Foreign bank lending and information asymmetries in China

This paper considers whether information asymmetries affect the willingness of foreign banks to participate in syndicated loans to corporate borrowers in China. In line with theoretical literature, ownership concentration of the borrowing firm is assumed to influence information asymmetries in the relationship between the borrower and the lender. We analyze how ownership concentration influences the participation of foreign banks in a loan syndicate using a sample of syndicated loans granted to Chinese borrowers in the period 2004-2009 for which we have information on ownership concentration. We observe that greater ownership concentration of the borrowing firm does not positively influence participation of foreign banks in the loan syndicate. Additional estimations using alternative specifications provide similar results. As foreign banks do not react positively to ownership concentration, we conclude that information asymmetries are not exacerbated for foreign banks relative to local banks in China. Moreover, it appears that increased financial leverage discourages foreign bank participation, suggesting that domestic banks are less cautious in their risk management.bank; foreign investors; information asymmetry; loan; syndication; China

Investisseurs étrangers et asymétries d'information : l'impact de la structure de propriété des entreprises chinoises sur la composition des syndicats bancaires

Les entreprises chinoises ont connu des réformes importantes depuis le début des années 1990. Ces réformes associées au potentiel de croissance de l’économie chinoise ne manquent pas d’attirer les investisseurs étrangers. Cependant, les risques d’un investissement demeurent élevés du fait d’un environnement juridique et financier faiblement protecteur des investisseurs. L’investissement en Chine suppose donc une connaissance fine du fonctionnement des entreprises locales, des conventions juridiques, voire même de la culture sociale du pays. De ce fait, un investisseur étranger peut souffrir d’asymétries d’information par rapport à son homologue local. Ce mémoire étudie la façon dont les banques étrangères résolvent les problèmes d’asymétries d’information dans leur politique de prêt en Chine au travers du marché des prêts syndiqués. Le marché des prêts syndiqués présente notamment l’avantage de garantir la présence de banques étrangères du fait de son caractère international, et de permettre d’étudier les asymétries d’information à partir de la structure des syndicats bancaires

Essais sur le système financier chinois

This dissertation analyzes the development of the Chinese financial system from different perspectives. It has shed light on the recent advancements of the last decade. Overall, the findings reveal a contrasted picture of the progress achieved towards an efficient system. Chapter 1 has shown that the corporate bond market is still impeded by government influence. Based on this evidence, it is thus very unlikely to expect the banking system to decrease its dominance on the financial system. Chapter 2 also stressed that internal governance mechanisms remain imperfect. By analyzing the market price fluctuations at the time of the announcement of a CEO turnover, we find that ownership type plays a major influence on the expected consequences of such a decision. Chapter 3 revealed that little progress has been made in terms of banking competition despite the increasing number of new entrants in the market. However, banks behaved more efficiently over the decade. No trade-off seems to exist for policy-makers between the benefits of lower banking prices and efficiency of the system. Chapter 4 finally showed the beneficial effects of the capital requirement regulation on bank efficiency in China. Capital requirements, in supplement to provide higher capital buffers, appear to lower moral between banks’ shareholders and debtholders.Cette thèse étudie le développement du système financier chinois. Elle dévoile des aspects nouveaux du développement du système financier sur la dernière décennie. Globalement, les résultats montrent que les progrès réalisés vers un système efficient demeurent contrastés. Le premier chapitre montre que le marché obligataire des entreprises non financières est toujours sous influence du gouvernement. Sur la base de cet élément, il est peu probable d’espérer une baisse de la domination du secteur bancaire sur le système financier. Le second chapitre montre que la gouvernance d’entreprise interne reste imparfaite. En analysant les fluctuations des prix des actions au moment de l’annonce d’un changement de P-DG, nous trouvons que le type de propriété de l’entreprise joue une influence majeure sur les conséquences d’une telle décision. Le troisième chapitre révèle que peu de progrès ont été faits en termes de concurrence au sein du secteur bancaire malgré le nombre de nouveaux entrants sur le marché. Cependant, les banques se comportent de façon plus efficiente sur la décennie. Il ne semble pas exister d’arbitrage entre les bénéfices d’une plus grande concurrence et l’efficience du système bancaire en Chine. Le quatrième chapitre montre les effets bénéfiques de la nouvelle réglementation sur les exigences en capital des banques chinoises en termes d’efficience bancaire. Les exigences en capital, en plus de fournir des coussins en capital supplémentaires, apparaissent réduire l’aléa moral entre les actionnaires des banques et leurs créanciers

The supply of long-term credit after a funding shock: evidence from 2007-2009

URL des Documents de travail : http://ces.univ-paris1.fr/cesdp/cesdp2015.htmlDocuments de travail du Centre d'Economie de la Sorbonne 2015.73 - ISSN : 1955-611XWe study banks supply of long-term credit after a negative funding shock. Thanks to a unique database at bank-firm level, we take advantage of the exogenous interbank market freeze in 2007-2008 to assess the causal relation between French banks' liquidity risk and their lending. We find that banks with higher funding risk and more maturity transformation provided a lower supply of long-term loans after the shock, even controlling for credit demand. Short-term lending supply is however unaffected. These findings help explain the severity of the recession that followed the liquidity crisis. And they support Basel III liquidity regulation. This regulation should have a stabilising effect on long-term lending in times of funding stress

Can better capitalised banks be more profitable? An analysis of large French banking groups before and after the financial crisis

The article studies the effect of French banks’ capitalisation on their profitability. It contributes to the debate which has emerged, following the financial crisis, on the impact of the tightening of the regulation of capital (Basel III). Our econometric results show that over the period of 1993-2012, beyond the general trend of profitability which is weaker after the crisis, banks which increase their capital ratio more than the average improve their profitability, without it being possible to distinguish between voluntary increases and those imposed by regulation. All else being equal, a 100 basis point increase of the different capitalisation measures leads to a 3 to 10% increase in the average return on equity (ROE), depending on the measures considered, and to a 7 to 30% increase in the average return on assets (ROA). The positive impact of an increase of capitalisation on ROA is less significant when it is done by issuing shares.De Bandt Olivier, Camara Boubacar, Pessarossi Pierre, Rose Martin. Can better capitalised banks be more profitable? An analysis of large French banking groups before and after the financial crisis. In: Economie et Statistique / Economics and Statistics, n°494-496, 2017. The Crisis, Ten Years After. pp. 131-148

Systemic liquidity concept, measurement and macroprudential instruments

This study provides a conceptual and monitoring framework for systemic liquidity, as well as a legal assessment of the possible use of macroprudential liquidity tools in the European Union. It complements previous work on liquidity and focuses on the development of liquidity risk at the system-wide level. A dashboard with a total of 20 indicators is developed for the financial system, including banks and non-banks, to assess the build-up of systemic liquidity risk over time. In addition to examining liquidity risks, this study sheds light on the legal basis for additional macroprudential liquidity tools under existing regulation (Article 458 of the Capital Requirements Regulation (CRR), Articles 105 and 103 of the Capital Requirements Directive (CRD IV) and national law), which is a key condition for the implementation of macroprudential liquidity tools

Does CEO Turnover Matter in China? Evidence from the Stock Market

We study the consequences of CEO turnover announcements on the stock prices of firms in China, where most listed firms remain majority-owned by the state. Our proposition is that state ownership may affect stock market reaction to CEO replacement because state-owned firms often pursue multiple, potentially contradictory, objectives, i.e. economic performance and social objectives. Applying standard event study methodology to a sample of 1,094 announcements from 2002 to 2010, we find that CEO turnover typically produces a positive stock market reaction. The reaction is significantly positive, however, only for enterprises owned by the central government, and not significant for enterprises owned by local governments or privately owned enterprises. These results suggest that a CEO turnover in a central state-owned enterprise signals a renewed commitment to the economic performance objective by state officials. The small size of CEO labor market suggests that other shareholders have a relatively small pool of CEO talent to proceed to managerial improvement when a CEO turnover takes place