Pub Date : 2025-02-01DOI: 10.1016/j.jfs.2024.101364
Jie Jiao , An Yan , Wei Yin
Using China’s religion and household survey data, we find that a high degree of religiosity increases households’ willingness to borrow, both formally from financial institutions and informally from family and friends. A high degree of religiosity could facilitate formal household borrowing by fostering trust in transactions. However, the trust mechanism cannot explain the impact of religiosity on informal borrowing. We hypothesize that a strong religiosity might facilitate informal loans by promoting altruism, and we find supporting evidence. The effect of religiosity on informal loans is more pronounced in transactions where the parties involved are intrinsically less altruistic toward each other.
{"title":"The effect of religiosity on trust and altruism: Evidence from China’s household borrowing","authors":"Jie Jiao , An Yan , Wei Yin","doi":"10.1016/j.jfs.2024.101364","DOIUrl":"10.1016/j.jfs.2024.101364","url":null,"abstract":"<div><div>Using China’s religion and household survey data, we find that a high degree of religiosity increases households’ willingness to borrow, both formally from financial institutions and informally from family and friends. A high degree of religiosity could facilitate formal household borrowing by fostering trust in transactions. However, the trust mechanism cannot explain the impact of religiosity on informal borrowing. We hypothesize that a strong religiosity might facilitate informal loans by promoting altruism, and we find supporting evidence. The effect of religiosity on informal loans is more pronounced in transactions where the parties involved are intrinsically less altruistic toward each other.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"76 ","pages":"Article 101364"},"PeriodicalIF":6.1,"publicationDate":"2025-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143144319","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-01DOI: 10.1016/j.jfs.2025.101386
Pierre Nkou Mananga , Shiqiang Lin , Hairui Zhang
We investigate the resilience of the South African banking sector by applying a dynamic agent-based model and the DebtRank algorithm. In contrast to previous studies focusing on listed banks, our methodology includes both listed and non-listed institutions that make up the banking industry, thereby capturing the systemic importance and vulnerability of all banks within the interbank market network. Our findings indicate that while larger banks exhibit greater systemic importance, a statistically significant correlation exists between a bank’s interbank-lending-to-equity ratio and vulnerability. Moreover, a bank’s size and specific interbank activities influence its systemic contribution, both in terms of importance and vulnerability. These insights offer policymakers an empirically grounded framework for improving financial stability monitoring and risk mitigation efforts.
{"title":"A network approach to interbank contagion risk in South Africa","authors":"Pierre Nkou Mananga , Shiqiang Lin , Hairui Zhang","doi":"10.1016/j.jfs.2025.101386","DOIUrl":"10.1016/j.jfs.2025.101386","url":null,"abstract":"<div><div>We investigate the resilience of the South African banking sector by applying a dynamic agent-based model and the DebtRank algorithm. In contrast to previous studies focusing on listed banks, our methodology includes both listed and non-listed institutions that make up the banking industry, thereby capturing the systemic importance and vulnerability of all banks within the interbank market network. Our findings indicate that while larger banks exhibit greater systemic importance, a statistically significant correlation exists between a bank’s interbank-lending-to-equity ratio and vulnerability. Moreover, a bank’s size and specific interbank activities influence its systemic contribution, both in terms of importance and vulnerability. These insights offer policymakers an empirically grounded framework for improving financial stability monitoring and risk mitigation efforts.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"77 ","pages":"Article 101386"},"PeriodicalIF":6.1,"publicationDate":"2025-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143201032","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-01DOI: 10.1016/j.jfs.2024.101370
Georgios Bampinas , Magnus Blomkvist , Elias Demetriades , Panagiotis N. Politsidis
This paper provides evidence of a flight home effect in the syndicated loan market during the COVID-19 pandemic, where lenders rebalance their loan portfolios towards domestic borrowers. Specifically, a one standard deviation increase in COVID exposure in the lenders’ home country is associated with a 4.1 percentage point decrease in lenders’ share of foreign loans. This home bias eases with the intensity of government restrictions during the pandemic and strengthens with expansionary monetary policy. We further pinpoint an operative supply-side mechanism, where smaller, less capitalized banks with a higher proportion of non-performing loans are more likely to rebalance towards domestic borrowers. Although different forms of asymmetric information exert a material – yet not uniform – effect on the lenders’ rebalancing decisions, the flight home effect emerges independently of the existence of these information asymmetries.
{"title":"The flight home effect during the COVID-19 pandemic: Evidence from syndicated loans","authors":"Georgios Bampinas , Magnus Blomkvist , Elias Demetriades , Panagiotis N. Politsidis","doi":"10.1016/j.jfs.2024.101370","DOIUrl":"10.1016/j.jfs.2024.101370","url":null,"abstract":"<div><div>This paper provides evidence of a flight home effect in the syndicated loan market during the COVID-19 pandemic, where lenders rebalance their loan portfolios towards domestic borrowers. Specifically, a one standard deviation increase in COVID exposure in the lenders’ home country is associated with a 4.1 percentage point decrease in lenders’ share of foreign loans. This home bias eases with the intensity of government restrictions during the pandemic and strengthens with expansionary monetary policy. We further pinpoint an operative supply-side mechanism, where smaller, less capitalized banks with a higher proportion of non-performing loans are more likely to rebalance towards domestic borrowers. Although different forms of asymmetric information exert a material – yet not uniform – effect on the lenders’ rebalancing decisions, the flight home effect emerges independently of the existence of these information asymmetries.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"76 ","pages":"Article 101370"},"PeriodicalIF":6.1,"publicationDate":"2025-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143143404","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the relationship between the behavior of a CEO’s ancestors and firm performance. To do so, we collect detailed information on emigrants from Italian municipalities during the Age of Mass Migration (1892–1924) from Ellis Island ships lists. We adopt an epidemiological approach complemented with an instrumental variables strategy and find that Italian firms managed by a CEO who belongs to a family with past emigration experience tend to perform better and to be more productive. In line with an inter-generational transmission of attitudes hypothesis, we show a positive relationship between the emigration experience of a CEO’s ancestors and alternative measures of corporate risk-taking. In addition, we find a positive relationship between having an ancestor who emigrated during the Age of Mass Migration and FDI to the United States. We also provide evidence that these CEOs have better managerial practices.
{"title":"Ancestors and corporate performance: Evidence from the Italian Mass Migration","authors":"Mingying Cheng , Erminia Florio , Stefano Manfredonia","doi":"10.1016/j.jfs.2024.101371","DOIUrl":"10.1016/j.jfs.2024.101371","url":null,"abstract":"<div><div>We study the relationship between the behavior of a CEO’s ancestors and firm performance. To do so, we collect detailed information on emigrants from Italian municipalities during the Age of Mass Migration (1892–1924) from Ellis Island ships lists. We adopt an epidemiological approach complemented with an instrumental variables strategy and find that Italian firms managed by a CEO who belongs to a family with past emigration experience tend to perform better and to be more productive. In line with an inter-generational transmission of attitudes hypothesis, we show a positive relationship between the emigration experience of a CEO’s ancestors and alternative measures of corporate risk-taking. In addition, we find a positive relationship between having an ancestor who emigrated during the Age of Mass Migration and FDI to the United States. We also provide evidence that these CEOs have better managerial practices.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"76 ","pages":"Article 101371"},"PeriodicalIF":6.1,"publicationDate":"2025-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143143405","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-02-01DOI: 10.1016/j.jfs.2024.101368
Ethan Xin Liu, Lily Dang
This paper reports the results of an investigation of the impact of digital transformation on debt financing costs. By integrating information asymmetry theory and agency theory, we have developed a threefold risk-theoretic model to demonstrate how corporate digital transformation affects a firm’s debt financing costs. Drawing on a dataset of Chinese listed companies from 2007 to 2022, we measured digital transformation across three dimensions: attention, investment, and outcomes. The findings reveal that corporate digital transformation significantly reduces the cost of debt financing for companies. Mechanism tests indicate that digital transformation reduces debt financing costs by mitigating information risk, agency risk, and earnings risk through enhanced information disclosure quality, strengthened corporate governance, and improved expected earnings. Our paper not only enriches emerging research on the impact of corporate digital transformation on financial accounting but also provides theoretical insights for effectively alleviating the issue of expensive financing.
{"title":"Digital transformation and debt financing cost: A threefold risk perspective","authors":"Ethan Xin Liu, Lily Dang","doi":"10.1016/j.jfs.2024.101368","DOIUrl":"10.1016/j.jfs.2024.101368","url":null,"abstract":"<div><div>This paper reports the results of an investigation of the impact of digital transformation on debt financing costs. By integrating information asymmetry theory and agency theory, we have developed a threefold risk-theoretic model to demonstrate how corporate digital transformation affects a firm’s debt financing costs. Drawing on a dataset of Chinese listed companies from 2007 to 2022, we measured digital transformation across three dimensions: attention, investment, and outcomes. The findings reveal that corporate digital transformation significantly reduces the cost of debt financing for companies. Mechanism tests indicate that digital transformation reduces debt financing costs by mitigating information risk, agency risk, and earnings risk through enhanced information disclosure quality, strengthened corporate governance, and improved expected earnings. Our paper not only enriches emerging research on the impact of corporate digital transformation on financial accounting but also provides theoretical insights for effectively alleviating the issue of expensive financing.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"76 ","pages":"Article 101368"},"PeriodicalIF":6.1,"publicationDate":"2025-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143144322","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-31DOI: 10.1016/j.jfs.2025.101385
Hsuan-Chi Chen , Robin K. Chou , Chih-Yung Lin , Chien-Lin Lu
In this study, we examine the impact of liquidity support from the Federal Reserve on the capital structures of firms of varying sizes. Our findings suggest that large firms tend to increase their debt financing and leverage ratios in response to significant shocks triggered by the large-scale asset purchases (LSAPs) of the US Federal Reserve. By contrast, small firms with preexisting banking relationships are more likely to receive liquidity support. Notably, small firms associated with smaller banks exhibit increased default risks. Furthermore, large firms exhibited weaker operating performance but received greater managerial compensation following the LSAP. This trend indicates potential inefficiencies in the distribution of funding facilitated by unconventional monetary policies.
{"title":"Too big to fail? Asymmetric effects of quantitative easing","authors":"Hsuan-Chi Chen , Robin K. Chou , Chih-Yung Lin , Chien-Lin Lu","doi":"10.1016/j.jfs.2025.101385","DOIUrl":"10.1016/j.jfs.2025.101385","url":null,"abstract":"<div><div>In this study, we examine the impact of liquidity support from the Federal Reserve on the capital structures of firms of varying sizes. Our findings suggest that large firms tend to increase their debt financing and leverage ratios in response to significant shocks triggered by the large-scale asset purchases (LSAPs) of the US Federal Reserve. By contrast, small firms with preexisting banking relationships are more likely to receive liquidity support. Notably, small firms associated with smaller banks exhibit increased default risks. Furthermore, large firms exhibited weaker operating performance but received greater managerial compensation following the LSAP. This trend indicates potential inefficiencies in the distribution of funding facilitated by unconventional monetary policies.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"77 ","pages":"Article 101385"},"PeriodicalIF":6.1,"publicationDate":"2025-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143349930","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-31DOI: 10.1016/j.jfs.2025.101384
Hasibul Chowdhury , Trinh Hue Le , Kelvin Jui Keng Tan
We examine whether a firm’s organization capital (OC) affects its labor investment efficiency. We find that a higher level of OC is related to lower deviations from the optimal level of labor investment according to economic conditions (higher labor investment efficiency). We find that this result is empirically robust to a stacked difference-in-differences approach using exogenous CEO turnover as a quasi-natural experiment and planned CEO retirements and forced CEO turnovers as placebo tests. We identify that the ability to retain talented employees and reduction of agency costs are the two channels by which OC improves a firm’s labor investment efficiency. Furthermore, we report that the positive effect of OC on labor investment efficiency is more pronounced in firms in highly competitive markets, firms with better access to external financing and firms with highly skilled labor.
{"title":"Organization capital and labor investment efficiency","authors":"Hasibul Chowdhury , Trinh Hue Le , Kelvin Jui Keng Tan","doi":"10.1016/j.jfs.2025.101384","DOIUrl":"10.1016/j.jfs.2025.101384","url":null,"abstract":"<div><div>We examine whether a firm’s organization capital (OC) affects its labor investment efficiency. We find that a higher level of OC is related to lower deviations from the optimal level of labor investment according to economic conditions (higher labor investment efficiency). We find that this result is empirically robust to a stacked difference-in-differences approach using exogenous CEO turnover as a quasi-natural experiment and planned CEO retirements and forced CEO turnovers as placebo tests. We identify that the ability to retain talented employees and reduction of agency costs are the two channels by which OC improves a firm’s labor investment efficiency. Furthermore, we report that the positive effect of OC on labor investment efficiency is more pronounced in firms in highly competitive markets, firms with better access to external financing and firms with highly skilled labor.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"77 ","pages":"Article 101384"},"PeriodicalIF":6.1,"publicationDate":"2025-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143201029","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-01-31DOI: 10.1016/j.jfs.2025.101387
Joana F. Kanda , João M. Pinto , Beatriz P. Silva
We examine the impact of the ECB’s asset purchase programmes on euro area non-financial firms’ cost of borrowing and their choice between corporate bonds and syndicated loans. Our findings indicate that the Corporate Sector Purchase Programme (CSPP) reduced spreads for both eligible and non-eligible corporate bonds, and that ECB purchases of covered bonds positively affected corporate bond spreads. The CSPP also compressed spreads across all syndicated loans, irrespective of eligibility. We find evidence supporting a “cost of borrowing channel” for covered bonds under the first programme and asset-backed securities, indicating that syndicated loan spreads reflect banks’ borrowing costs in the bond market. Additionally, our results reveal that the CSPP significantly influenced firms’ debt financing choices, with these effects being more pronounced for non-switchers.
{"title":"The ECB’s APP’s impact on non-financial firms’ cost of borrowing and debt choice","authors":"Joana F. Kanda , João M. Pinto , Beatriz P. Silva","doi":"10.1016/j.jfs.2025.101387","DOIUrl":"10.1016/j.jfs.2025.101387","url":null,"abstract":"<div><div>We examine the impact of the ECB’s asset purchase programmes on euro area non-financial firms’ cost of borrowing and their choice between corporate bonds and syndicated loans. Our findings indicate that the Corporate Sector Purchase Programme (CSPP) reduced spreads for both eligible and non-eligible corporate bonds, and that ECB purchases of covered bonds positively affected corporate bond spreads. The CSPP also compressed spreads across all syndicated loans, irrespective of eligibility. We find evidence supporting a “cost of borrowing channel” for covered bonds under the first programme and asset-backed securities, indicating that syndicated loan spreads reflect banks’ borrowing costs in the bond market. Additionally, our results reveal that the CSPP significantly influenced firms’ debt financing choices, with these effects being more pronounced for non-switchers.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"77 ","pages":"Article 101387"},"PeriodicalIF":6.1,"publicationDate":"2025-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"143372777","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines how various facets of social and political freedom shape the impact of political connections on bank lending. Using a new dataset covering the period 2007–2018 and more than 100 countries, we find that the establishment of political connections stimulates lending, but only in countries with constrained media freedom and restricted freedom of association and expression, as well as in those scoring low on political rights and civil liberties. These results suggest that social and political freedom constitute critical factors that limit the resource-allocation distortions caused by political connections.
{"title":"Banks, freedom, and political connections: New evidence from around the world","authors":"Bartłomiej Cegłowski , Krzysztof Jackowicz , Łukasz Kozłowski , Iwa Kuchciak","doi":"10.1016/j.jfs.2024.101353","DOIUrl":"10.1016/j.jfs.2024.101353","url":null,"abstract":"<div><div>This study examines how various facets of social and political freedom shape the impact of political connections on bank lending. Using a new dataset covering the period 2007–2018 and more than 100 countries, we find that the establishment of political connections stimulates lending, but only in countries with constrained media freedom and restricted freedom of association and expression, as well as in those scoring low on political rights and civil liberties. These results suggest that social and political freedom constitute critical factors that limit the resource-allocation distortions caused by political connections.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"76 ","pages":"Article 101353"},"PeriodicalIF":6.1,"publicationDate":"2024-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142699292","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2024-11-22DOI: 10.1016/j.jfs.2024.101348
Lei Cheng
The involvement of the Communist Party of China in corporate decision-making has formed a corporate governance model with “Chinese characteristics” that diverges from commonly studied governance models. This paper aims to provide direct insight into China’s corporate governance model by examining how the involvement of Party organizations in corporate governance influences the performance of private firms. To address endogeneity concerns, we use a quasi-natural experiment (i.e., sudden deaths of board directors) that leads to an exogenous change in the proportion of Party directors. Using difference-in-differences estimation, we find that an increase in the proportion of Party directors (i.e., stronger political governance) improves private firms’ performance. This finding is robust to various tests. Moreover, the channel analysis suggests that the Party organization performs advisory and supervisory functions in corporate governance. Last, we present evidence that the excessive involvement of the Party organization in corporate governance also imposes political costs on private firms.
{"title":"Political governance and firm performance in China: Evidence from a quasi-natural experiment","authors":"Lei Cheng","doi":"10.1016/j.jfs.2024.101348","DOIUrl":"10.1016/j.jfs.2024.101348","url":null,"abstract":"<div><div>The involvement of the Communist Party of China in corporate decision-making has formed a corporate governance model with “Chinese characteristics” that diverges from commonly studied governance models. This paper aims to provide direct insight into China’s corporate governance model by examining how the involvement of Party organizations in corporate governance influences the performance of private firms. To address endogeneity concerns, we use a quasi-natural experiment (i.e., sudden deaths of board directors) that leads to an exogenous change in the proportion of Party directors. Using difference-in-differences estimation, we find that an increase in the proportion of Party directors (i.e., stronger political governance) improves private firms’ performance. This finding is robust to various tests. Moreover, the channel analysis suggests that the Party organization performs advisory and supervisory functions in corporate governance. Last, we present evidence that the excessive involvement of the Party organization in corporate governance also imposes political costs on private firms.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"76 ","pages":"Article 101348"},"PeriodicalIF":6.1,"publicationDate":"2024-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142722629","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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