Earnout financing in the financial services industry

This paper explores the effects of earnout contracts used in US financial services M&A. We use propensity score matching (PSM) to address selection bias issues with regard to the endogeneity of the decision of financial institutions to use such contracts. We find that the use of earnout contracts leads to significantly higher acquirer abnormal returns (short- and long-run) compared to counterpart acquisitions (control deals) which do not use such contracts. The larger the size of the deferred (earnout) payment, as a fraction of the total transaction value, the higher the acquirers' gains in the short- and long-run. Both acquirer short- and long-run gains increase when the management team of the target institution is retained in the post-acquisition period

Do Islamic and conventional banks have the same technology?

Is there a technology gap between Islamic and conventional banks? Do Islamic and conventional banks have different cost efficiency levels? We show that conventional and Islamic banks have similar mean (aggregate) cost efficiency levels in the MENA area and there is no technology gap between the two types of banks. At the country level, Islamic banks are more cost efficient than conventional banks in Indonesia, Pakistan, Turkey and United Arab Emirates, and less efficient in Bangladesh, Kuwait, Malaysia and Tunisia. We analyse a very large sample of banks in twelve MENA and South East Asian countries between 2000 and 2006 and we use the meta-frontier approach to account for the sample heterogeneity

Efficiency and risk in european banking

We analyze the impact of efficiency on bank risk. We also consider whether bank capital has an effect on this relationship. We model the inter-temporal relationships among efficiency, capital and risk for a large sample of commercial banks operating in the European Union. We find that reductions in cost and revenue efficiencies increase banks’ future risks thus supporting the bad management and efficiency version of the moral hazard hypotheses. In contrast, bank efficiency improvements contribute to shore up bank capital levels. Our findings suggest that banks lagging behind in their efficiency levels might expect higher risk and subdued capital positions in the near future. JEL Classification: G21, D24, C23, E44banking risk, capital, Efficiency

Mehrfache Intelligenzen und Umweltintelligenz

Polazeći od teorije višestrukih inteligencija i njenih pedagoških implikacija te ekologije kao egzistencijalnog problema čovjeka, u radu se na osnovi teorijske analize ukazuje na realnu mogućnost postojanja i razvoja ekološke inteligencije kao specifične inteligencije. Na osnovi društvenog značenja i potrebe ekološkog odgoja, obrazovanja i osposobljavanja za preventivno i kurativno ekološko djelovanje, za što je potrebno razvijati specifične kognitivne sposobnosti, te inteligencije kao pretpostavke za racionalno ekološko djelovanje i učenje, obrazlaže se potreba istraživanja postojanja, odnosno razvoja ekološke inteligencije. Nakon razmatranja psihologijskih i ekologijskih teorija, kao argumenti se navode, prema Gardnerovoj Preglednoj karti teorije višestrukih inteligencija, traženi kriteriji i prepoznatljiva obilježja ekološke inteligencije. Na osnovi analize i prikaza navedenih kriterija zaključuje se da ekološka inteligencija ispunjava gotovo u potpunosti sve tražene kriterije. U zaključku se predlaže pokretanje psihologijskih i pedagogijskih istraživanja ekološke inteligencije.Starting with the theory of multiple intelligences and its pedagogical implications, as well as the ecology as an existential concern of humankind, this study, based on a theoretical analysis, suggests an actual possibility of the existence and development of ecological intelligence as a specific intelligence type. The necessity for researching the existence and development of ecological intelligence is explained on the basis of the social significance of and a need for ecological education and training for preventive and curative ecological activity, which requires the development of specific cognitive abilities, as well as on the basis of intelligence as a starting point for rational ecological action and learning. After considering psychological and ecological theories, this study explores, according to Gardner’s Comprehensive Overview of the Theory of Multiple Intelligences, the required criteria and recognisable features of ecological intelligence. Based on the analysis and illustration of these criteria, the author finds that ecological intelligence almost entirely meets the criteria. The study concludes by suggesting an initiative for psychological and pedagogical exploration of ecological intelligence.Ausgehend von der Theorie der mehrfachen Intelligenz und ihrer pädagogischen Implikationen sowie dem Umweltschutz als existentiellem Problem des Menschen, wird in der Arbeit anhand theoretscher Analyse auf die reale Möglichkeit des Vorhandsenseinns und der Entwicklung ökologischer Intelligenz als spezifischer Intelligenzform hingewiesen. Auf Grund gesellschaftlicher Bedeutung und Bedürfnisse nach der Erziehung und Befähigung für das präventive und kurative Umwelthandeln, das die Entwicklung spezifischer kognitiver Föhigkeiten sowie der Intelligenz als Voraussetzung für das rationale Umweltdenken und – handeln erfordert, wird die Notwendigkeit der Erforschung bzw. Entwicklung der Umweltintelligenz erörtert. Nach der Behandlung von psychologischen und ökologischen Theorien werden nach Gardners Übersichtskarte zur Theorie der mehrfachen Intelligenzen als Argumente geforderte Kriterien und erkennbare Merkmale der Umweltintelligenz angeführt. Auf Grund der Analyse und Darstellung der angeführten Kriterien zieht man die Schlussfolgerung, dass die Umweltintelligenz fast vollständig alle geforderten Kriterien erfüllt. Anschließend wird vorgeschlagen, psychologische und pädagogische Erforschungen der Umweltintelligenz ins Leben zu rufen

Small Banks and Local Economic Development

This article discusses the effects of small banks on economic growth. We first theoretically show that small banks operating at a regional level can spur local economic growth. As compared with big interregional banks, small regional banks are more effective in promoting local economic growth, especially in regions with lower initial endowments and severe credit rationing. We then test the model predictions using a sample of German banks and corresponding regional statistics. We find that small regional banks are more important funding providers in regions with low access to finance. The empirical results support the theoretical hypotheses

Earnout financing in the financial services industry

This paper explores the effects of earnout contracts used in US financial services M&A. We use propensity score matching (PSM) to address selection bias issues with regard to the endogeneity of the decision of financial institutions to use such contracts. We find that the use of earnout contracts leads to significantly higher acquirer abnormal (short- and long-run) returns compared to counterpart acquisitions (control deals) which do not use such contracts. The larger the size of the deferred (earnout) payment, as a fraction of the total transaction value, the higher the acquirers’ gains in the short- and long-run. Both acquirer short- and long-run gains increase when the management team of the target institution is retained in the post-acquisition period.PostprintPeer reviewe

Is the neglected tropical disease mass drug administration campaign approach an effective strategy to deliver universal health coverage? A case study of the Liberia neglected tropical disease programme

Background Access to affordable, quality healthcare is the key element of universal health coverage (UHC). This study examines the effectiveness of the neglected tropical disease (NTD) mass drug administration (MDA) campaign approach as a means to deliver UHC, using the example of the Liberia national programme. Methods We first mapped the location of 3195 communities from the 2019 national MDA treatment data reporting record of Liberia. The association between coverage for onchocerciasis and lymphatic filariasis treatment achieved in these communities was then explored using a binomial geo-additive model. This model employed three key determinants for community ‘remoteness’: population density and the modelled travel time of communities to their supporting health facility and to their nearest major settlement. Results Maps produced highlight a small number of clusters of low treatment coverage in Liberia. Statistical analysis suggests there is a complex relationship between treatment coverage and geographic location. Conclusions We accept the MDA campaign approach is a valid mechanism to reach geographically marginal communities and, as such, has the potential to deliver UHC. We recognise there are specific limitations requiring further study

Productivity in the Financial Services Sector

On 11-12 November 2008, SUERF and Banque Centrale du Luxembourg organized a conference on Productivity in the Financial Services Sector on the occasion of the tenth anniversary of the Banque Centrale du Luxembourg. The conference addressed three main themes: first, stylized facts on banks' productivity developments and the measurement of productivity; second, sources of productivity in banking; and third, the possible repercussions and consequences of the financial crisis on financial institutions' future productivity development. These three topics are taken up from various angles in the papers contained in the present volume, which represent a selection of the papers presented at the conference. Coming back to the three themes mentioned at the outset, the conference yielded some interesting results and raised many issues for further research. As regards theme 1, the papers presented overall suggest that financial integration in Europe has brought some, albeit according to some studies limited, convergence of bank efficiency among countries but on average productivity improvement has been weak. Various interesting attempts to capture banks' output were presented, but the various performance and efficiency measures yield different results. Linked to the difficulty of measuring the value of financial institutions' services, it remains far from clear what the "fair value" of a bank should be. This problem may also in part explain the very sharp ups and downs of bank stocks recently. Concerning theme 2, sources of productivity in financial services, several potentially important factors were mentioned: investments in ICT, investments in human resources, the quality of managers and remuneration policy, process effectiveness, mergers and acquisitions and economies of scale, privatizations, risk diversification versus regional and/or product specialisation, and risk-taking. Yet, no unambiguous picture emerged on which of these factors are most important. Regarding theme 3, the financial crisis may have far-reaching implications on our view of financial innovation and efficiency, on the way how to measure productivity appropriately as well as on the future development of financial institutions' productivity. First, the question arises whether the quest for productivity and profitability may under certain circumstances compromise the quality of banks' services (such as, e.g. the care invested into credit assessments and risk monitoring) and as a consequence put the stability of banks and the financial system at risk. As the recent crisis and its underlying causes suggest, there may at times be trade-offs between innovation and financial stability. If financial supervision and risk management do not keep up with financial innovation, the social value of such innovation may not be positive at all times. Financial innovation may also have blurred signals on banks? financial and risk positions, and thus have misled bank shareholders, clients and supervisors in their assessment of banks? business models and conduct of business. Second, the crisis might also affect banks? future performance: Increased government interference and stricter surveillance and capital adequacy rules might curb banks? profitability and efficiency, as measured by traditional performance indicators. However, the conventional measures of performance as presented and discussed at the conference - however varied and multifaceted they may be in trying to measure efficieny (i.e. the avoidance of unnecessary costs in the production process) and competition (the avoidance of inappropriately high profits) - basically seem to have a short-term focus. A longer-term perspective would also consider e.g. the financial institutions? solvency and the safety of deposits, as well as their stability and continued performance in periods of severe stress. Such extensions to the concept of ?performance? should certainly be explored more deeply in the light of the current crisis. In particular, bank efficiency should be considered by supervisors with a view to its influence on risk behaviour. The current debate on regulatory reform in response to the crisis also addresses the need for closer international coordination among supervisory regimes. Tighter regulatory coordination may, on the one hand, close regulatory loopholes, thus curbing banks? profit opportunities, at least in the short run. On the other hand, international harmonization of regulatory rules may generate considerable cost savings for internationally active financial institutions. By contributing to financial market integration it could also stiffen competition and in this way improve efficiency. A related issue is how the crisis will affect the size of banks in the future. Will consolidation in the sector ultimately result in fewer and bigger banks? Or will governments? and regulators? bad experience with institutions which are ?too big to fail? create pressure towards more and smaller institutions? The outcome of this may in turn have possible implications for competition and thus, ultimately, on future innovation, efficiency and productivity developments. Finally, in the coming months and years the issue of exit strategies from state intervention will have to be solved. In particular, how long should partial or full nationalisations of troubled banks last? Historical experiences vary, ranging from rather rapid re-privatisations in some cases to continued strong government influence decades. How can banks? increased reliance on government assistance be abolished and market-based incentives for productivity-enhancing strategies be restored, given the massive moral hazard created by the ? unavoidable ? government bail outs of banks? In conclusion, the conference demonstrated that various disciplines ? business administration, management, organisation and economics ? as well as different professional perspectives ? those of academia, practitioners and of policy makers ? need to be combined to do full justice to the complexity of the subject at hand. SUERF?s triple constituency and multiple-discipline approach again proved particularly suitable to approaching such a far-reaching topic