Browsing by Author "Hasan, Iftekhar"

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  • Hasan, Iftekhar; Xie, Ru (2012)
    BOFIT Discussion Papers 8/2012
    Published in Emerging Markets Finance and Trade, Volume 49, Issue 2, 1 March 2013, Pages 4-18 as Foreign bank entry and bank corporate governance in China
    China employs a unique foreign bank entry model. Instead of allowing full foreign control of domestic banks, foreign investors are only permitted to be involved in the local banks as minority shareholders. At the same time, foreign strategic investors are expected to commit to bank corporate governance improvement and new technology support. In this context, the paper examines the effect of foreign strategic investors on Chinese bank performance. Based on a unique data set of bank ownership, performance, corporate governance and stock returns from 2003 to 2007, our regression and event study analysis results suggest that active involvement of foreign strategic investors in bank management have improved the corporate governance model of Chinese banks from a control based model to a market oriented model, and accordingly have promoted bank performance. JEL Classification Code: G21, G28, G34, F23 Keywords: China, Foreign Market Entry, Corporate Governance
  • Francis, Bill; Hasan, Iftekhar; Li, Lingxiang (2014)
    Bank of Finland Research Discussion Papers 19/2014
    Published in Review of Quantitative Finance and Accounting, Volume 46, Issue 2, February 2016: 217–260
    We study the impact of firms' abnormal business operations on their future crash risk in stock prices. Computed based on real earnings management (REM) models, firms' deviation in real operations from industry norms (DRO) is shown to be positively associated with their future crash risk. This association is incremental to that between discretionary accruals (DA) and crash risk found by prior studies. Moreover, after Sarbanes-Oxley Act (SOX) of 2002, DRO's predictive power for crash risk strengthens substantially, while DA's predictive power essentially dissipates. These results are consistent with the prior finding that managers shift from accrual earnings management (AEM) to REM after SOX. We further develop a suspect-firm approach to capture firms' use of DRO for REM purposes. This analysis shows that REM-firms experience a significant increase in crash risk in the following year. These findings suggest that the impact of DRO on crash risk is at least partially through REM.
  • Delis, Manthos D.; Hasan, Iftekhar; Iosifidi, Maria; Li, Lingxiang (Elsevier, 2018)
    Journal of Banking & Finance December ; 2018
    Using the full sample of U.S. banks and hand-collected data on enforcement actions over 2000–2014, we analyze the role of these interventions in promoting several aspects of accounting quality. We find that enforcement actions issued for both risk-related and accounting-related reasons lead to significant improvements in accounting quality. This improvement is consistently found for earnings smoothing, big-bath accounting, timely recognition of future loan losses, the association of loan loss provisions with future loan charge offs, loss avoidance, and cash flow predictability and earnings persistence. Most of the effects are somewhat more potent in the crisis period and survive in several sensitivity tests. Our findings highlight the imperative role of regulatory interventions in promoting bank accounting quality.
  • Ambrocio, Gene; Hasan, Iftekhar; Jokivuolle, Esa; Ristolainen, Kim (2020)
    Journal of Financial Stability October ; 2020
    Published in BoF DP 10/2020 http://urn.fi/URN:NBN:fi:bof-202006012160
    We survey 149 leading academic researchers on bank capital regulation. The median (average) respondent prefers a 10% (15%) minimum non-risk-weighted equity-to-assets ratio, which is considerably higher than the current requirement. North Americans prefer a significantly higher equity-to-assets ratio than Europeans. We find substantial support for the new forms of regulation introduced in Basel III, such as liquidity requirements. Views are most dispersed regarding the use of hybrid assets and bail-inable debt in capital regulation. 70% of experts would support an additional market-based capital requirement. When investigating factors driving capital requirement preferences, we find that the typical expert believes a five percentage points increase in capital requirements would “probably decrease” both the likelihood and social cost of a crisis with “minimal to no change” to loan volumes and economic activity. The best predictor of capital requirement preference is how strongly an expert believes that higher capital requirements would increase the cost of bank lending.
  • Ambrocio, Gene; Hasan, Iftekhar; Jokivuolle, Esa; Ristolainen, Kim (2020)
    Bank of Finland Research Discussion Papers 10/2020
    Published in Journal of Financial Stability 2020 ; 50 ; October https://doi.org/10.1016/j.jfs.2020.100772
    We survey 149 leading academic researchers on bank capital regulation. The median (average) respondent prefers a 10% (15%) minimum non-risk-weighted equity-to-assets ratio, which is considerably higher than the current requirement. North Americans prefer a significantly higher equity-to-assets ratio than Europeans. We find substantial support for the new forms of regulation introduced in Basel III, such as liquidity requirements. Views are most dispersed regarding the use of hybrid assets and bail-inable debt in capital regulation. 70% of experts would support an additional market-based capital requirement. When investigating factors driving capital requirement preferences, we find that the typical expert believes a five percentage points increase in capital requirements would “probably decrease” both the likelihood and social cost of a crisis with “minimal to no change” to loan volumes and economic activity. The best predictor of capital requirement preference is how strongly an expert believes that higher capital requirements would increase the cost of bank lending.
  • Hasan, Iftekhar; Malkamäki, Markku (2000)
    Bank of Finland. Discussion papers 20/2000
    This paper investigates the existence and extent of economies of scale and scope among stock exchanges.Evidence from 38 exchanges in 32 countries and 4 continents around the world for the years 1989-1998 indicates the existence of significant economies of scale and scope.The degree of such economies however differs by size of exchange and region.The largest stock exchanges show an increasing trend of cost effectiveness.Exchanges in North America and Europe report substantially larger economies of scale than those in the Asia-Pacific regions. Keywords: stock exchanges, mergers, regional alliances, economies of scale
  • Francis, Bill; Hasan, Iftekhar; Wu, Qiang; Yan, Meng (2014)
    Bank of Finland Research Discussion Papers 16/2014
    Published in Journal of American Taxation Association Volume 36, Issue 2 2014: 171-202
    This paper investigates the effect of CFO gender on corporate tax aggressiveness. Focusing on firms that experience a male-to-female CFO transition, the paper compares those firms' degree of tax aggressiveness during the pre- and post-transition periods. Using the probability of tax sheltering, the predicted unrecognized tax benefits, and the discretionary permanent book-tax differences to measure tax aggressiveness, we find that female CFOs are associated with less tax aggressiveness as compared to their male counterparts. The main findings are supported by additional tests based on propensity score matching, difference-in-difference tests, and tests with a female-to-male CFO transition sample. Overall, our study establishes CFO gender as an important determinant of tax aggressiveness.
  • Francis, Bill; Hasan, Iftekhar; Song, Liang (2012)
    Bank of Finland Research Discussion Papers 12/2012
    Published in Journal of Financial Research, Volume 35, Issue 3, October 2012: 343-374
    We investigate how borrowers corporate governance influences bank loan contracting terms in emerging markets and how this relation varies across countries with different country-level governance. We find that borrowers with stronger corporate governance obtain favorable contracting terms with respect to loan amount, maturity, collateral requirements, and spread. Firm-level and country-level corporate governance are substitutes in writing and enforcing financial contracts. We also find that the distinctiveness of borrowers characteristics affect the relation between firm-level corporate governance and loan contracting terms. Our findings are robust, irrespective of types of regression methods and specifications. JEL Classification: G20, G30, G31, G34, G38.
  • Shen, Chung-Hua; Huang, Yu-Li; Hasan, Iftekhar (2012)
    Bank of Finland Research Discussion Papers 13/2012
    This study proposes an information asymmetry hypothesis to examine why bank credit ratings vary among countries even when bank financial ratios remain constant. Countries are divided among those with low and high information asymmetry. The former include high-income countries, those in North America and West Europe regions, and those with strong institutional environment quality, whereas the latter group possess the opposite characteristics. This study hypothesizes that the influences of financial ratios on ratings are enhanced in low information asymmetry countries but reduced in countries with high information asymmetry. The sample includes the long-term credit ratings issued by Standard and Poor's from 86 countries during 2002-2008. The estimated results show that the effects of financial ratios on ratings are significantly affected by information asymmetries. Countries wishing to improve the credit ratings of their banks thus should reduce information asymmetry. JEL classification: G21; G32; G38 Keywords: Bank rating; Financial ratio; Information asymmetry; Institutional quality
  • Duru, Augustine; Hasan, Iftekhar; Song, Liang; Zhao, Yijiang (2020)
    Accounting and Business Research 3
    We construct measures of accounting regulations and enforcement mechanisms that are specific to a country's banking industry. Using a sample of major banks in 37 economies, we find that the informativeness of banks’ financial statements, measured by the value relevance of earnings and common equity, is higher in countries with stricter bank accounting regulations and countries with stronger enforcement. These findings suggest that superior bank accounting and enforcement mechanisms enhance the informativeness of banks’ financial statements. In addition, we find that the effects of bank accounting regulations are more pronounced in countries with stronger enforcement in the banking industry, suggesting that enforcement is complementary to bank accounting regulations in achieving higher value relevance of financial statements. Our study has important policy implications for bank regulators.
  • Fang, Yiwei; Hasan, Iftekhar; Marton, Katherin (2011)
    Bank of Finland Research Discussion Papers 5/2011
    Published in Economics of Transition, Volume 19, Issue 3, July 2011: 495-520
    This study examines the cost and profit efficiency of banking sectors in six transition countries of South-Eastern Europe over the period 1998 2008. Using the stochastic frontier approach, our analysis reveals that the average cost efficiency of SEE banks is 68.59% and the average profit efficiency is 53.87%. The second-stage regressions on the determinants of bank efficiency further show that foreign banks are associated with higher profit efficiency but moderately lower cost efficiency. Government banks are associated with lower profit efficiency. The efficiency gap between foreign banks, domestic private banks and government banks, however, has narrowed over time. We also find that the degree of individual banks competitiveness has a positive association with both cost and profit efficiency. Finally, institutional development, proxied by progress in banking reforms, privatization and corporate governance restructuring, also has a positive impact on bank efficiency.
  • Deli, Yota; Delis, Manthos D.; Hasan, Iftekhar; Liu, Liuling (2016)
    Bank of Finland Research Discussion Papers 23/2016
    Formal enforcement actions issued against banks for violations of laws and regulations related to safety and soundness can theoretically have both positive and negative effects on the terms of lending. Using hand-collected data on such enforcement actions issued against U.S. banks, we show that they have a strong negative effect on price terms (loan spreads and fees) for corporate loans and a positive one on non-price terms (loan maturity, size, covenants, and collateral). The results also indicate that in the absence of enforcement actions, the cost of borrowing during the subprime crisis would have been much higher, while punished banks intensify use of collateral.
  • Hasan, Iftekhar; Kobeissi, Nada; Wang, Haizhi; Zhou, Mingming (2017)
    International Review of Economics & Finance November
    We investigate the effects of bank financing on regional entrepreneurial activities in China. We present contrasting findings on the role of quantity vs. quality of bank financing on small business formation in China: while we document a consistent, significantly positive relationship between the quality of bank financing and new venture formation, we find that the quantity of supplied credit is insignificant. We report that formal institutions are positively correlated to regional entrepreneurial activities, and informal institutions substitute formal institutions. Our findings also reveal that the institutional environment tends to supplement bank financing in promoting regional entrepreneurial activities.
  • Hasan, Iftekhar; Liu, Liuling; Wang, Haizhi; Zhen, Xinting (2017)
    Economic Notes 3 ; November
    Using a sample of syndicated loan facilities granted to US corporate borrowers from 1987 to 2013, we directly gauge the lead banks’ market power, and test its effects on both price and non-price terms in loan contracts. We find that bank market power is positively correlated with loan spreads, and the positive relation holds for both non-relationship loans and relationship loans. In particular, we report that, for relationship loans, lending banks charge lower loan price for borrowing firms with lower switching cost. We further employ a framework accommodating the joint determination of loan contractual terms, and document that the lead banks’ market power is positively correlated with collateral and negatively correlated with loan maturity. In addition, we report a significant and negative relationship between banking power and the number of covenants in loan contracts, and the negative relationship is stronger for relationship loans.
  • Doumpos, Michael; Hasan, Iftekhar; Pasiouras, Fotios (2017)
    Economic Modelling August
    A number of recent studies compare the performance of Islamic and conventional banks with the use of individual financial ratios or efficiency frontier techniques. The present study extends this strand of the literature, by comparing Islamic banks, conventional banks, and banks with an Islamic window with the use of a bank overall financial strength index. This index is developed with a multicriteria methodology that allows us to aggregate various criteria capturing bank capital strength, asset quality, earnings, liquidity, and management quality in controlling expenses. We find that banks differ significantly in terms of individual financial ratios
  • Berger, Allen N.; Hasan, Iftekhar; Zhou, Mingming (2007)
    Bank of Finland Research Discussion Papers 16/2007
    Published in Journal of Banking & Finance, Volume 33, Issue 1, January 2009, Pages 113-130
    China is reforming its banking system, partially privatizing and permitting minority foreign ownership of three of the dominant 'big four' state-owned banks. This paper seeks to help predict the effects of this change by analysing the efficiency of virtually all Chinese banks in the years 1994-2003. Our findings suggest the big four banks are by far the least efficient and foreign banks the most efficient while minority foreign ownership is associated with significantly improved efficiency. We present corroborating robustness checks and offer several credible mechanisms through which minority foreign owners can increase Chinese bank efficiency. These findings suggest that minority foreign ownership of the big four is likely to significantly improve performance. Keywords: China, foreign banks, efficiency, foreign ownership JEL classification numbers: G21, G28, G34, F23
  • Hasan, Iftekhar; Jackowicz, Krzysztof; Kowalewski, Oskar; Kozłowski, Łukasz (2014)
    Bank of Finland Research Discussion Papers 22/2014
    Published as "Do local banking market structures matter for SME financing and performance? New evidence from an emerging economy" in Journal of Banking and Finance, 79, June 2017: 142-158
    In this paper, by employing a novel approach, we study the relationship between bank type and small-business lending in a post-transition country. Using a unique dataset on bank branches and firm-level data, we find that local cooperative banks lend more to small businesses than do large domestic banks and foreign-owned banks, even when controlling for the financial situation of the cooperative banks. Additionally, our results suggest that cooperative banks provide loans to small businesses at lower costs than foreign-owned banks or large domestic banks. Finally, we show that small and medium-sized firms perform better in counties with a large number of cooperative banks than in counties dominated by foreign-owned banks or large domestic banks. Our results are important from a policy perspective, as they show that foreign bank entry and industry consolidation may raise valid concerns for small firms in developing countries. Keywords: small-business lending, cooperative banks, foreign banks, post-transition countries
  • Bonin, John P.; Hasan, Iftekhar; Wachtel, Paul (2004)
    BOFIT Discussion Papers 7/2004
    Published in Journal of Banking & Finance vol. 29, no 1 (2005), pp. 31-53
    Using data from 1996 to 2000, we investigate the effects of ownership, especially by a strategic foreign owner, on bank efficiency for eleven transition countries in an unbalanced panel consisting of 225 banks and 856 observations.Applying stochastic frontier estimation procedures, we compute profit and cost efficiency scores taking account of both time and country effects directly.In second-stage regressions, we take these efficiency measures along with return on assets as dependent variables with dummy variables for ownership type, a variable controlling for bank size, and dummy variables for year and country effects as explanatory variables.Methodologically, our results demonstrate the importance of including fixed effects, especially country effects, and also suggest a preference for efficiency measures over financial measures of bank performance in empirical work on transition countries. With respect to the impact of ownership, we conclude that privatization by itself is not sufficient to increase bank efficiency as government-owned banks are not appreciably less efficient than domestic private banks.Our results do support the hypothesis that foreign ownership leads to more efficient banks in transition countries.We find that foreign-owned banks are more cost-efficient than other banks and that they also provide better service, in particular if they have a strategic foreign owner. Moreover, the participation of international institutional investors is shown to have a considerable additional positive impact on profit efficiency, which is consistent with the notion that these investors facilitate the transfer of technology and know how to newly privatized banks.In addition, we find that the remaining government-owned banks are less efficient in providing services, which is consistent with the hypothesis that the better banks were privatized first in transition countries.Finally, efficiency declines with bank size, which could call into question government-orchestrated bank consolidation strategies.We conjecture that the presence of many small and efficient foreign greenfield operations in these transition countries may be responsible for this result. JEL Classifications: P30, P34, P52.
  • Delis, Manthos D.; Hasan, Iftekhar; Kazakis, Pantelis (2012)
    Bank of Finland Research Discussion Papers 18/2012
    Published in Review of Finance, 18,5,2014: 1811-1846
    This paper provides cross-country evidence that variations in bank regulatory policies result in differences in income distribution. In particular, the overall liberalization of banking systems decreases the Gini coefficient and the Theil index significantly. However, this effect fades away for countries with low levels of economic and institutional development and for market-based economies. Among the different liberalization policies, the most significant negative effect on inequality is that of credit controls, which also seem to have a lasting effect on the Gini coefficient. Banking supervision and the abolition of interest rate controls also have a negative yet short-run impact on income inequality. A notable finding is that liberalization of securities markets increases income inequality substantially and over a long time span, suggesting that securitization widens the distribution of income. We contend that these findings have new implications for the effects of bank regulations, besides those related to their impact on financial stability. Keywords: Bank regulations; Income inequality; Cross-country panel data; Instrumental variables; Panel VAR JEL classification: G28; O15; O16
  • Castelli, Annalisa; Dwyer, Gerald P.; Hasan, Iftekhar (2009)
    Bank of Finland Research Discussion Papers 36/2009
    Published in European Financial Management, Volume 18, Issue 1, January 2012: 28–67
    We examine the connection between the number of bank relationships and firms performance using a unique data set on Italian small firms for which banks are a major source of financing. Our evidence indicates that return on equity and return on assets decrease as the number of bank relationships increases, the effects being stronger for small firms than for large firms. We also find that the ratio of interest expense to assets increases as the number of relationships increases. Particularly for small firms, these results are consistent with finding that suggest that having fewer bank relationships reduces the information asymmetries and agency problems and outweighs the hold-up problems.