A study of contagion in global and local banking industries

This thesis investigates contagion risk for the global and local banking environment using three different distance to risk measures (distance to default - DD, distance to capital – DC and distance to inefficiency- DI). In order to achieve this goal, the research has been divided into three parts (each will have its own chapter) to study the contagion effect in the global and local market. In the first part (chapter 4), the thesis investigates the contagion effect among the top 20 countries of the world. The sample consists of 91 banks from 20 countries across the globe including all G8 and BRICS countries. A list of all these countries and their corresponding banks is included later. The sample also includes all the GSIB (Global systematically important banks) banks excluding Group BPCE of France (given that Group BPCE originated in year 2009 by merging Caisse nationale des caisses d'épargne and Banque fédérale des banques populaires). In the second part (chapter 5), the thesis examines the local contagion by studying the spill over among top 15 US states. The sample consist of four of the largest banks from each of the sample 15 US state. A list of these banks is attached in the sample description. In chapter 6, the thesis performs a spill over analysis using DD, DI and DC. In order to do so, the thesis has measured the systemic risk using distance to default, distance to inefficiency and distance to capital, which are introduced by the option pricing theory (Merton, 1976). These distance to risk methods are defined as the theoretical difference between the entity’s current and breakeven risk position (Distance to default is the difference between the current and default position; Distance to inefficiency is the difference between the current and inefficient position and distance to capital is the difference between the current and default capital threshold position). Any position lower then this distance to risk measures is considered undesirable for the entity. The study has calculated 2606 daily observations for each of the different distance to risk measures for each bank in the sample for approximately 10 financial years from 2006 to 2015. Then the thesis compute the probability of experiencing extreme shocks in these distance measures of contagion risk using extreme value threshold. This research categorizes these extreme shocks into sub groups for the first two parts and keep the extreme shock unchanged for the last part and examine the contagion risk ascending from the movement of these extreme systemic shocks all through the US and global baking environment using multinomial logistic regression model (MLM). Finally, in chapter 7, the thesis discussed a possible risk management framework based on findings of the previous chapters. It has taken all the banks and divided them into 4 tiers based on their spill over impact. The study suggests that any bank in the 1st tier of the short term or long-term contagion capacity table should be referred to a high degree of regulatory control to enforce not only better capital governance or liquidity requirement but to also enforce overall financial governance as they have a huge impact on the other financial institutions. For the banks in the second and third tier, the authority may adopt a more gradually enforceable governance control in lieu with the current practice and the last tier can do their business in the current regulation, as they pose no real threat to the other peers. At the end, the study also suggests a new generic risk management framework for financial institutions

Knowledge management overview of feature selection problem in high-dimensional financial data: Cooperative co-evolution and Map Reduce perspectives

The term big data characterizes the massive amounts of data generation by the advanced technologies in different domains using 4Vs volume, velocity, variety, and veracity-to indicate the amount of data that can only be processed via computationally intensive analysis, the speed of their creation, the different types of data, and their accuracy. High-dimensional financial data, such as time-series and space-Time data, contain a large number of features (variables) while having a small number of samples, which are used to measure various real-Time business situations for financial organizations. Such datasets are normally noisy, and complex correlations may exist between their features, and many domains, including financial, lack the al analytic tools to mine the data for knowledge discovery because of the high-dimensionality. Feature selection is an optimization problem to find a minimal subset of relevant features that maximizes the classification accuracy and reduces the computations. Traditional statistical-based feature selection approaches are not adequate to deal with the curse of dimensionality associated with big data. Cooperative co-evolution, a meta-heuristic algorithm and a divide-And-conquer approach, decomposes high-dimensional problems into smaller sub-problems. Further, MapReduce, a programming model, offers a ready-To-use distributed, scalable, and fault-Tolerant infrastructure for parallelizing the developed algorithm. This article presents a knowledge management overview of evolutionary feature selection approaches, state-of-The-Art cooperative co-evolution and MapReduce-based feature selection techniques, and future research directions

Non-traditional systemic risk contagion within the Chinese banking industry

Systemic risk contagion is a key issue in the banking sector in maintaining financial system stability. This study is among the first few to use three different distance-to-risk measures to empirically assess the domestic interbank linkages and systemic contagion risk of the Chinese banking industry, by using bivariate dynamic conditional correlation GARCH model on data collected from eight prominent Chinese banks for the period 2006–2018. The results show a relatively high correlation among almost all the banks, suggesting an interconnectedness among the banks. We found evidence that the banking system is exposed to significant domestic contagion risks arising from systemic defaults. Given that Chinese markets deliver weak signals of forthcoming stress in banking sectors, new policy intervention is crucial to resolve the hidden stress in the system. The results have important policy implications and will provide scholars and policymakers further insight into the risk contagion originating from interbank networks

An Integration of D-8 Countries with the Focus of Competitiveness, Opulence and Economic Accretion via the Advancement Of SMES: Bangladesh Perspective And Scope of Cooperation

Radical transmutation of technology and integrating and interrelationship with the world community facilitated economic proliferation and deplete multitudinous problems encompasses with the SME that is an inevitable and enviable subject matter in the global market for alleviating poverty, engender manifold employment opportunities, evolution of economic standard and exploring apparent resources. D-8 in their recent conglomeration exhibits their necessity to consolidate their strengthen and propitious approach for the purpose of propagation of collaboration and conciliation that indubitably prevailing propinquity and ensuring sustainable economic amelioration.  In Bangladesh, one of the D-8 members, development of SME sectors is an astounding appliance for accomplishing industrialization, attaining millennium development goals such as eradication of extreme poverty, developing a global partnership for development etc. Capital accumulations, business environment, indistinctive framework for SME are the major impediments in Bangladesh. Facilitating cross-border integration, cross national cooperation, cluster or network development, construction of international value chain, Public- private partnership and also to establish congruous strategies and programs within the internal infrastructure may assist to mitigate the predicaments and also comply with the commitment of local government for unremitting growth of SME in Bangladesh. Keywords: SME, D-8, Industrialization, MDG, cross-national cooperation, cluster development, interrelationship, public-private partnership

Comparison of weighted and unweighted methods of wealth indices for assessing SOCIO-ECONOMIC status

Due to some of the limitations of monetary measures, various non-monetary approaches for assessing household wealth have been developed as alternative tools for classifying household socio-economic status. Among them, wealth indices based on household durable assets are being used. The literature revealed that two basic methods of constructing wealth indices are employed: an unweighted method, where assets are weighted equally; and a weighted method, where specific weights are assigned to assets. In the case of using the weighted method, weighting can be assigned using various techniques. The overall objective of the study is to compare the wealth indices constructed by using weighted and unweighted methods for assessing the socio-economic status of households in rural Bangladesh. Firstly, the study attempts to construct wealth indices based on durable assets using the unweighted method and two techniques of the weighted method: weighted index using the inverse of proportion, and weighted index using principal component analysis (PCA). Following this, the study compares some distributional characteristics of these indices as well as monetary indicators. At the same time, the study evaluates and examines some attractive properties of these indices such as the extent of clumping and truncation, consistency with traditional monetary measures. Comparative analysis revealed that the unweighted asset index, as well as weighted asset index using PCA, can be treated as an efficient alternative to the monetary measures to evaluate the living standard of the households in the present study. However, due to some advantage\u27s asset index using PCA can be considered to be somewhat better than the unweighted index. But, as the unweighted asset index is not very different from the weighted asset index using PCA, it can also be used as an alternative to the monetary measures without the need to use weighting

Influence of Stakeholders in Developing Green Banking Products in Bangladesh

Environmental concern is trying to control the patterns of consumers’ consumption and behavior of manufacturing industries and business enterprises worldwide since climate change issues has been considered as a global challenge. After so many argumentations in the developed countries, it has become an incessant public endearment in the developing countries like Bangladesh, as the level of environmental deterioration has picked up to the mountains. Many measures have been taken into account while adapting to climate changes, but the actions are inconsistent in many cases especially in the financial sector (most appropriately in the banking sector). This study aims to highlight the supreme benefits, encountering challenges, strategic aspects of Green Banking with two major objectives. First one is to caricature the existing scenario of green banking practice in Bangladesh and the other one is to accentuate how individual and also institutional stakeholder forces such as regulatory, managerial or environmental, that can affect the deliberate environmental behavior of banks performing in Bangladesh. The findings suggest that banks should go green and play a pro-active role to take environmental aspects for functional improvements and changing client habits in banking business. Use of appropriate environmental technologies and management systems will not only be useful for environment, but also provide benefits as greater operational efficiencies. After using both descriptive and inferential statistics analysis, this study also advocacy for the necessity of stakeholder’s influences in green banking practice and recommend some indication for Government, the whole banking sector and for the business community

Effect of Interest Rate Changes and Dividend Announcements on Stock Returns: Evidence from a Frontier Economy

This paper is motivated from previous work in the area of bank interest rate and dividend policy, and we went further to figure out whether there is any association between interest rate changes and the stock market's reaction to dividend announcements. To conduct this research paper, we used 61 Bangladeshi banks out of 66 banks (excluding central bank) from the period from 2010-2021. After using three different types of estimations (OLS, two stage least squared and GMM) we found that when savings interest rate and dividend increase stock market react positively and our result show that stock market react negatively when savings interest rate and dividend decrease. On the other hand, our results show that when loan interest rate and dividend increase stock market react more negatively and if loan interest rate and dividend decrease stock market react more positively

How Earning Per Share (EPS) affects on share price and firm value

This article was published in European Journal of Business and Management [© 2014 European Journal of Business and Management ] and the definite version is available at : http://www.iiste.org/Journals/index.php/EJBM/article/viewFile/13572/13841 The article website is at: http://iiste.org/Journals/index.php/EJBM/article/view/13572/13841 The journal is licensed under a Creative Commons Attribution 3.0 Unported (CC BY 3.0) License.Earnings per Share (EPS) is generally considered most important factor to determine share price and firm value. Literature shows that most of the individual investors take their individual investment decision based on the EPS. This paper attempts to provide empirical evidence on how EPS affect the share price movement. We have collected and analyzed 22 scheduled banks 110 firm year data and found that share price does not move as fast as the EPS move. We also further found that the share price movement depends on micro and macro economic factors on the economy. We suggest that investors must consider other factors as well as EPS in order to invest in the security market.Publishe

How Earning Per Share (EPS) Affects on Share Price and Firm Value

Earnings per Share (EPS) is generally considered most important factor to determine share price and firm value. Literature shows that most of the individual investors take their individual investment decision based on the EPS. This paper attempts to provide empirical evidence on how EPS affect the share price movement. We have collected and analyzed 22 scheduled banks 110 firm year data and found that share price does not move as fast as the EPS move. We also further found that the share price movement depends on micro and macro economic factors on the economy. We suggest that investors must consider other factors as well as EPS in order to invest in the security market

The development of Corporate Social Responsibility (CSR) and challenges of Environmental and Social Reporting in Bangladesh

Corporate social responsibility (CSR) has been recognised as corporation’s strategic tools to response the social obligation and corporation’s sustainability. The meaning and importance of CSR has been changed over time. At the inception, CSR was the obligation to pursue corporation policies and decision based on the desirable objectives and values of the society. But now corporate social responsibility is regarded as corporate sustainability and corporate citizenship. In this paper we have analysed content of 70 (Out of 123) audited corporate annual reports listed in the Dhaka Stock exchange of Bangladeshi companies. Realizing the importance of CSR we have attempted to find out the development of CSR, and formulate a strategic corporate CSR model for Bangladeshi Companies and justified the model compared with the international companies CSR activities. We have also identified the challenges of environmental and social reporting. We found that it is very hard to segregate environmental cost and social audit as they are arisen number of ways. The environment and social audit are not mandatory and should be reported in the notes to the financial statements. Key words: Corporate Social Responsibility, Strategic CSR Model, Challenges of Environmental costs, Social Reportin