Is foreign-bank efficiency in financial centers driven by home-country characteristics?

This paper investigates the effects of home country banking regulations on the performance of foreign banks in Luxembourg’s financial center. We control for the main regulatory indicators, such as capital requirements, private monitoring, official disciplinary power and restrictions on bank activities, accounting for the regulatory regime applied to foreign banks. We also control for the level of GDP in the home country and its position in the business cycle. The two-stage bootstrap method proposed by Simar and Wilson (2007) is applied to bank panel data covering 1999-2009. The analysis carries policy implications for bank regulators in both home and host countries and provides insight into the choice between establishing a branch or a subsidiary, when developing cross-border activities through financial centers.

Comparing Macroeconomic Performance of the Union for the Mediterranean Countries Using Grey Relational Analysis and Multi-Dimensional Scaling

The aim of this study is to evaluate the economic performance of the Union for the Mediterranean (UfM) countries during 2006-2016 periods. The Union for the Mediterranean comprises the 28 EU Member States, the European Commission and 15 Mediterranean countries namely Albania, Austria, Bosnia and Herzegovina, Croatia, Czech Republic, Egypt, Finland, Germany, Hungary, Italy, Jordan, Lebanon, Luxemburg, Mauritania, Montenegro, The Netherlands, Poland, Romania, Slovenia, Sweden, Tunisia, United Kingdom, Algeria, Belgium, Bulgaria, Cyprus, Denmark, Estonia, France, Greece, Ireland, Israel, Latvia, Lithuania, Malta, Monaco, Morocco, Palestine, Portugal, Slovakia, Spain and Turkey. Syria has suspended its membership to the UfM on December 1, 2011. Libya has an observer status in the UfM. Grey Relational Analysis is used for the outranking of countries using macroeconomic indicators including total investment, gross national savings, inflation, average consumer prices, volume of imports of goods and services, volume of exports of goods and services, unemployment rate, general government revenue, general government total expenditure, general government gross debt, current account balance, gross product domestic (constant). Also annual macroeconomic indicators are converted to single data set by using arithmetic mean and weighted arithmetic mean (to be focused on recent years). This combined data was also used for another economic performance evaluation and Multidimensional Scaling Analysis has been used for weighted arithmetic mean to show countries' positions relative to each other in a two-dimensional plane. The results of the empirical analyses show that Ireland ranked as first according to the weighted arithmetic mean among 36 UfM countries. Egypt and Tunisia have been found as the countries with the worst economic performance

Two-stage DEA-Truncated Regression:Application in Banking Efficiency and Financial Development

This study evaluates the efficiency of peripheral European domestic banks and examines the effects of bank-risk determinants on their performance over 2007–2014. Data Envelopment Analysis is utilised on a Malmquist Productivity Index in order to calculate the bank efficiency scores. Next, a Double Bootstrapped Truncated Regression is applied to obtain bias-corrected scores and examine whether changes in the financial conditions affect differently banks’ efficiency levels. The analysis accounts for the sovereign debt crisis period and for different levels of financial development in the countries under study. Such an application in the respective European banking setting is unique. The proposed method also copes with common misspecification problems observed in regression models based on efficiency scores. The results have important policy implications for the Euro area, as they indicate the existence of a periphery efficiency meta-frontier. Liquidity and credit risk are found to negatively affect banks productivity, whereas capital and profit risk have a positive impact on their performance. The crisis period is found to augment these effects, while bank-risk variables affect more banks' efficiency when lower levels of financial development are observed

Three essays on rebound effects

This thesis investigates three major aspects of energy consumption rebound effects (RE) in three papers. More specifically, the issues addressed are (i) the magnitude of economy-wide rebound effect (ii) the role of energy policy instruments in mitigating it and (iii) its channels of impact. The research begins with the estimation of cross-country economy-wide rebound effects for a panel of 55 countries over the period 1980 to 2010. A two-stage approach is utilized in which energy efficiency is first estimated from a stochastic input distance frontier (SIDF). The estimated energy efficiency is then used in a second stage dynamic panel model to derive short-run and long-run RE for an array of developing and developed countries. The cross-country point estimates indicate substantial RE magnitudes across sampled countries during the period under consideration, although a positive and encouraging finding is the declining RE trend across most of the sampled countries during the study period. The second paper contains an RE benchmark for 19 EU countries, as well as an investigation of the effects of two energy policy instruments (energy taxes and ener-gy R&D) on RE performance over the period 1995 to 2010. The results indicate that RE performance improved over the sample period, reinforcing the results from paper one. In addition, there is also some evidence suggesting that binding market-based instruments such as energy taxes have been more effective in restricting RE than in-direct instruments such as energy R&D during the period under consideration. This is consistent across both estimated model specifications. An important observation from the first essay is the slightly larger average RE across the non-OECD countries. For this reason, the last empirical chapter evaluated the channels through which RE stimulated energy use across productive sectors of major developing/emerging economies, namely Brazil, Russia, India, Indonesia and China. To achieve this, the essay relied on duality theory to decompose changes in energy demand into substitution and output effects through the estimation of a trans-log cost function using data spanning 1995-2009. Findings reveal that energy use elasticities across sampled sectors/countries are dominated by substitution effects. One intriguing result that also emerges from this analysis is the role of economies of scale and factor accumulation, rather than technical progress, in giving rise to eco-nomic growth and energy consumption in these countries during the period under consideration

The determinants for the survival of firms in the Athens Exchange

This study examines the survival of firms in the Athens Exchange for the period 1993-2006, by applying a number of alternative parametric and non-parametric models. A company is considered not to survive, if its shares have been either under supervision or their trading is suspended for over six months. According to the results, firms characterised by a high degree of debt or by small size or firms that are active in sectors in which new competitors can penetrate easily, run higher risks of non-survival. By contrast, factors such as the corporate governance and the business cycle do not seem to offer a plausible explanation for the probability of non-survival. In addition, it appears that the risk of non-survival is increasing during the first years of a firm's listing in the stock exchange, peaking after approximately 7 years and then decreasing; this suggests that investments in stocks should have a long-term focus.survival models; company delisting

Banking sector depth & long-term economic growth in the GCC States: relationship nature, sector development status & policy implications

The thesis investigates the nature of the relationship between the banking sector depth and long-term economic growth in the Gulf Cooperation Council (GCC) States, assesses the banking sector development status in each of the States, and underlines the policy implications in the light of the banking-growth nexus and the banking development benchmarking models’ findings for the region by undertaking three projects. The thesis examines the nature of the relationship between banking sector depth and long-term economic growth in the NRBC—as a proxy for the GCC States— vis-à-vis the rest of the world countries. For the empirical investigation, a dynamic panel data approach, i.e. Generalised Method of Moments (GMM), is adopted over the period 1961 to 2013. By utilising mixed effects and System GMM frameworks, the research identifies the countries with the strongest banking-growth relationships and establishes the banking sector development determinants in those countries. Employing a novel benchmarking process, the thesis assesses the status of the banking sector development in each of the GCC member countries and simulates the change in the banking sector depth across the Gulf region over a period of ten years to highlight the potential policy implications for the sector development. The findings of the thesis suggest that the relationship between banking sector depth and long-term economic growth in the NRBC is non-linear, where the relationship between the banking sector depth and economic growth turns from positive to negative beyond certain levels of sector depth. In comparison to other countries, the results indicate that the banking-growth nexus in the NRBC exhibits a smaller total effect magnitude as well as a shorter time between the change in the sector depth and its effect on economic growth. The benchmarking of the banking sectors in the GCC region suggests that in five of the six member countries the banking sectors are underdeveloped. The simulation results predict that the banking sectors will develop further in half of the countries in the region, given their current levels of banking sector development determinants, while two countries require reforms in terms of undertaking regulations and policies to avoid seeing their sector development levels deteriorate. The thesis contributes to theory by confirming findings in the literature and expanding the body of knowledge through novel findings. This research also contributes to policy by demonstrating the significance of the banking sector development for long-term economic growth in the NRBC, providing policymakers in the Gulf States with the status of their banking sectors, and underlining the banking sector depth determinants that ought to be considered when setting regulations and policies that are aimed at developing the banking sector further

Is foreign-bank efficiency in financial centers driven by homecountry characteristics?

This paper investigates the effects of home country banking regulations on the performance of foreign banks in Luxembourg?s financial center. We control for the main regulatory indicators, such as capital requirements, private monitoring, official disciplinary power and restrictions on bank activities, accounting for the regulatory regime applied to foreign banks. We also control for the level of GDP in the home country and its position in the business cycle. The two-stage bootstrap method proposed by Simar and Wilson (2007) is applied to bank panel data covering 1999-2009. The analysis carries policy implications for bank regulators in both home and host countries and provides insight into the choice between establishing a branch or a subsidiary, when developing cross-border activities through financial centers.Foreign bank efficiency, Home-host country characteristics, Bank regulation, Data Envelopment Analysis, Bootstrap

An analysis of endogenous sunk cost competition in the banking industry

Banks play a critical role in providing liquidity to an economy by transforming small deposits into large loans. Due to the importance of the banking system, bank performance has been an area of keen interest for regulators. Traditionally, regulators saw competition in the banking sector as a source of excessive risk-taking, adversely impacting bank performance and threatening the system’s stability. Consequently, regulators globally supported a concentrated banking market. However, there was a paradigm shift towards the last quarter of the 20th century. Assuming deregulation will compete away inefficiencies stemming from concentrated market structure, regulators started desiring greater competition in the banking industry. As a result, globally, regulators undertook several measures to reduce the market power of national champions. But, contrary to conventional economic theories and regulatory expectations, concentration in most banking markets remains elevated. This situation concerns the authorities; however, the literature offers no clarity on what enables banks to forestall competition in expanding markets. The present study addresses the issue by integrating Sutton’s (1991) philosophy of endogenous sunk cost (ESC) with established theories in the banking literature. According to Sutton (1991), as the size of the market increases, incumbent firms attempt to soften competition through “a proportionate increase in fixed cost” in quality (p. 47). The author argues that fixed investments in the vertical form of product differentiation by a few large firms in an industry pushes rivals to either match the quality of their larger peers or quit the market. Consequently, as the market size expands, a few large firms incur higher ESC, discouraging new participation on the one hand and triggering consolidation on the other, resulting in a concentrated market structure. Notably, as investments in quality are a firm-specific approach to handling competition beyond the purview of regulators, banks strategically invest in ESC to configure the market structure, quashing regulatory efforts to fragment the market. In conclusion, this research addresses significant voids in the banking literature. The study reveals the importance of ESC investments in evaluating banking market competition. Additionally, the study establishes the non-monotonic relationship between IT sunk cost investments and bank profitability.The study’s findings give banking researchers and regulators valuable direction in assessing the competition in the banking markets. Additionally, it encourages supporters of the IT productivity paradox in banking to reassess their position following the discoveries of the present study