Balance Sheet Structure Research Articles

Моделирование структуры бухгалтерского баланса с целью укрепления финансовой устойчивости

Моделирование структуры бухгалтерского баланса с целью укрепления финансовой устойчивости

Emergence of a core-periphery structure in a simple dynamic model of the interbank market

This paper studies a simple dynamic model of interbank credit relationships. Starting from a given balance sheet structure of a banking system with a realistic distribution of bank sizes, the necessity of establishing interbank credit connections emerges from idiosyncratic liquidity shocks. Banks initially choose potential trading partners randomly, but over time form preferential relationships via an elementary reinforcement learning algorithm. As it turns out, the dynamic evolution of this system displays a formation of a core-periphery structure with mainly the largest banks assuming the roles of money center banks mediating between the liquidity needs of many smaller banks. Statistical analysis shows that this evolving interbank market shares the majority of the salient characteristics of interbank credit relationship that have been put forth in recent literature. Preferential interest rates for borrowers with strong attachment to a lender may prevent the system from becoming extortionary and guarantee the survival of the small peripherical banks.

Interaction-Based Model for Pricing CDS with Counterparty Risk

The paper provides methodologically new approach to pricing CDS, predicated on the banking network and the banks’ balance sheets. The model is evolutionary and includes a counterparty risk and the central bank bailout policy. The banking network is used to accurately calculate the capital ratio of each bank at each point in time, which serves as information to accurately calculate the bank’s probability of default and then its CDS price. Default events across the banks may be correlated due to similarities in banks’ balance sheet structures, the shock magnitude, the counterparty risk and the bailout policy. Interplay of these factors helps us explain co-movements in the CDS prices across the banks. Big and well capitalized small banks tend to have smaller median CDS prices than others. A credit event of a substantial magnitude may push the prices into the extreme in a very short period of time. Bailout policy of the central bank is significant in preventing contagion by which it indirectly affects CDS prices. It has been demonstrated that there is the interplay between the systemic and the bank-specific components in the shock effects. The shock exhibits an extreme nonlinear characteristic in the CDS prices.

Are Banks Really Lazy? Evidence from Middle East and North Africa

We investigate whether low loan-to-deposit (LTD) ratios and high levels of reserve balances at the central bank (or holdings of government securities) are a reflection of policy-driven factors compared to commonly cited reasons of reluctance to lend or sometimes weak investment demand in uncertain environments. We examine changes to central bank (CB) balance sheet structures as well as commercial banks’ flow of funds over the period 2007–2012. First, Middle East and North Africa (MENA) CBs play an active role in view of their size that is very large with respect to their economies compared to CBs in advanced economies. Second, under exchange rate targeting, most MENA CB balance sheets are asset-driven, holding foreign exchange (FX) reserves to support the exchange rate policy and resulting in lower loan-to-deposit (LTD) ratios in the case of unsterilized increases in FX. Third, CB policy decisions seem to be accompanied by an increase in commercial bank reserve money balances, with ensuing reduction in the LTD. Finally, if governments meet their financing needs from the banking system—whether from commercial banks or by monetary financing—commercial bank balance sheets will tend to expand, resulting in lower LTD ratios. Our analysis suggests that government and CB actions may also drive the demand for and supply of credit, which are traditionally attributed to the behavior of banks and non-financial corporates and households only. The findings offer a different interpretation of changes in CB and banks’ balance sheets, with direct implications for LTD, calling to exercise caution in recommending policy action which aim at propping up LTD to ‘appropriate’ levels in an effort to reinvigorate credit following a downturn.

Liquidity Risk and U.S. Bank Lending at Home and Abroad

While the balance sheet structure of U.S. banks influences how they respond to liquidity risks, the mechanisms for the effects on and consequences for lending vary widely across banks. We demonstrate fundamental differences across banks without foreign affiliates versus those with foreign affiliates. Among the nonglobal banks (those without a foreign affiliate), cross-sectional differences in response to liquidity risk depend on the banks' shares of core deposit funding. By contrast, differences across global banks (those with foreign affiliates) are associated with ex ante liquidity management strategies as reflected in internal borrowing across the global organization. This intra-firm borrowing by banks serves as a shock absorber and affects lending patterns to domestic and foreign customers. The use of official-sector emergency liquidity facilities by global and nonglobal banks in response to market liquidity risks tends to reduce the importance of ex ante differences in balance sheets as drivers of cross-sectional differences in lending.

Uncertain exit time multi-period mean–variance portfolio selection with endogenous liabilities and Markov jumps

This paper considers an uncertain exit time multi-period mean–variance portfolio selection problem with endogenous liabilities in a Markov jump market, where assets and liabilities of the balance sheet are simultaneously optimized. The random returns of assets and liabilities depend on the states of the financial market. By applying the Lagrange duality method, the Khatri–Rao matrix product technique and the dynamic programming approach, the explicit expressions for the mean–variance efficient strategy and efficient frontier are derived. In addition, the optimal balance sheet structures in both cases with and without boundary constraints are studied. Moreover, some degenerate cases are discussed, and some results in the literature are recovered as degenerate cases under our setting. Furthermore, a numerical example based on real data from the Chinese stock market is provided to illustrate the results obtained in this paper, and some interesting findings are presented.

Comparative Analysis of Selected Elements of Polish and Spanish Accounting System

The article presents the history and premises of revolts of accounting and basic rules of double-entry bookkeeping system, which is international, so is the same both in Poland and Spain. The comparative analysis verifies, the existence of many similarities and only a few differences between Polish and Spanish annual accounts. Differences in both countries between a structure of balance sheet and income statement are of a minor character. There are different economic conditions for firms in both countries which can prepare the abbreviated format for annual accounts. The analysis of documents shows that Spanish General Accounting Plan is much more precise (359 pages) then Polish Act of Accounting (137 pages).

Financial statement analysis of logistics service providers: ways of enhancing performance

Purpose – Despite the relevance of financial information relating to logistics service providers (LSPs), recent research has paid little attention to the financial analysis of LSPs. The aim of this paper is to examine the balance sheet structure of LSPs in order to find out if there are differences between single providers or defined LSP groups (clusters), respectively. Furthermore, the dependency of asset, capital and liquidity structures on LSPs specific characteristics is pointed out. Finally, we show which financial indicators positively influence profitability. Design/methodology/approach – A total of 150 quoted LSPs from all over the world, allocated to six different clusters depending on scope of service were examined. A detailed balance sheet analysis using contingency theory, complemented by a correlation analysis, provides information about the financial structure, similarities and differences within and in-between the LSP clusters. Findings – It was found that there are many differences regarding the financial structures of LSPs. The asset and liquidity structure of LSPs show significant differences, while the capital structure is mostly homogeneous. Profitability is achieved in various ways: Focusing on high net profit margin or asset turnover rates. Research limitations/implications – Only quoted LSPs are analyzed. With this broad research approach the authors point out the range of possibilities for financial statement analysis of LSPs and demonstrate the potential for future research. Practical implications – Financial analysis yields information for making strategic decisions including organic growth, outsourcing, mergers and acquisitions or cooperation between LSPs. Originality/value – This paper contributes to further performance examinations of LSPs by providing a profound financial statement analysis with potential benefits for logistics executives, analysts and researchers.

Integrated bank risk modeling: A bottom-up statistical framework

In the last few years, according to the evolution of financial markets and the enforcement of international supervisory requirements, an increasing interest has been devoted to risk integration. The original focus on individual risk estimation has been replaced by the growing prominence of top-down and bottom-up risk integration perspectives. Following this latter way, we bring together different approaches developed in the recent literature elaborating a general model to assess banking solvency in both the long-run (economic capital) as well as in the short period (liquidity mismatching). We consider banking capability to face credit, interest rate and liquidity risks associated to macro-economic shocks affecting both assets and liabilities. Following the perspective of commercial banks, we concentrate on information available in the risk management practice to propose an easy to implement statistical framework. We put in place this framework estimating its scenario generation parameters on Italian macro-economic time series from 1990 to 2009. Once applied to a stylized commercial bank, we compare the results of our approach to regulatory capital requirements. We emphasize the need for policy makers as well as risk managers, to take into account the entire balance sheet structure to assess banking solvency.

Completeness, interconnectedness and distribution of interbank exposures—a parameterized analysis of the stability of financial networks

This paper assesses the impact of a certain structure of interbank exposures on the stability of a stylized financial system. Given a certain balance sheet structure of financial institutions, a large number of valid matrices of interbank exposures is created by a random generator. Assuming a certain loss given default, domino effects are simulated. The main results are, first, that financial stability depends not only on the completeness and interconnectedness of the network, but also on the distribution of interbank exposures within the system (measured by entropy). Second, looking at random graphs, the sign of the correlation between the degree of equality of the distribution of claims and financial stability depends on the connectivity of the financial system as well as on additional parameters that affect the vulnerability of the system to interbank contagion. Third, the more concentrated the assets are within a money center model, the less stable it is. Fourth, a money center model with asset concentration among core banks is less stable than a random graph with banks of homogeneous size.

Completeness, Interconnectedness and Distribution of Interbank Exposures - A Parameterized Analysis of the Stability of Financial Networks

This paper assesses the impact of a certain structure of interbank exposures on the stability of a stylized financial system. Given a certain balance sheet structure of financial institutions, a large number of valid matrices of interbank exposures is created by a random generator. Assuming a certain loss given default, domino effects are simulated. The main results are, first, that financial stability depends not only on the completeness and inter-connectedness of the network but also on the distribution of interbank exposures within the system (measured by entropy). Second, looking at random graphs, the sign of the correlation between the degree of equality of the distribution of claims and financial stability depends on the connectivity of the financial system as well as on additional parameters that affect the vulnerability of the system to interbank contagion. Third, the more concentrated assets are within a money center model, the less stable it is. Fourth, a money center model with asset concentration among core banks is less stable than a random graph with banks of homogeneous size. Results obtained in this paper extend existing theoretical literature that exclusively focuses on completeness and interconnectedness of the network as well as empirical literature that exclusively focuses on one particular financial network.

Integrated Bank Risk Modeling: A Bottom-Up Statistical Framework

In the last few years, according to the evolution of financial markets and the enforcement of international supervisory requirements, an increasing interest has been devoted to risk integration. The original focus on individual risk estimation has been replaced by the growing prominence of top-down and bottom-up risk integration perspectives. Following this latter way, we bring together different approaches developed in the recent literature elaborating a general model to assess banking solvency in both the long-run (economic capital) as well as in the short period (liquidity mismatching). We consider banking capability to face credit, interest rate and liquidity risks associated to macro-economic shocks affecting both assets and liabilities. Following the perspective of commercial banks, we concentrate on information available in the risk management practice to propose an easy to implement statistical framework. We put in place this framework estimating its scenario generation parameters on Italian macro-economic time series from 1990 to 2009. Once applied to a stylized commercial bank, we compare the results of our approach to regulatory capital requirements. We emphasize the need for policy makers as well as risk managers, to take into account the entire balance sheet structure to assess banking solvency.

Bank Ownership and Credit Cycle: The Lower Sensitivity of Public Bank Lending to the Business Cycle

This paper examines empirically to which extent public banks feature a different pattern in their lending behaviour over macroeconomic fluctuations. Based on a unique dataset from 1990 to 2010, including at most 459 public banks in 93 countries, I can handle ownership change by including records on privatisations as well as nationalisations during banking crisis, which would otherwise blur the picture. I find that (i) public bank lending is significantly less cyclical than that of private banks, (ii) public banks cut less on their loans during economic downturns, with a positive relation between economic development and their ability to absorb macro shocks, and (iii) privatised banks switch from a regime of low to high lending cyclicality. Then, the lower co-movement of public bank loans with macroeconomic fluctuations reveals both (a) a less vulnerable balance sheet structure and more stable financing sources, which is consistent with a lending relationship business model, (b) as well as delayed loan deterioration, which is a symptom of forbearance and inefficient loan management; the actual combination of the two is not orthogonal to economic development, with high income countries more likely to feature efficient public bank lending cyclicality, while evidences suggest it may reveal an inefficient credit allocation for less developed countries.

THE ECONOMY AS A COMPLEX SYSTEM: THE BALANCE SHEET DIMENSION

Given the economy's complex behavior and sudden transitions as evidenced in the 2007–2008 crisis, agent-based models are widely considered a promising alternative to current macroeconomic research dominated by DSGE models. Their failure is commonly interpreted as a failure to incorporate heterogeneous interacting agents. This paper explains that complex behavior and sudden transitions also arise from the economy's financial structure as reflected in its balance sheets, not just from heterogeneous interacting agents. It introduces "flow-of-funds" or "accounting" models, which were pre eminent in successful anticipations of the recent crisis. In illustration, a simple balance sheet model of the economy is developed to demonstrate that non-linear behavior and sudden transition may arise from the economy's balance sheet structure, even without any micro-foundations. The paper concludes by discussing one recent example of combining flow-of-funds and agent-based models. This appears a promising avenue for future research.

Analyzing income statement of 3 star hotels in Thessaloniki

The sector of hotel business in Greece is facing major problems. Based on several scientific studies, there is deteriorating financial situation and reduced efficiency. Moreover, many hotels have shown repeated losses. This study has attempted to investigate the effectiveness of the three star hotels of the city of Thessaloniki compared with the whole country. Also, with the regression method (regression analysis) sought the sources of profit or loss. Based on the accounts of all the hotels of this category in Thessaloniki, it was found that the economic situation and their effectiveness is not significantly different to that of the national total, although in general the situation is better. In addition, the structure of balance sheets and income statements show many differences between the different companies so it is not possible to draw firm conclusions about the sources of efficiency.

Balance Sheet Outlier Detection Using a Graph Similarity Algorithm

Graph similarity measurement has been used in many applications, such as computational biology, text mining, pattern recognition, and computer vision. In this paper, we apply similarity measurement on graphs to measure structural differences in financial statements. Unconventional financial statement structures may potentially reveal deceptive intention of hiding certain information while making technically correct financial statements. Furthermore, unconventional financial statements may also lead to investment opportunities if legitimacy is not questioned. We construct an algorithm based on the metric of string edit distance as an approximation of graph similarity, and apply the Levenshtein algorithm with modified string edit costs to measure string edit distance. We demonstrate the effectiveness of this algorithm in capturing the sensitive changes of balance sheet structures by applying the algorithm in two experiments. The first experiment shows the algorithm is sensitive to all three basic edits (namely deletion, insertion and substitution) on a particular balance sheet, and the second experiment shows more than 90% clustering accuracy on real balance sheets.

Causes of Financial Instability: Don’t Forget Finance

Given the economy’s complex behavior and sudden transitions as evidenced in the 2007-08 crisis, agent-based models are widely considered a promising alternative to current macroeconomic practice dominated by DSGE models. Their failure is commonly interpreted as a failure to incorporate heterogeneous interacting agents. This paper explains that complex behavior and sudden transitions also arise from the economy’s financial structure as reflected in its balance sheets, not just from heterogeneous interacting agents. It introduces “flow-of-funds” and “accounting” models, which were preeminent in successful anticipations of the recent crisis. In illustration, a simple balance-sheet model of the economy is developed to demonstrate that nonlinear behavior and sudden transition may arise from the economy’s balance-sheet structure, even without any microfoundations. The paper concludes by discussing one recent example of combining flow-of-funds and agent-based models. This appears a promising avenue for future research.

The Impact of Stock Market Shocks on Credit in France Since the Mid-1990s (L’Impact des Chocs Boursiers sur le Crédit en France Depuis le Milieu des Années Quatre-Vingt-Dix) (French)

This study attempts to distinguish, in the impact on credit in France, between the effects of stock market shocks occurred since the mid-1990s and more traditional effects, stemming from the business cycle. To do so, it uses a model focused on two financial assets: loans and equities. According to the simulations of this model, companies in France appear much more sensitive than households to stock market shocks. Wealth effects seem to have a fairly limited impact on loans to households. However, the balance sheet structure effect appears to be largely responsible for the expansion of loans to companies. The rise in stock prices in the latter half of the 1990s seems to have sharply increased companies' equity capital, thus allowing them to increase their leverage. The bursting of the equity bubble as of mid-2000 then appears to have contracted this positive credit gap but it was not entirely offset in 2004.

Monetary Policy of Central Banks during Global Financial Crisis

The paper analyzes different regimes of monetary policy, which central banks realized in normal macroeconomic conditions, summarizes their pluses and minuses. During the global financial crisis central banks had to conduct unconventional measures of monetary policy. Their realization has changed the structure and values of central banks balance sheets that is shown on the example of statistical data of FRS, Bank of England, ECB, Bundesbank, Bank of Japan, Peoples Bank of China.

De la diversité des pratiques comptables à l'objet de la comptabilité : le cas de l'air liquide (1902-1939)

Résumé L’industrialisation et le flux continu d’innovations techniques à la fin du XIX e siècle modifient considérablement la structure du bilan des entreprises au sein duquel les immobilisations prennent une place croissante. Ces changements rendent nécessaires le recours à des sources de financement externes et influencent le modèle comptable français qui se diffuse au début du XX e siècle. Moyen de preuve et de garantie, la comptabilité doit désormais être un instrument d’information en raison de l’introduction de nouvelles parties prenantes de l’entreprise. L’étude de cas de L’Air Liquide, de sa création à 1939, illustre les nouveaux enjeux qui pèsent sur l’objet comptable au début du XX e siècle : elle met en évidence comment les modalités de comptabilisation et d’évaluation des actifs, en l’absence de normalisation, permettent un arbitrage entre la constitution de réserves et la rémunération des actionnaires. Elle montre ainsi l’étroite relation de la comptabilité avec l’évolution du capitalisme.