Are Foreign Banks Bad for Development Even If They Are Efficient? Evidence from the Indian Banking Industry

Most papers on banking focus on profitability and cost efficiency as measures of performance. In doing so, these papers ignore the fact that, unlike in the manufacturing and services sector industries, the long term viability of a bank depends more on its ability to assess credit worthiness of potential borrowers and provide credit, than on static measures of financial performance. At the same time, the political economy of economic growth and economic reforms cannot overlook the impact of ownership and reforms on credit infusion, which is a major determinant of economic growth. Specifically, there is widespread belief that while foreign banks are perhaps more efficient and profitable than domestic banks in emerging markets, these banks are content to ‘cherry pick’ and limit disbursal of loans. Using bank-level data from India, for six years (1995-96 to 2000-01), we show that given a favourable atmosphere involving economic reforms and banking sector liberalisation, as well as time needed to overcome the informational disadvantages vis a vis the domestic banks, foreign banks are willing to be aggressive in credit markets of emerging economies. The policy implication of our paper is that it provides a strong rationale for policy initiatives that encourages entry of foreign banks into emerging markets and the expansion of their activities in these economies.Indian banking, Development, Credit Market, Stochastic frontier analysis

Are Foreign Banks Bad for Development Even If They Are Efficient? Evidence from the Indian Banking Industry

Most papers on banking focus on profitability and cost efficiency as measures of performance. In doing so, these papers ignore the fact that, unlike in the manufacturing and services sector industries, the long term viability of a bank depends more on its ability to assess credit worthiness of potential borrowers and provide credit, than on static measures of financial performance. At the same time, the political economy of economic growth and economic reforms cannot overlook the impact of ownership and reforms on credit infusion, which is a major determinant of economic growth. Specifically, there is widespread belief that while foreign banks are perhaps more efficient and profitable than domestic banks in emerging markets, these banks are content to ‘cherry pick’ and limit disbursal of loans. Using bank-level data from India, for six years (1995-96 to 2000-01), we show that given a favourable atmosphere involving economic reforms and banking sector liberalisation, as well as time needed to overcome the informational disadvantages vis a vis the domestic banks, foreign banks are willing to be aggressive in credit markets of emerging economies. The policy implication of our paper is that it provides a strong rationale for policy initiatives that encourages entry of foreign banks into emerging markets and the expansion of their activities in these economies.http://deepblue.lib.umich.edu/bitstream/2027.42/40005/3/wp619.pd

The Risk Aversion of Banks in Emerging Credit markets: Evidence from India

Using bank-level data from India, for nine years (1995-96 to 2003-04), we examine banks’ behavior in the context of emerging credit markets. Our results indicate that the credit market behavior of banks in emerging markets is determined by past trends, the diversity of the potential pool of borrowers to whom a bank can lend, and regulations regarding treatment of NPA and lending restrictions imposed by the Reserve Bank of India. Finally, we find evidence that suggest that credit disbursal by banks can be facilitated by regulatory and institutional changes that help banks mitigate the problems associated with enforcement of debt covenants and treatment of NPA on the balance sheets. On the basis of these results, we speculate on some possible policy recommendations.http://deepblue.lib.umich.edu/bitstream/2027.42/40160/3/wp774.pd

The Risk Aversion of Banks in Emerging Credit markets: Evidence from India

Using bank-level data from India, for nine years (1995-96 to 2003-04), we examine banks’ behavior in the context of emerging credit markets. Our results indicate that the credit market behavior of banks in emerging markets is determined by past trends, the diversity of the potential pool of borrowers to whom a bank can lend, and regulations regarding treatment of NPA and lending restrictions imposed by the Reserve Bank of India. Finally, we find evidence that suggest that credit disbursal by banks can be facilitated by regulatory and institutional changes that help banks mitigate the problems associated with enforcement of debt covenants and treatment of NPA on the balance sheets. On the basis of these results, we speculate on some possible policy recommendations.Indian banking, Development, Credit-to-deposit ratio, Risk aversion

Overcoming financing constraints to corporate expansion: evidence from a company in an emerging Islamic market

The sourcing of low-cost finance to facilitate corporate expansion on competitive terms is a major challenge to firms from emerging markets. There are additional constraints in Islamic markets as financial instruments must adhere to shari’ya law. This paper examines the approach taken by the Sudan Telecommunications Company (Sudatel) to obtain cost effective equity financing using secondary listings on multiple Middle East and North Africa (MENA) stock exchanges. We compare the costs of equity for Sudatel stock on the Sudan and Abu Dhabi Exchanges, and compare these figures with those for Sudatel’s two main regional competitors. Furthermore, we highlight the risk-return trade-off faced by investors in Sudatel stock on both Exchanges, and provide evidence of the potential benefits to investors from the overseas listin

THE IMPACT OF RESEARCH LED AGRICULTURAL PRODUCTIVITY GROWTH ON POVERTY REDUCTION IN AFRICA, ASIA AND LATIN AMERICA

Twenty percent of the world population, or 1.2 billion live on less than $1 per day; 70$144 and in Asia $180, or 50 cents per day, but this is covered by output growth. By contrast, the per capita cost for the richer countries of Latin America is over$11,000.Agricultural Productivity, Poverty Reduction, Food Security and Poverty, Research and Development/Tech Change/Emerging Technologies, 011, 013, 015,

Stakeholder orientation and organizational performance in an emerging market

There has been research that studies Chinese firms’ stakeholder orientation but fails to identify Chinese firms’ specific stakeholder groups. In addition, little research in this line has been conducted so far to reflect recent Chinese constitutional transition. This study seeks to fill these gaps. It extends previous studies assuming that a fixed set of stakeholders is suitable for firms in different countries context, and identifies Chinese firms’ key stakeholder groups by adopting the descriptive approach of stakeholder theory. Based on this identification, the authors further examine how these stakeholder orientations influence organizational performance and how they interact. Interviews with managers from 107 firms show that customer, employee, shareholder, supplier, and competitors are perceived as Chinese firms’ most important stakeholders; empirical studies using data collected from 307 Chinese firms reveal that orientations towards these stakeholders enhance organizational performance. Moreover, there are synergy effects existing among customer orientation, supplier orientation, and competitor orientation, and between customer orientation and competitor orientation, while shareholder orientation has significant hindering effects upon competitor orientation as a reflection of recent institutional changes taking place in China

The effect of predator culling on livestock losses: Ceres, South Africa, 1979 - 1987

Caracals (Caracal caracal) and leopards (Panthera pardus) are perennial problems for sheep farmers on the southern fringe of the arid Karoo. In the past, farmers responded to the conflict with blanket culling of predators, a strategy which ecologists understand to be harmful. This paper investigated the ability of blanket predator culling to reduce livestock losses. It found the probability of livestock losses to be a function of the number of caracals, leopards, vagrant dogs (Canis familiaris) and other wildlife culled during the previous year, as well as the previous year’s trapper effort, the farm’s remoteness and three years’ worth of rainfall. Other unobserved farm characteristics did not systematically affect losses. Culling an additional caracal or leopard was estimated to increase future livestock losses by 5.7% and 27.2% respectively, while culling a vagrant dog was estimated to reduce the likelihood of future losses by 9.5%. Both trapper effort and remoteness increased the probability of livestock losses. The current and previous years’ rainfall decreased the likelihood of future losses, while rainfall from two years prior was positively correlated with future losses. These results are important because they describe general culling effectiveness under a variety of management conditions over a period long enough to allow for adjustment to culling

Agricultural technology, productivity and employment: Policies for poverty reduction

This paper begins by arguing that agricultural economics has an important contribution to make to the economic transition of the new democratic South Africa. Policies are required to reduce unemployment, poverty and inequality, but does the work of agricultural economists provide the policy makers with the information necessary to make the correct choices? In this context, we update our recent work on technology, efficiency and productivity in South African agriculture, for both the commercial and smallholder sub-sectors. For the commercial sector, this means extending the total factor productivity index and estimates of the demand for labour. For the smallholder sector, there are new results on the impacts of GM cotton and white maize on output and employment. However, this piecemeal approach treats the two sectors as entirely separate, when they are actually interdependent. Thus, a Ricardian model of dualistic agriculture is used to explain the historical development of dualism in agriculture, especially how the native agriculturalists were impoverished by the colonists. Then this model is adapted to resemble the Harris-Todaro model of urban unemployment is order to represent the present dual agricultural sector. This allows the current policy options to be compared, although real data is needed to estimate the relationships and so the full analysis remains incomplete.Agricultural and Food Policy, Food Security and Poverty,

What is the appropriate level of aggregation for productivity indices? Comparing district, regional and national measures

This paper examines the appropriate level of aggregation for the construction of total factor productivity (TFP) indices. The dataset covers the magisterial districts and statistical regions of the Western Cape for the years 1952 to 2002. Over these five decades agricultural production in the Western Cape grew twice as fast as in the country as a whole but this average masks substantial regional variation. Results show that TFP growth was negative in the Karoo, moderate in the Swartland, Overberg and Southern Cape, and generally above 2% per year in the Boland and Breede River Valleys, where there is extensive irrigation.Total factor productivity, Western Cape, South Africa, Agribusiness,