Pub Date : 2023-12-16DOI: 10.1016/j.qref.2023.12.006
Alexandre Schwinden Garcia , André Lucas Moreira Gonzaga
We investigated the effects of the growth of credit unions, which by law are non-profit entities, on the return on assets and equity of Brazilian commercial banks. We also assess the impacts on commercial banks’ main revenue and expense lines. Data from 2000 to 2021 were used and dynamic panel models, System-GMM, were estimated. The results indicate that the greater the participation of credit unions, the greater the return on assets and equity of commercial banks. As for the impact on expenses, we noticed that the greater the participation of credit unions, the lower the expenses with funding by commercial banks. The results found bring a different perspective from what could be expected: the entry of a non-maximizing agent (credit unions) in a given market can reduce the profitability of the incumbent agents. Moreover, the relationship between commercial banks and credit unions can be one of complementarity and not substitutes. The results are robust for several specifications.
{"title":"How credit unions affect the profitability of Brazilian commercial banks?","authors":"Alexandre Schwinden Garcia , André Lucas Moreira Gonzaga","doi":"10.1016/j.qref.2023.12.006","DOIUrl":"10.1016/j.qref.2023.12.006","url":null,"abstract":"<div><p>We investigated the effects of the growth of credit unions, which by law are non-profit entities, on the return on assets and equity of Brazilian commercial banks. We also assess the impacts on commercial banks’ main revenue and expense lines. Data from 2000 to 2021 were used and dynamic panel models, System-GMM, were estimated. The results indicate that the greater the participation of credit unions, the greater the return on assets and equity of commercial banks. As for the impact on expenses, we noticed that the greater the participation of credit unions, the lower the expenses with funding by commercial banks. The results found bring a different perspective from what could be expected: the entry of a non-maximizing agent (credit unions) in a given market can reduce the profitability of the incumbent agents. Moreover, the relationship between commercial banks and credit unions can be one of complementarity and not substitutes. The results are robust for several specifications.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138687412","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-12-10DOI: 10.1016/j.qref.2023.12.007
Wenwen Jiang , Jangkoo Kang , Hwa-Sung Kim
Incompatible with standard capital structure theories, zero-leverage (ZL) firms are becoming increasingly common in recent decades. In this study, we examine whether shareholders consider a firm’s ZL policy value-enhancing or value-reducing. Using Faulkender and Wang’s (2006) methodology, we find that shareholders place a positive value on the event of a firm switching to zero debt. Furthermore, this valuation is not affected by whether the firm faces a managerial entrenchment problem, but is affected significantly by whether it is financially constrained before becoming debt-free. We find that shareholders place no value on a financially constrained firm following a ZL policy, but place a positive value on an unconstrained firm doing so, indicating that they only consider the latter as a value-enhancing policy. We also show that our finding still holds even when conducting an event study with short-term event windows. We infer that shareholders’ positive valuation on financially unconstrained firms is related to the financial flexibility of ZL policies.
{"title":"Is the zero-leverage policy value-enhancing?","authors":"Wenwen Jiang , Jangkoo Kang , Hwa-Sung Kim","doi":"10.1016/j.qref.2023.12.007","DOIUrl":"10.1016/j.qref.2023.12.007","url":null,"abstract":"<div><p>Incompatible with standard capital structure theories<span>, zero-leverage (ZL) firms are becoming increasingly common in recent decades. In this study, we examine whether shareholders consider a firm’s ZL policy value-enhancing or value-reducing. Using Faulkender and Wang’s (2006) methodology, we find that shareholders place a positive value on the event of a firm switching to zero debt. Furthermore, this valuation is not affected by whether the firm faces a managerial entrenchment problem, but is affected significantly by whether it is financially constrained before becoming debt-free. We find that shareholders place no value on a financially constrained firm following a ZL policy, but place a positive value on an unconstrained firm doing so, indicating that they only consider the latter as a value-enhancing policy. We also show that our finding still holds even when conducting an event study with short-term event windows. We infer that shareholders’ positive valuation on financially unconstrained firms is related to the financial flexibility of ZL policies.</span></p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138568028","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-12-10DOI: 10.1016/j.qref.2023.12.004
Elie Bouri , Remzi Gök , Eray Gemi̇ci̇ , Erkan Kara
This paper examines the impact of three global risk factors (geopolitical risk (GPR), economic policy uncertainty (EPU), and crude oil volatility (OVX)) on the returns and variance of commodity, Islamic stock, and green bond markets across quantile distributions and various time horizons. To this end, Granger causality tests in quantiles and distributions along with wavelet-based correlation and causality approaches are applied to daily data from February 1, 2013 to June 30, 2023. The results of the Granger causality in quantiles tests show strong evidence that all three global risk factors Granger-cause returns across all quantiles, except the lowest and middle quantiles. The Granger causality is significant for both returns and variances, where GPR is the least predictor and OVX is the most predictor. Evidence of causation in risk spillovers is in the right tail and center of the distribution rather than the left tail, indicating no evidence of down-to-down risk spillover. The upside risk of OVX causes both the upside and downside risk of asset returns. The positive volatility of EPU and GPR drives the positive and negative volatility of the green bond and Islamic stock markets, respectively. Green bond markets are completely immune to risk spillover from geopolitical risks. The effects of risk factors are negligible at the lower and somewhat middle quantiles but strengthen with varying magnitude and significance for the remaining quantiles. The results of the wavelet analysis indicate that asset returns co-move with the global risk factors in the short term but decouple in the longer term. Risk factors exert short-lived causal impacts in the short term, but the duration of significant causal periods rises with time and the effect intensifies during crisis periods.
{"title":"Do geopolitical risk, economic policy uncertainty, and oil implied volatility drive assets across quantiles and time-horizons?","authors":"Elie Bouri , Remzi Gök , Eray Gemi̇ci̇ , Erkan Kara","doi":"10.1016/j.qref.2023.12.004","DOIUrl":"10.1016/j.qref.2023.12.004","url":null,"abstract":"<div><p><span><span>This paper examines the impact of three global risk factors (geopolitical risk (GPR), economic policy uncertainty<span> (EPU), and crude oil volatility (OVX)) on the returns and variance of commodity, Islamic stock, and green bond<span> markets across quantile distributions and various time horizons. To this end, Granger causality tests in quantiles and distributions along with wavelet-based correlation and causality approaches are applied to daily data from February 1, 2013 to June 30, 2023. The results of the Granger causality in quantiles tests show strong evidence that all three global risk factors Granger-cause returns across all quantiles, except the lowest and middle quantiles. The Granger causality is significant for both returns and variances, where GPR is the least predictor and OVX is the most predictor. Evidence of causation in risk </span></span></span>spillovers is in the right tail and center of the distribution rather than the left tail, indicating no evidence of down-to-down risk spillover. The upside risk of OVX causes both the upside and downside risk of </span>asset returns. The positive volatility of EPU and GPR drives the positive and negative volatility of the green bond and Islamic stock markets, respectively. Green bond markets are completely immune to risk spillover from geopolitical risks. The effects of risk factors are negligible at the lower and somewhat middle quantiles but strengthen with varying magnitude and significance for the remaining quantiles. The results of the wavelet analysis indicate that asset returns co-move with the global risk factors in the short term but decouple in the longer term. Risk factors exert short-lived causal impacts in the short term, but the duration of significant causal periods rises with time and the effect intensifies during crisis periods.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138568032","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-12-08DOI: 10.1016/j.qref.2023.12.001
J. Salvador Cortés-García , Jorge V. Pérez-Rodríguez
This paper estimates the efficiency of Ecuadorian commercial banks from 2007 to 2017, considering multiple inputs and outputs, several factors explaining inefficiency, technological unobserved heterogeneity, and time-varying efficiency. To do this, we used an output distance function stochastic frontier model in a Bayesian framework and considered the profitability approach. In general, the results show evidence of unobserved cross-bank heterogeneity and time-varying inefficiencies, the latter of which presented scores which were high and stable over time. One factor that significantly explains inefficiency is foreign ownership, however internal factors such operating profitability and Central Bank policy reserve requirements did not. Finally, estimated returns to scale show bimodality indicating the existence of two bank groups associated with decreasing and constant returns to scale.
{"title":"Heterogeneity and time-varying efficiency in the Ecuadorian banking sector. An output distance stochastic frontier approach","authors":"J. Salvador Cortés-García , Jorge V. Pérez-Rodríguez","doi":"10.1016/j.qref.2023.12.001","DOIUrl":"10.1016/j.qref.2023.12.001","url":null,"abstract":"<div><p>This paper estimates the efficiency of Ecuadorian commercial banks from 2007 to 2017, considering multiple inputs and outputs, several factors explaining inefficiency, technological unobserved heterogeneity, and time-varying efficiency. To do this, we used an output distance function stochastic frontier model in a Bayesian<span> framework and considered the profitability approach. In general, the results show evidence of unobserved cross-bank heterogeneity and time-varying inefficiencies, the latter of which presented scores which were high and stable over time. One factor that significantly explains inefficiency is foreign ownership, however internal factors such operating profitability and Central Bank policy reserve requirements did not. Finally, estimated returns to scale show bimodality indicating the existence of two bank groups associated with decreasing and constant returns to scale.</span></p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-12-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138562330","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-12-08DOI: 10.1016/j.qref.2023.12.002
Hongji Xie , Cunzhi Tian , Fangying Pang
We examine whether and how venture capital investors (VCs) affect corporate financialization in post-IPO stages using China’s A-share non-financial listed firms from 2007 to 2019. We find that the presence of VCs reduces the level of corporate financialization. The negative relationship is more pronounced in VCs with private ownership and portfolio firms with poor corporate governance. Further evidence shows that the negative effect of VCs on corporate financialization is driven by VCs through stronger corporate governance engagement, indicating a monitoring channel. We also find that VCs exhibit a high level of failure tolerance and innovation promotion by decreasing the sensitivity of CEO turnover to compensation performance, and promoting R&D investment in firms with a stronger arbitrage incentive, suggesting another innovation channel.
{"title":"Venture capital and corporate financialization: Evidence from China","authors":"Hongji Xie , Cunzhi Tian , Fangying Pang","doi":"10.1016/j.qref.2023.12.002","DOIUrl":"https://doi.org/10.1016/j.qref.2023.12.002","url":null,"abstract":"<div><p>We examine whether and how venture capital investors (VCs) affect corporate financialization<span> in post-IPO stages using China’s A-share non-financial listed firms from 2007 to 2019. We find that the presence of VCs reduces the level of corporate financialization. The negative relationship is more pronounced in VCs with private ownership and portfolio firms with poor corporate governance. Further evidence shows that the negative effect of VCs on corporate financialization is driven by VCs through stronger corporate governance engagement, indicating a monitoring channel. We also find that VCs exhibit a high level of failure tolerance and innovation promotion by decreasing the sensitivity of CEO turnover to compensation performance, and promoting R&D investment in firms with a stronger arbitrage incentive, suggesting another innovation channel.</span></p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-12-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138570298","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-12-02DOI: 10.1016/j.qref.2023.11.009
HALIL I. MEMIS, ULRICH WESSELS
We examine the previously documented effect between a firm’s FSCORE and book-to-market ratio proposed by Piotroski and So (2012) and analyze the authors’ expectation errors hypothesis from a present value perspective. We find a strong value premium which is concentrated among firms where book-to-market implied expectations are incongruent with underlying fundamental strength. Using the decomposition of variation in book-to-market ratios motivated by Cohen et al. (2003), we show that the observed effect between a firm’s FSCORE and book-to-market ratio is attributable to mispricing as the variation is mostly due to variation in expected returns rather than variation in expected profitability.
{"title":"Dissecting value-growth strategies conditioned on expectation errors","authors":"HALIL I. MEMIS, ULRICH WESSELS","doi":"10.1016/j.qref.2023.11.009","DOIUrl":"10.1016/j.qref.2023.11.009","url":null,"abstract":"<div><p>We examine the previously documented effect between a firm’s FSCORE and book-to-market ratio proposed by Piotroski and So (2012) and analyze the authors’ expectation errors hypothesis from a present value perspective. We find a strong value premium which is concentrated among firms where book-to-market implied expectations are incongruent with underlying fundamental strength. Using the decomposition of variation in book-to-market ratios motivated by Cohen et al. (2003), we show that the observed effect between a firm’s FSCORE and book-to-market ratio is attributable to mispricing as the variation is mostly due to variation in expected returns rather than variation in expected profitability.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138493249","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-12-02DOI: 10.1016/j.qref.2023.11.008
Gamze Ozturk Danisman , Amine Tarazi
We examine the impact of economic policy uncertainty on bank stability post-2007–2008 global financial crisis and how bank size, capital, and liquidity mitigate this relationship. We use 176,477 quarterly observations for US commercial banks over the period from 2011Q1 to 2020Q3 and find consistent and robust evidence that bank stability decreases as the level of economic policy uncertainty increases. We show that bank size, capital, and liquidity matter, i.e., the negative impact of policy uncertainty on bank stability is stronger for larger banks and weaker for highly capitalized banks as well as for more liquid banks. Our channel analysis shows that the increase in the level and volatility of lending and deposit rates, and the decrease in risk-adjusted capitalization and risk-adjusted profitability might to some extent explain the decrease in bank stability in times of higher economic policy uncertainty. Additional analysis reveals that higher market power mitigates the negative impact of EPU on bank stability. Our findings support the Basel II and III regulatory reforms aimed at tightening the capital levels with stricter rules for the larger banks and the implementation of the newly introduced liquidity rules.
{"title":"Economic policy uncertainty and bank stability: Size, capital, and liquidity matter","authors":"Gamze Ozturk Danisman , Amine Tarazi","doi":"10.1016/j.qref.2023.11.008","DOIUrl":"10.1016/j.qref.2023.11.008","url":null,"abstract":"<div><p>We examine the impact of economic policy uncertainty on bank stability post-2007–2008 global financial crisis and how bank size, capital, and liquidity mitigate this relationship. We use 176,477 quarterly observations for US commercial banks over the period from 2011Q1 to 2020Q3 and find consistent and robust evidence that bank stability decreases as the level of economic policy uncertainty increases. We show that bank size, capital, and liquidity matter, i.e., the negative impact of policy uncertainty on bank stability is stronger for larger banks and weaker for highly capitalized banks as well as for more liquid banks. Our channel analysis shows that the increase in the level and volatility of lending and deposit rates, and the decrease in risk-adjusted capitalization and risk-adjusted profitability might to some extent explain the decrease in bank stability in times of higher economic policy uncertainty. Additional analysis reveals that higher market power mitigates the negative impact of EPU on bank stability. Our findings support the Basel II and III regulatory reforms aimed at tightening the capital levels with stricter rules for the larger banks and the implementation of the newly introduced liquidity rules.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138493250","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-11-25DOI: 10.1016/j.qref.2023.11.006
Simran, Anil Kumar Sharma
This study examines linkages between the stock market and uncertainty in the real economy generated by unpredictability of economic policies. We investigate the asymmetric effect of economic policy uncertainty (EPU) on India’s stock market performance through the non-linear autoregressive distributed lag (NARDL) approach for the period ranging from 2003 to 2022. A sub-sample analysis of the pre-covid period is also done to confirm that EPU had an impact on the stock market even prior to the pandemic. Our findings support the existence of asymmetry in the variables as the stock prices’ response to rising and declining EPU is not identical in both sample periods. It is observed that falling EPU’s positive impact on stock prices is greater than rising EPU’s adverse impact. The study suggests that government officials and policymakers must ensure consistency in policymaking and prevent the adverse effects of EPU as it impedes the long-term development of the securities market.
{"title":"Asymmetric nexus between economic policy uncertainty and the Indian stock market: Evidence using NARDL approach","authors":"Simran, Anil Kumar Sharma","doi":"10.1016/j.qref.2023.11.006","DOIUrl":"https://doi.org/10.1016/j.qref.2023.11.006","url":null,"abstract":"<div><p>This study examines linkages between the stock market and uncertainty in the real economy generated by unpredictability of economic policies. We investigate the asymmetric effect of economic policy uncertainty (EPU) on India’s stock market performance through the non-linear autoregressive distributed lag (NARDL) approach for the period ranging from 2003 to 2022. A sub-sample analysis of the pre-covid period is also done to confirm that EPU had an impact on the stock market even prior to the pandemic. Our findings support the existence of asymmetry in the variables as the stock prices’ response to rising and declining EPU is not identical in both sample periods. It is observed that falling EPU’s positive impact on stock prices is greater than rising EPU’s adverse impact. The study suggests that government officials and policymakers must ensure consistency in policymaking and prevent the adverse effects of EPU as it impedes the long-term development of the securities market.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-11-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138474150","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-11-24DOI: 10.1016/j.qref.2023.11.007
Brahim Gaies , Najeh Chaâbane , Nesrine Bouzouita
In this study, we conduct a novel exploration of the time-frequency quantile dynamics between global crypto-currency market volatility and financial instability, using the recently introduced Cryptocurrency VIX indicator from a macro perspective. Taking into account the impact of Covid-19 and the Russian-Ukrainian war shocks, the results from the wavelet coherence analysis, the novel quantile wavelet coherency approach, and the non-parametric causality test reveal a strong dependence between the US financial stress and the volatility of the global cryptocurrency market. This dependence is likely to persist over the long-term and in extreme market conditions, but weaken in the short-term. Additionally, the study finds that while cryptocurrencies are not effective for hedging against risks associated with the banking sector and systemic risk, they can be used to hedge against stock market risk in the short term and under stable market conditions. However, the study shows a mutual transmission of financial risk between the stock market and the cryptocurrency market over the medium run. Tested against the alternative method of quantile connectedness, these findings further reaffirm their robustness.
{"title":"Navigating the storm: Time-frequency quantile dependence and non-linear causality between crypto-currency market volatility and financial instability","authors":"Brahim Gaies , Najeh Chaâbane , Nesrine Bouzouita","doi":"10.1016/j.qref.2023.11.007","DOIUrl":"https://doi.org/10.1016/j.qref.2023.11.007","url":null,"abstract":"<div><p><span>In this study, we conduct a novel exploration of the time-frequency quantile dynamics between global crypto-currency market volatility and financial instability, using the recently introduced Cryptocurrency VIX indicator from a macro perspective. Taking into account the impact of Covid-19 and the Russian-Ukrainian war shocks, the results from the wavelet coherence analysis, the novel quantile wavelet coherency approach, and the non-parametric causality test reveal a strong dependence between the US financial stress and the volatility of the global </span>cryptocurrency market. This dependence is likely to persist over the long-term and in extreme market conditions, but weaken in the short-term. Additionally, the study finds that while cryptocurrencies are not effective for hedging against risks associated with the banking sector and systemic risk, they can be used to hedge against stock market risk in the short term and under stable market conditions. However, the study shows a mutual transmission of financial risk between the stock market and the cryptocurrency market over the medium run. Tested against the alternative method of quantile connectedness, these findings further reaffirm their robustness.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138467965","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-11-23DOI: 10.1016/j.qref.2023.11.005
Seryoong Ahn , Doojin Ryu
Chonsei, an exceptional but prevalent housing rental system in the Republic of Korea, functions as private loans between individuals, and its implicit interest rate is called the “chonsei to monthly rent conversion rate”. Although the chonsei to monthly rent conversion rate is much higher than the interest rate of savings accounts or mortgage loans, making chonsei a more expensive channel of financing, chonsei remains a dominant type of rent in Korea. This study provides a novel theoretical model in a continuous-time portfolio selection framework that allows a lessor, given borrowing constraints, to optimally choose between chonsei and monthly rent contracts to show a possible solution to this situation. We investigate the optimal choice between chonsei and the monthly rent of lessors using a rigorous theoretical model and find a closed-form solution to the model. We analyze how credit availability in the banking sector affects the choice problem, showing that the lessor may prefer the chonsei contract over the monthly rent contract, given the borrowing limit from a bank. In addition, we analyze the impact of other major factors, such as the market price of risk, the amount of chonsei deposit, the monthly rental rate, and the income rate, on the lessor’s optimal decision between chonsei and monthly rent.
Chonsei是韩国一种特殊但普遍的住房租赁制度,其功能是个人之间的私人贷款,其隐含利率被称为“Chonsei to monthly rent conversion rate”。虽然与储蓄账户或抵押贷款的利率相比,全租房与月租的转换率要高得多,这使得全租房成为更昂贵的融资渠道,但全租房仍然是韩国主要的租赁方式。本研究在连续时间投资组合选择框架中提供了一个新颖的理论模型,该模型允许出租人在给定借款约束的情况下,在全租合同和月租合同之间进行最佳选择,以显示这种情况的可能解决方案。我们用一个严谨的理论模型研究了租房和租房之间的最优选择,并找到了该模型的封闭解。我们分析了银行部门的信贷可获得性如何影响选择问题,显示出租人可能更倾向于全世合同而不是月租合同,考虑到银行的借款限额。此外,我们分析了其他主要因素的影响,如风险的市场价格,全世押金金额,月租金率和收入率,对出租人在全世和月租金之间的最优决策。
{"title":"Optimal chonsei to monthly rent conversion choice given borrowing constraints","authors":"Seryoong Ahn , Doojin Ryu","doi":"10.1016/j.qref.2023.11.005","DOIUrl":"https://doi.org/10.1016/j.qref.2023.11.005","url":null,"abstract":"<div><p><em>Chonsei</em><span>, an exceptional but prevalent housing rental system in the Republic of Korea, functions as private loans between individuals, and its implicit interest rate<span> is called the “chonsei to monthly rent conversion rate”. Although the chonsei to monthly rent conversion rate is much higher than the interest rate of savings accounts or mortgage loans, making chonsei a more expensive channel of financing, chonsei remains a dominant type of rent in Korea. This study provides a novel theoretical model in a continuous-time portfolio selection framework that allows a lessor, given borrowing constraints, to optimally choose between chonsei and monthly rent contracts to show a possible solution to this situation. We investigate the optimal choice between chonsei and the monthly rent of lessors using a rigorous theoretical model and find a closed-form solution to the model. We analyze how credit availability in the banking sector affects the choice problem, showing that the lessor may prefer the chonsei contract over the monthly rent contract, given the borrowing limit from a bank. In addition, we analyze the impact of other major factors, such as the market price of risk, the amount of chonsei deposit, the monthly rental rate, and the income rate, on the lessor’s optimal decision between chonsei and monthly rent.</span></span></p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":null,"pages":null},"PeriodicalIF":3.4,"publicationDate":"2023-11-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138453837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}