatial range between banks and their borrowers has commonly been considered as ambiguous in literature on borrower-lenderrelationships; On the one hand, a higher spatial separation increases informational costs, resulting in ceteris paribus higher interest rates charged by the lending bank. On the other hand, borrowers located closely to their lending banks are exposed to the local market power of the latter and therefore charged higher loan rates. With maintaining a single bank relationship, firms furthermore might occur liquidity risks. In this paper, the spatial distance between German firms and their banks is considered as impact on firms’ lending rate. Employing Heckman’s two-stage approach, there is strong evidence that distance has a positive impact on firms’ lending rates in relationship lending.

Determinants of the Productivity Change for the Banking Sector in Egypt

This study aims to undertake an evaluation and examination of the productivity change of the Egyptian banking sector, using a novel data set which covers 14 banks operating in the Egyptian market from 1997 to 2013. We use a non-parametric approach Data Envelopment Analysis (DEA) based analysis to investigate the productivity change in the Egyptian banking sector. Input-oriented Malmquist indices of productivity change are estimated with DEA to measure total factor productivity (TFP) change. The TFP changes are decomposed into the product of technological change and technical efficiency change (catch up). In the second stage, potential determinants of productivity change are studied using a regression model. We find that the Egyptian banking sector as a whole shows a productivity regress of 0.9 per cent per year, which is mainly due to the technological improvements. The estimated regression model identifies some variables which significantly influence the productivity of banks in Egypt. The banks with higher loans to deposit ratio and higher returns on equity have higher productivity growth reflecting on their strong strategic and managerial skills. The size of bank seems to be associated with an increase in productivity. The maturity of a bank (measured by age) is associated with higher productivity. The net interest margin (NIM) and non-interest expense over total assets (NIETA) variables do not seem to be affecting the productivity of banks. Surprisingly, our results reveal that the financial crisis is negatively and statistically insignificant which means there are no effects on the Egyptian banks.

Human Rights, Capital, or Capabilities? Narrowing Race and Income Gaps in Educational Opportunity

The author presents an understanding of how human capital and human rights have influenced educational policies and the persistence of inequitable opportunities for students. As an alternative approach, human capabilities, an emerging concept of basic liberties, provides an alternative theory for building human capital that can inform academic and social advocacy for reducing gaps in fairness in opportunities to attain a higher education. The author introduces four frames for decoding assumptions used in political rationales for higher education policies, programs, and funding. These frames are used to examine how six states adapted to shifts in federal policy on educational standards and high loans. When policy assumptions are decoded, a human capabilities lens can help find remedies to inequalities in state system markets.

Why Does Fast Loan Growth Predict Poor Performance for Banks?

From 1973 to 2014, the common stock of U.S. banks with loan growth in the top quartile of banks over a three-year period significantly underperformed the common stock of banks with loan growth in the bottom quartile over the next three years. After the period of high growth, these banks have a lower return on assets and increase their loan loss reserves. The poorer performance of fast-growing banks is not explained by merger activity. The evidence is consistent with banks, analysts, and investors being overoptimistic about the risk of loans extended during bank-level periods of high loan growth. Received September 14, 2016; editorial decision May 28, 2017 by Editor Itay Goldstein.

The clustering analysis on data and lending strategy of supply chain with information asymmetry method

In this paper, a theoretical framework is proposed to analyze how trade credit effect bank credit in circumstance of supply chain. We constructed a model to describe information asymmetry among lender and borrower based on game theory and conducted numerical simulation to discuss risk contagion. The static comparison and numerical results illustrate that the loan interest in symmetric case is significantly lower than it in asymmetric case. Default risk of buyer increases the cost of borrower compared to the case when buyer pays for sure and massive trade credit associated with higher loan interest. However the impact on loan amount of credit risk and default risk is more complex. It turns out that information asymmetry can be seen as a moderating factor in the impact on loan amount of default risk and credit risk. Generally this study may not only bring some policy implications for banks to control credit risk along supply chain, but also shed lights in theoretical analysis of trade credit.

Does Skin-In-The-Game Discipline Risk Management? Evidence from Mortgage Insurance

Many mortgage reform proposals suggest replacing Fannie Mae and Freddie Mac (the GSEs) with private entities. A common assumption underlying these proposals is that unlike the GSEs, private insurers will properly manage risk and set fair prices. Inconsistent with this assumption, this paper presents evidence that private insurers less effectively managed home price risks during the 2000-2006 housing boom than the GSEs did. Mortgage origination data reveal that the GSEs were selecting loans with increasingly higher percentages of down payments, or lower loan to value ratios (LTVs), in boom areas than in other areas. These lower LTVs in boom areas reduced the GSEs’ exposure to overheated markets. Furthermore, the decline of LTVs in boom areas stems entirely from the segment insured by the GSEs only, and none of the decline stems from the segment where private mortgage insurers take the first loss position. Private insurers also did not lower their exposure to home price risks along other dimensions, including the percentage of high LTV GSE loans they insured and the percentage of insured mortgage balance. My results highlight that post-crisis reform of the mortgage insurance industry should carefully consider additional factors besides moral hazard induced by the government guarantees, such as mortgage insurers’ future home price assumptions and the industry organization of the mortgage origination chain.

Determinants of SACCOOs Credit Accessibility in Kenya; A Survey of SACCOOs in Imenti North Sub County

The objective of SACCO’s is members’ empowerment through savings mobilization, disbursement of credit and ensuring long-term sustainability through prudent financial practices. A national survey conducted by Central bank of Kenya on financial access revealed that access to SACCO’s credit accessibility has reduced despite the increase in credit demand. This continuous decline in access to credit shows that SACCO’s members are not able to access the credit from their SACCO’s and they seek for credit from other financial institutions. The specific objectives that guided the study were to determine whether products range is a determinant of credit accessibility, to establish if collateral requirement is a determinant of credit accessibility, to determine if product characteristics is a determinant of credit accessibility and to establish if lending procedures is a determinant of credit accessibility in SACCO’s. The study adopted a descriptive research design which is concerned with describing the characteristics of a particular individual and census method was used. Data was collected through questionnaire. The test-retest method was conducted and correlation coefficient calculated using spearman's formula. The questionnaire was validated through a pilot with a sample of 10 respondents from SACCO’s in Nkubu town which is in Meru County. Descriptive statistics which includes mean and standard deviations were used to analyze data. The study also used logistic regression analysis to test the hypothesis and the p-value from test statistic was used to determine whether any differences could be attributed to the ordinary random factors or not. This was done using SPSS Version 22 where data collected was subjected to logistic regression. The study found that credit accessibility in Sacco’s is influenced by product range, collateral requirements, product characteristics and lending procedures. These findings were both supported by the frequencies of the responses from the respondents which were presented in the form of percentages and mean scores. On the credit accessibility parameters, product range and lending procedures had the highest positive influence on SACCO’s credit accessibility. The findings revealed that from 2011 to 2013, the number of loan applications received in SACCO’s from Imenti North Sub-County has dropped from significantly. This has affected the number of successful loan applications. The results of the analysis of the moderating variable revealed that government policies had a higher moderating influence on credit accessibility. The results also showed that the product range, collateral requirements, products characteristics and lending procedures can explain the changes in credit accessibility of SACCO’s in Imenti North Sub-County. The study recommends that SACCO’s should start investing in products innovation in order to ensure that they have a wide range of products which are tailor made to suit their client’s needs and develop a policy that allows members to use other forms of collateral at their disposal in order for them to qualify for higher loans that the ones guaranteed by their shares only. This will increase the number of members accessing credit and reduce the stiff competition that SACCO’s experience with the other credit service providers. SACCO’s should come up with ways of developing products that have features which will encourage their members to borrow loans. They should structure their repayment period to suit the ability of borrowers to pay. SACCO’s should simplify the lending procedures for members to be able to access credit. The lending procedure of having guarantors sign the borrower’s loan application form discourages members from accessing credit. SACCO’s should come up with the procedures other than limiting themselves to number of shares held and guarantors. Further study can be can be done in this area by increasing the scope of the study. Such scope would include other Sub- Counties in Kenya.

Monetary Policy Without a Bank Lending Channel

We study the transmission channels from central banks’ quantitative easing programs via the banking sector when central banks start purchasing corporate bonds. We find evidence consistent with a “capital structure channel” of monetary policy. The announcement of central bank purchases reduces the bond yields of firms whose bonds are eligible for central bank purchases. These firms substitute bank term loans with bond debt, thereby relaxing banks’ lending constraints: banks with low Tier-1 ratios and high non-performing loans increase lending to private (and profitable) firms, which experience a growth in capital expenditures and sales. The credit reallocation increases banks’ risk-taking in corporate credit.

Foreign Penetration, Lending Behavior and Risk in Southeast Asian Banks: Does Bank Competition Matter?

This paper attempts to analyze the joint impact of foreign penetration and competition on financial intermediation and risk in banking. Our empirical results from a sample of commercial banks in ASEAN-5 over the 1999-2012 period suggest that banks in countries with higher foreign bank penetration exhibit higher loan growth and lower riskiness. However, the positive impact of foreign bank penetration at the country level on bank loan growth and stability only holds for banks operating in countries with higher competition in banking. Finally, this paper also highlights several policy implications to strengthen financial intermediation and bank stability in ASEAN-5.

Asset Securitization and Risk: Does Bank Type Matter?

This study is among the first attempts to tests for the relative differences between Islamic and conventional asset securitizations on bases of bank’s capitalization and risk (credit risk and liquidity risk) during two evidential crises, financial crisis (2007-2009) and the political crisis (2011-2012). We employ GMM estimation for uniquely constructed data for global asset securitization of commercial banks in 22 countries in the years 2003 to 2012, data of 672 global banks (4889 year-observations). We find that on average, securitized banks are less capitalized but more liquid than non-securitized banks. Islamic banks (IBs) involved in securitization hold higher quality loan portfolios and are more prudent but less liquid than securitizing conventional banks (CBs). We find no relative differences between the two sectors with respect to capitalization. Results are robust during the financial crisis. Additional tests, distinguishes between retained and non-retained interests for asset securitizations to test whether the level of control of the securitizing assets affect banks’ risk and capital adequacy. We find that non-retain interests by banks over securitization indicate significantly high prudence by banks however; this is associated with lower liquidity Our results are of importance to both local and international regulators as well as different stakeholders in banks. The bank type does not matters but the relative size of retained interests to the total issuance is that matters because it shows that there is impact on credit risk. Constrained model of IBs do not improve their liquidity though but helped with loan portfolio.

Did Pre-Crisis Mortgage Lending Limit Post-Crisis Corporate Lending? Evidence from UK Bank Balance Sheets

Was the bank credit crunch following the collapse of Lehman Brothers in September 2008 in many economies due to a loan supply collapse or to a decrease in loan demand? This paper investigates the effects of UK banks’ pre-crises exposure to residential property markets on their post-crisis business lending to explore the existence of a negative post-crisis loan supply shock. We isolate the loan supply effect from a loan demand effect by using a unique quasi-experimental setting and a rich, tailor-made micro-level data set on bank lending volumes, bank balance sheets and mortgage loan characteristics. Controlling for a range of bank-specific factors, we find that banks with larger shares of residential mortgages in total loans in 2008 Q2 reduced their lending to business more after 2008 Q3. Post-crisis lending to business is also sensitive to the riskiness of banks’ mortgage portfolios. Banks having more mortgages to borrowers with impaired credit history, or more mortgages to the self-employed, or mortgages with higher loan to value ratios prior to the crisis reduced their lending to non-financial businesses more.

Overconfident Banks and Firm Innovations

We find that banks with overconfident CEOs (overconfident banks) have greater risk tolerance and lend more frequently to high-risk firms. However, overconfident banks also charge higher loan spreads to compensate for taking such risks. Moreover, overconfident banks prefer lending to high-risk firms with more innovative activities. After obtaining loans from overconfident banks, these firms undertake more R&D activities compared to other borrowers and they attain higher innovation outputs and market valuation than others. Overall, our findings indicate that a bright side of overconfident banks is the innovative activities of their borrowers to the benefit of the economy in general.

Global Banks and Syndicated Loan Spreads: Evidence from U.S. Banks

This paper explores the relationship between bank global exposure and their syndicated loan spreads. Linking syndicated loan information from Dealscan with confidential US bank foreign exposure data and borrower characteristics, we find that more bank global exposure is associated with a higher loan spread that is statistically significant. To analyze this relationship between global banks and loan spreads, we develop a theoretical framework where, in equilibrium, riskier borrowers are more likely to work with global banks. Using a Heckman selection model, we confirm that borrower risk characteristics indeed predict a higher likelihood of having a loan arranged by a global bank. However, after controlling for the bank-borrower selection effect, we continue to find that global banks charge on average an 12.7 bps higher spread on their syndicated loans, as compared with domestically focused banks. Finally, we explore a non-risk based alternative where firms with multinational operations are more likely to work with global banks for international banking services.

Well-connected short-sellers pay lower loan fees: A market-wide analysis

High loan fees generate short-selling constraints and, therefore, reduce price efficiency. Despite the importance of loan fees, empirical evidence on their determinants is scarce. Using a market-wide deal-by-deal data set on the Brazilian equity lending market which uniquely identifies borrowers, brokers, and lenders, we are able to construct a proxy of search costs at the borrower–stock–day level. We find that—for the same stock, on the same day—borrowers with higher search costs pay significantly higher loan fees. Our results suggest that regulators should encourage the use of a centralized lending platform to reduce search costs in the lending market.