23,141 research outputs found
Banks, knowledge and crisis: a case of knowledge and learning failure
Purpose â Regulators such as Turner have identified excessive securitization, high leverage, extensive market trading and a bonus culture, as being major factors in bringing about the bank centred financial crisis of 2007-2009. Whilst it is inevitable that banks adopt procyclical business strategies, not all banks took excessive risks and subsequently had to be rescued by taxpayers. The paper examines the extent to which individual bank outcomes can be attributed to systematic differences in banking knowledge concerning the primary risks and value drivers of their organisations by bank board directors and top management.
Design/methodology/approach â The paper reviews a wide range of theoretical, historical and empirical literatures on banking models and detailed case analyses of failing and non-failing banks. A framework for understanding the role and application of knowledge in banking is developed which suggests how banks, despite their pro-cyclical business strategies, are able to institutionalise learning and actively create new knowledge through time to improve bank organisation, intermediation and risk management.
Findings â The paper finds that a lack of basic knowledge of banking risks and value drivers by the boards and senior managers of the failing banks were implicated in the banking crisis. These knowledge problems concerned banks' understanding of their organisation, intermediation and risk management in an active market setting characterised by rapid economic and organisational change. Thus, the failing banks ignored or were unaware of this knowledge and hence experienced acute difficulties with learning the new knowledge needed to address the new problems thrown-up by the financial crisis.
Practical implications â The analysis suggests that addressing this knowledge gap via the institutionalisation of banking knowledge ought to constitute an important element of any sustainable solution to the problems currently being experienced by the banking sector. By ensuring greater bank learning, knowledge creation, and knowledge use, governments and regulators could help reduce individual bank risk and the likelihood of future crisis.
Originality/value â In contrast to the claims made by some politicians and banking insiders, the analysis indicates that the banking crisis and its severity were neither unpredictable nor unavoidable since some banks, by institutionalising banking knowledge and history of past crises, successfully avoided the pitfalls experienced by the failing banks
Incorporation and Taxation: Theory and Firm-level Evidence
This paper provides a theory and firm-level evidence on the incorporation decision of entrepreneurs in a model of taxes and corporate governance. The theory explains how the incorporation decision of entrepreneurs is driven by taxation (corporate and personal income taxes), corporate transparency, access to external capital and limited liability. We estimate features of this model using a large cross-section of more than 540, 000 firms in European manufacturing. We find that higher personal income tax rates favor incorporation while higher corporate tax rates reduce the probability to incorporate. These findings are robust to the inclusion of other economic and institutional determinants of external financing and choice of organizational form.incorporation, governance, taxes, discrete choice models
Organisational Control an English Commercial Bank Lending to Industry in the decades before Wowrld War I
Editada en la FundaciĂłn Empresa PĂșblicaLos años 1880-1914 fueron de crecimiento institucional y de sistemĂĄtica
consolidación en el sector bancario inglés. A principios del siglo XIX se produjeron
una serie de crisis que afectaron seriamente a los bancos de Inglaterra
y Gales. Una de sus consecuencias fue generar preocupaciĂłn sobre la liquidez
de los bancos, planteĂĄndose simultĂĄneamente interrogantes sobre la adecuada
composiciĂłn de los crĂ©ditos al sector privado. El artĂculo examina los procedimientos
utilizados por los bancos para minimizar los riesgos y estudia
algunos aspectos de las prĂĄcticas crediticias que se aplicaron en las regiones
mås industrializadas de Gran Bretaña. En la primera parte se resume la organización
y los métodos de control adoptados por las principales sociedades
anĂłnimas bancarias. La segunda presenta un esquema para la evaluaciĂłn y
seguimiento de los créditos. Y la tercera analiza las pråcticas de los bancos
en sus préstamos al sector industrial.The years 1880-1914 were years of institutional growth and systemic consolidation
for English banks. In the early and middle decades of the nineteenth
century there had been a number of crises which had affected the banks of
England and Wales. On effect was to raise anxieties about the liquidity of
bank balance sheets, including fundamental questions about the composition
of lending to the private sector. In particular, the paper discusses the procedures
used by the banks to minimise risk and examines some aspects of
actual lending practice as it applied to the industrial regions of Britain. There
are three parĂs to the paper. The fĂrst briefly summarises the organisational
and control structures that were introduced by the large joint-stock banks to standardise lending at their numerous branches. The second section
introduces a schema Ăot the assessment and monitoring of loans, and the
third discusses some of the banks' pre-1914 practices with regard to loans
to industry.Publicad
Corporate environmental assessment by a bank lender : a social constructionist perspective
Over the last decade evidence has emerged which suggests that lenders are considering environmental impact of corporate borrowers as part of their lending decisions. Environmental consideration by lenders may considerably influence the level of financial support available for economic growth and environmemntal management. The primary aim of this research project is to examine the development and use of corporate environmental assessment techniques by members of a commercial lending bank. The research will build upon previous findings that highlight the influences of culture upon bank members perception of environmental credit risks. Specific emphasis will be placed on evaluating the role of mechanisms for the communiaction of bank policy. These will be analysed to find out how and why corporate environmental performance considerations shape the lending process. Research will be undertaken in the form of a case study facilitated by Lloyds TSB Group plc. Analysis will centre on an evaluation of the rationalities for environmental assessment displayed by bank members and their justification for the application of specific environemnatal assessment techniques. The findings are expected to be of direct practical benefit to bank lending officers and others interested in lending processes and/or corporate environmental assessment techniques
Contingent Capital and Bank Risk-Taking among British Banks before World War I
The recent financial turmoil highlights the incentive of highly leveraged financial institutions to take excessive risk, given the protection of limited liability. During the nineteenth and early twentieth century, many banks operated under liability rules which obligated shareholders to bear larger costs of bank insolvency in the form of contingent, or even unlimited liability. This paper examines the empirical relationship between the size of banksâ contingent liability and their risk-taking behavior using data on British banks from 1878-1912. We find that banks with more contingent liability appear to have taken less risk. We also find evidence that the risk-reducing effects of contingent liability were larger for banks with higher leverage, suggesting that contingent capital mitigated moral hazard problem at banks.Contingent Capital, Bank Risk-Taking, British Banks
Corporate risks, risk bearing ability and equity
There is a relation between corporate risks, risk bearing ability and equity. In order to assess the risk bearing ability of a corporation, one reference figure is equity, understood as the sum of legal capital and reserves, free reserves and accrued profits. Equity shows the risk bearing ability related to the risk of asset reduction as well as the ability of the corporation to attract new liquidity by increasing debts, in case of a negative free cash flow. Equity is the risk reserve of the corporation. The relation between equity and risk bearing ability allows defining the necessary amount of equity by analyzing the corporate risks. Furthermore, it leads to rules for the valuation of assets, the creation of reserves and as to the boardâs duty of care on how to pursue the corporate strategy
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Software tools for stochastic programming: A Stochastic Programming Integrated Environment (SPInE)
SP models combine the paradigm of dynamic linear programming with
modelling of random parameters, providing optimal decisions which hedge
against future uncertainties. Advances in hardware as well as software
techniques and solution methods have made SP a viable optimisation tool.
We identify a growing need for modelling systems which support the creation
and investigation of SP problems. Our SPInE system integrates a number of
components which include a flexible modelling tool (based on stochastic
extensions of the algebraic modelling languages AMPL and MPL), stochastic
solvers, as well as special purpose scenario generators and database tools.
We introduce an asset/liability management model and illustrate how SPInE
can be used to create and process this model as a multistage SP application
Building Wealth on the Foundation of Employment Portfolio Series
[Excerpt] The vision of the U.S. Department of Labor (USDOL) is to advance the economic futures of workers, including those with disabilities. The unique mission of the Office of Disability Employment Policy (ODEP) within USDOL is to promote the involvement, cooperation, and collaboration of multiple federal, state, and local agencies with the private sector, to increase participation of individuals with disabilities in the workforce and economic mainstream. No single program, policy, funding stream, or strategy is a universal solution for the multiple challenges encountered by individuals with disabilities who want become economically self-sufficient. Yet, across the federal government, there are tools and strategies now being implemented to help lift low-income wage earnersâincluding individuals with disabilitiesâout of poverty and empower them through employment and expanded economic opportunities. This portfolio series introduces asset development concepts, tools, and activities that individuals with disabilities, their families, and the workforce development professionals who support them can use to build wealth on the foundation of successful employment
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