Much Ado about nothing? Interest and non-interest products and services: Their impact on small banks’ margins

We investigate the impact of interest and non-interest products and services on the margin a bank can derive from a specific customer. The analysis is based on 4,277 observations of relationships between small cooperative banks and small and medium-sized enterprises (SME) in Finland from 2001 to 2005. The results show that only long-term loans significantly contribute to the bank’s margin, whereas short-term loans as well as other additional products and services do not affect the bank’s margin, and cash management services even seem to reduce the bank’s margin. The findings suggest that small cooperative banks did concentrate on their core business during the first years of this millennium, i.e. lending, instead of diversifying their activities to increase their margin. However, by taking only financial considerations into account, small cooperative banks might forget about the non-financial impacts of their decisions, which may involve a considerable loss of information about SMEs

When the going gets tough, the tough get going

A bank’s lending decision is affected by the amount of information it can access and by its capability to manage this information. The latter aspect implies that the bank has to decide whether borrowers should be managed in a local branch of the bank or in its headquarters. By looking at a sample of Finnish banks, the present research investigates a bank’s capability to extract profitability from both locally and centrally managed firms. We find that banks are able to properly discriminate bet ween firms: those which should be managed by loan managers with expert knowledge in the bank’s headquarters due to their complexity, and those firms which should be managed in the bank’s local branch because they are simpler and need standard products and services. As a result, banks are able to extract risk - adjusted profitability (RAP) from both centrally and locally managed customers. Our findings clearly support the argument that the decision to centralise or decentralise the lending decision process is not an either/or decision: banks should implement both approaches and apply according to the type of firm they serve

Bank–SMEs relationships and banks’ risk-adjusted profitability”,

JEL classification: G21 Keywords: Small bank performance Relationships between small banks and SMEs Risk-adjusted profitability a b s t r a c t This research investigates how SME performance, the typology of loans and the length and scope of relationships between small banks and SMEs affect the margin adjusted for the risk that each customer generates. After analysing 4285 firm-year observations from Finnish banks, the quality of a SME's performance is found to be the major factor in explaining the risk-adjusted profitability of banks. However, the length and scope of a relationship and the loan dimensions also play an important role

Voluntary Audit Committees, Network Centrality and Accrual Estimation Errors

Drawing on the theoretical foundations of both agency theory and social structure, we study the network of a firm’s board members and auditor, defined as monitoring network, and the voluntary adoption of an audit committee as well as determine whether they make inferences on a firm’s volatility of accrual estimation errors. We theorise that a central position in the monitoring network enables the exchange of relevant accounting information affecting a firm’s decision control and ultimately the quality of accounting accruals. A firm’s voluntary adoption of an audit committee has a distinct information intermediary role in this process. We show that auditor connectedness and a firm’s network centrality are associated with a firm’s volatility of accrual estimation errors. These relations are affected by the voluntarily adoption of an audit committee, and auditor connectedness with the accrual quality is influenced by a firm’s network centrality.</div

Reputation Capital of Directorships and Demand for Audit Quality

This study examines whether boards of directors use external auditing to protect their reputation capital. We hypothesize and find that audit quality increases with the level of directors’ reputation capital. More specifically, using ten-year panel data on Finnish listed companies, we find that our measures of reputation capital based on the number of directorships that directors possess and their compensation are positively associated with various proxies for audit quality. We also find that the observed reputation effect on audit fees is stronger in companies with an audit committee, and that reputation capital matters in auditor choice in those companies in particular. In combination, our results add to the literature on the reputation capital of those in charge of corporate governance.</p

Much ado about nothing? Interest and non-interest products and services: Their impact on small banks’ margins

We investigate the impact of interest and non-interest products and services on the margin a bank can derive from a specific customer. The analysis is based on 4,277 observations of relationships between small cooperative banks and small and medium-sized enterprises (SME) in Finland from 2001 to 2005. The results show that only long-term loans significantly contribute to the bank’s margin, whereas shortterm loans as well as other additional products and services do not aff ect the bank’s margin, and cash management services even seem to reduce the bank’s margin. The findings suggest that small cooperative banks did concentrate on their core business during the first years of this millennium, i.e. lending, instead of diversifying their activities to increase their margin. However, by taking only financial considerations into account, small cooperative banks might forget about the non-financial impacts of their decisions, which may involve a considerable loss of information about SMEs. </p

Presence of foodborne pathogens, extended-spectrum beta-lactamase -producing Enterobacteriaceae, and methicillin-resistant Staphylococcus aureus in slaughtered reindeer in northern Finland and Norway

Background: Various food-producing animals were recognized in recent years as healthy carriers of bacterial pathogens causing human illness. In northern Fennoscandia, the husbandry of semi-domesticated reindeer (Rangifer tarandus tarandus) is a traditional livelihood and meat is the main product. This study determined the presence of selected foodborne pathogens, methicillin-resistant Staphylococcus aureus (MRSA), and extended-spectrum beta-lactamase (ESBL)-producing Enterobacteriaceae in healthy semi-domesticated reindeer at slaughter in northern Finland and Norway. Results: All 470 reindeer fecal samples tested negative for Salmonella spp., whereas L. monocytogenes was detected in 3%, Yersinia spp. in 10%, and Shiga toxins genes (stx1 and/or stx2) in 33% of the samples. Listeria monocytogenes isolates belonged to the serotype 1/2a (14/15) and 4b, Yersinia spp. were identified mainly as Y. kristensenii (30/46) and Y. enterocolitica (8/46), and stx2 predominated among the Shiga toxin genes (stx2 alone or in combination with stx1 was found in 25% of the samples). With regard to the frequency and distribution of stx1/stx2, striking differences were evident among the 10 different areas of origin. Hence, reindeer could constitute a reservoir for Shiga toxin-producing E. coli (STEC), but strain isolation and characterization is required for verification purposes and to assess the potential human pathogenicity of strains. On the other hand, the favorable antibiotic resistance profiles (only 5% of 95 E. coli isolates were resistant to one or more of the tested antibiotics) and the absence of MRSA and ESBL-producing Enterobacteriaceae (when applying selective methods) suggest only a limited risk of transmission to humans. Conclusions: Healthy semi-domesticated reindeer in northern Finland and Norway can be carriers of certain bacterial foodborne pathogens. Strict compliance with good hygiene practices during any step of slaughter (in particular during dehiding and evisceration) is therefore of central importance to avoid carcass contamination and to prevent foodborne pathogens from entering the food chain.Peer reviewe

When the Going Gets Tough, the Tough Get Going

A bank’s lending decision is affected by the amount of information it can access and by its capability to manage this information. The latter aspect implies that the bank has to decide whether borrowers should be managed in a local branch of the bank or in its headquarters. By looking at a sample of Finnish banks, the present research investigates a bank’s capability to extract profitability from both locally and centrally managed firms. We find that banks are able to properly discriminate between firms: those which should be managed by loan managers with expert knowledge in the bank’s headquarters due to their complexity, and those firms which should be managed in the bank’s local branch because they are simpler and need standard products and services. As a result, banks are able to extract risk-adjusted profitability (RAP) from both centrally and locally managed customers. Our findings clearly support the argument that the decision to centralise or decentralise the lending decision process is not an either/or decision: banks should implement both approaches and apply according to the type of firm they serve.  </div

An estimate of the number of tropical tree species

The high species richness of tropical forests has long been recognized, yet there remains substantial uncertainty regarding the actual number of tropical tree species. Using a pantropical tree inventory database from closed canopy forests, consisting of 657,630 trees belonging to 11,371 species, we use a fitted value of Fisher’s alpha and an approximate pantropical stem total to estimate the minimum number of tropical forest tree species to fall between ∼40,000 and ∼53,000, i.e. at the high end of previous estimates. Contrary to common assumption, the Indo-Pacific region was found to be as species-rich as the Neotropics, with both regions having a minimum of ∼19,000–25,000 tree species. Continental Africa is relatively depauperate with a minimum of ∼4,500–6,000 tree species. Very few species are shared among the African, American, and the Indo-Pacific regions. We provide a methodological framework for estimating species richness in trees that may help refine species richness estimates of tree-dependent taxa