Browsing by Author "Weill, Laurent"

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  • Fungáčová, Zuzana; Weill, Laurent (2014)
    BOFIT Policy Brief 8/2014
    Financial inclusion contributes to economic growth and poverty reduction. We examine financial inclusion levels in twelve Asian countries. To do so, we utilize data from the World Bank Global Findex database for 2011. We find large cross-country differences for the three main indicators of financial inclusion (ownership of a bank account, savings on a bank account, use of bank credit) and observe that ownership of a bank account is more common in high-income countries. However, the pattern of financial inclusion in terms of saving on a bank account or using formal credit differs across countries and is not related to per capita income. There are nonetheless major similarities in the motives for financial exclusion and in the alternative sources of borrowing in Asian countries. Voluntary financial exclusion is more prominent than involuntary exclusion, the main reason being lack of money. We also find that borrowing from family or friends is the most common way of obtaining credit and that relying on alternative private lenders is quite limited.
  • Karas, Alexei; Schoors, Koen; Weill, Laurent (2008)
    BOFIT Discussion Papers 3/2008
    Published in Economics of Transition Vol 18, Issue 1 (January 2010), pp. 123-141
    We study whether bank efficiency is related to bank ownership in Russia. We find that foreign banks are more efficient than domestic private banks and - surprisingly - that domes-tic private banks are not more efficient than domestic public banks. These results are not driven by the choice of production process, the bank's environment, management's risk preferences. the bank's activity mix or size, or the econometric approach. The evidence in fnicl suggests that domestic public banks arc more efficient than domestic private banks and that the efficiency gap between these two ownership types did not narrow after the introduction of deposit insurance in 2004. This may be due to increased switching costs or to the moral hazard effects of deposit insurance. The policy conclusion is that the efficiency of the Russian banking system may benefit more from increased levels of competition and greater access of foreign banks than from bank privatization. JEL classification: G21; P30; P34; P52 Keywords: Bank efficiency; state ownership; foreign ownership; Russia
  • François, Abel; Panel, Sophie; Weill, Laurent (2019)
    BOFIT Discussion Papers 12/2019
    Since political uncertainty is greater in dictatorships than in democracies, we test the hypothesis that foreign investors scrutinize public information on dictators to assess this risk. In particular, we as-sume they use five suitable dictators’ characteristics: age, political experience, education level, ed-ucation in economics, and prior experience in business. We perform fixed effects estimations on an unbalanced panel of 100 dictatorial countries from 1973 to 2008 to explain foreign direct investment (FDI) inflows. We find that educated dictators are more attractive to foreign investors. We obtain strong evidence that greater educational attainment of the leader is associated with higher FDI. We also find evidence that the leader having received education in economics and prior experience in business is associated with greater FDI. By contrast, the leader’s age, and political experience have no relationship with FDI. Our results are robust to several tests and checks, including a comparison with democracies.
  • Fungáčová, Zuzana; Godlewski, Christophe J.; Weill, Laurent (2009)
    BOFIT Discussion Papers 7/2009
    Published in Eastern European Economics Vol. 49, no. 1, Jan.-Feb. 2011, pp. 13-30.
    This paper considers whether local bank participation exerts an impact on the spreads for syndicated loans in Russia. Following Berger, Klapper and Udell (2001), we test whether local banks possess a superior ability to deal with information asymmetries. Using a sample of 528 syndicated loans to Russian borrowers, we perform regressions of the spread on a set of variables including information on local bank participation and the characteristics of loans and borrowers. Unlike earlier studies, we distinguish foreign banks with a local presence from those without such presence. The intuition here is that a local presence may influence a foreign bank's monitoring ability and access to information about borrowers. We observe no significant impact on the spread when there is local bank participa-tion in a syndicated loan, nor do we find any significant influence of the presence of domestic-owned banks or foreign-owned banks on the spread. Additional estimations considering subsamples with exacerbated information asymmetries provide similar results. Therefore our conclusion is that local banks do not benefit from an advantage in monitoring ability and in information in Russia. JEL Codes : G21, P34. Keywords : Bank, Information asymmetry, Loan, Syndication, Russia
  • Fungáčová, Zuzana; Weill, Laurent; Zhou, Mingming (2017)
    Journal of Financial Services Research 1
    Published in BOFIT Discussion Papers 17/2010.
    This paper examines how the introduction of deposit insurance influences the relationship between bank capital and liquidity creation.
  • Fungáčová, Zuzana; Weill, Laurent; Zhou, Mingming (2010)
    BOFIT Discussion Papers 17/2010
    Published in Journal of Financial Services Research, 51(1), 2017: 97-123
    This paper examines how the introduction of deposit insurance influences the relationship between bank cap-ital and liquidity creation. As discussed by Berger and Bouwman (2009), there are two competing hypothes-es on this relationship which can be influenced by the presence of deposit insurance. The introduction of a deposit insurance scheme in an emerging market, Russia, provides a natural experiment to investigate this issue. We study three alternative measures of bank liquidity creation and perform estimations on a large set of Russian banks. Our findings suggest that the introduction of the deposit insurance scheme exerts a limited impact on the relationship between bank capital and liquidity creation and does not change the negative sign of the relationship. The implication is that better capitalized banks tend to create less liquidity, which sup-ports the "financial fragility/crowding-out" hypothesis. This conclusion has important policy implications for emerging countries as it suggests that bank capital requirements implemented to support financial stability may harm liquidity creation. JEL classification: G21; G28; G38; P30; P50 Keywords: Bank capital, liquidity creation, deposit insurance, Russia
  • Hainz, Christa; Weill, Laurent; Godlewski, Christophe J. (2008)
    Bank of Finland Research Discussion Papers 27/2008
    Published in Journal of Financial Services Research, Volume 44, Issue 2, October 2013: 131-148
    We investigate the impact of bank competition on the use of collateral in loan contracts. We develop a theoretical model incorporating information asymmetries in a spatial competition framework where banks choose between screening the borrower and asking for collateral. We show that presence of collateral is more likely when bank competition is low. We then test this prediction empirically on a sample of bank loans from 70 countries. We estimate logit models where the presence of collateral is regressed on bank competition, measured by the Lerner index. Our empirical tests corroborate the theoretical predictions that bank competition reduces the use of collateral. These findings survive several robustness checks.
  • Klein, Paul-Olivier; Weill, Laurent (2018)
    BOFIT Discussion Papers 15/2018
    This paper analyses the effect of bank profitability on economic growth. While policymakers have shown major concerns for low levels of bank profitability, there are no empirical studies on the growth effects of bank profitability. To fill this gap, we investigate the impact of bank profitability on economic growth using a sample of 133 countries during the period 1999–2013 with several empirical approaches. Our first major conclusion is that a high current level of bank profitability contributes positively to economic growth. Our second conclusion is that the past level of bank profitability exerts a negative influence on economic growth leading to the absence of significance for the overall bank profitability. Hence, the positive impact of bank profitability on economic growth is short-lived. These findings are robust to a battery of robustness checks, including those using alternative measures for profitability and growth.
  • Pessarossi, Pierre; Weill, Laurent (2011)
    BOFIT Discussion Papers 29/2011
    Published in China Economic Review, Volume 26, September 2013, Pages 1-16
    We analyze the determinants of debt choices for Chinese firms between bonds and syndicated loans. This issue helps appraise the weak development of bond market in China. We test if flotation costs, asymmetries of information, and renegotiation and liquidation costs influence the choice of debt in line with former studies in the context of regulatory interference in the bond market. We check the role of central state ownership on debt choice in order to assess to what extent corporate debt choices are politically or economically driven. We test these hypotheses on a dataset of 220 listed Chinese firms over the period 2006 2010. We find evidence in favour of the influence of central government ownership on the financing choices of firms it owns, as central state-owned firms are more likely to issue bonds. We also observe limited support for the premise that this influence is stronger for central state-owned firms located closer to the capital. Furthermore, we identify that these companies tend to borrow uniquely on the bond market rather than tapping both debt markets. We provide evidence in favour of the flotation costs hypothesis, but provide mixed evidence for the information asymmetry hypothesis and rather reject the renegotiation and liquidation hypothesis. All in all, our findings show that financial factors play a much more minor role in corporate debt choices compared to other countries, whereas state ownership remain a key determinant of preferring the bond market.
  • Fungáčová, Zuzana; Määttä, Ilari; Weill, Laurent (2019)
    Comparative Economic Studies 3
    Available also as BOFIT DP 18/2016.
    This research investigates the determinants of attitudes toward corruption in China using micro-level data. We use survey data on 6000 individuals from 28 provinces to estimate logit models that show how individual and provincial determinants shape attitudes toward corruption. Respondents who have higher education, belong to higher social class, live in rural areas, and are members of the Communist Party of China, think corruption is less useful than the other respondents. Negative attitude toward corruption is related to higher education, lower social class, and membership in the Communist Party of China.
  • Davydov, Denis; Fungáčová, Zuzana; Weill, Laurent (2018)
    Journal of International Financial Markets, Institutions and Money July ; 2018
    This paper investigates the cyclicality of bank liquidity creation. Since liquidity creation is a major economic function of banks, their liquidity creation behavior may amplify business cycle fluctuations. Using the methodology of Berger and Bouwman (2009) to compute liquidity creation measures, we analyze the relation between GDP growth and liquidity creation of Russian banks from 2004 to 2015. Detailed quarterly data on a very large sample of banks and coexistence of different bank ownership types (state-owned, domestic private and foreign banks), makes Russia an ideal natural laboratory for study of cyclicality of liquidity creation for banks. We find that liquidity creation of banks is procyclical. We show that the liquidity creation behavior of state-owned banks and foreign-owned banks is similar to that of domestic private banks in terms of procyclicality. We further find that the magnitude of procyclicality is higher for liquidity creation than for lending. Thus, while ownership of banks does not influence the cyclicality of bank liquidity creation, liquidity creation behavior of banks can amplify business cycle fluctuations.
  • Davydov, Denis; Fungáčová, Zuzana; Weill, Laurent (2017)
    BOFIT Discussion Papers 5/2017
    Published in Journal of International Financial Markets, Institutions & Money, 55, July, 2018, 81–93
    This paper investigates the cyclicality of bank liquidity creation. Since liquidity creation is a major economic function of banks, their liquidity creation behavior may amplify business cycle fluctuations. Using the methodology of Berger and Bouwman (2009) to compute liquidity creation measures, we analyze the relation between GDP growth and liquidity creation of Russian banks from 2004 to 2015. Detailed quarterly data on a very large sample of banks and coexistence of different bank ownership types (state-owned, domestic private and foreign banks), makes Russia an ideal natural laboratory for study of cyclicality of liquidity creation for banks. We find that liquidity creation of banks is procyclical. We show that the liquidity creation behavior of state-owned banks and foreign banks is similar to that of domestic private banks in terms of procyclicality. We further find that the magnitude of procyclicality is higher for liquidity creation than for lending. Thus, while ownership of banks does not influence the liquidity creation behavior of banks, such behavior can amplify business cycle fluctuations.
  • Pessarossi, Pierre; Weill, Laurent (2013)
    BOFIT Discussion Papers 28/2013
    Published in Revue économique 3/2015 (Vol. 66) , p. 505-520 as Les exigences de fonds propres influencent-elles l’efficience des banques? Leçons d'une expérience naturelle en Chine. http://www.cairn.info/revue-economique-2015-3-page-505.htm
    This paper contributes to the debate on the effect of capital requirements on bank effieciency. We study the relation between capital ratio and bank efficiency for Chinese banks over the period 2004?2009, taking advantage of the profound regulatory changes in capital requirements that occurred during this period to measure the exogenous impact of an in-crease in the capital ratio on banks' cost efficiency. We find that such an increase has a positive effect on cost efficiency, the size of which depends to an extent on the bank's ownership type. Our results therefore suggest that capital requirements can improve bank efficiency. JEL Codes: G21, G28 Keywords: bank, capital requirements, efficiency, China
  • Weill, Laurent (2010)
    BOFIT Discussion Papers 2/2010
    Published in Comparative Economic Studies (2011) 53, 291-306
    The aim of this paper is to investigate whether Islamic banks have greater market power than con-ventional banks. An Islamic bank, for example, might enjoy enhanced market power if a captive clientele adhering to religious principles permits it to charge higher prices. To measure market power, we compute Lerner indices for a sample of banks from 17 countries where Islamic and conventional banks coexist. Comparison of Lerner indices shows no significant difference between Islamic banks and conventional banks over the period 2000-2007. When including control variables, regression of Lerner indices even suggests that Islamic banks have less market power than conventional banks. A robustness check with the Rosse-Panzar model confirms that Islamic banks are no less competitive than conventional banks. Thus, any reduced market power of Islamic banks can be attributed to differences in norms and incentives.
  • Godlewski, Christophe J.; Turk-Ariss, Rima; Weill, Laurent (2011)
    BOFIT Discussion Papers 6/2011
    Published in Journal of Comparative Economics, Volume 41, Issue 3, Pages 745-761, August 2013
    The last decade witnessed a proliferation in issues of sukuk, Islamic financial instruments structured to replicate the cash flows of conventional bonds. Using a market-based approach on Malaysian data, we consider whether investors react differently to the announcements of sukuk and conventional bond issues. Our findings suggest the stock market is neutral to announcements of conventional bond issues, but reacts negatively to announcements of sukuk issues. We attribute this finding to the excess demand for Islamic investment certificates and explain the difference in stock market reactions as an adverse selection mechanism that favors sukuk issuance by lower-quality debtor companies. Unlike previous studies, our findings indicate markets readily distinguish between sukuk and conventional bonds.
  • Godlewski, Christophe J.; Turk-Ariss, Rima; Weill, Laurent (2014)
    BOFIT Discussion Papers 21/2014
    Published in Journal of Economic Behavior and Organization, Volume 132, December 2016: 63-76
    ​Sukuk, the shari’a-compliant alternative mode of financing to conventional bonds, have considerably expanded over the last decade. We analyze the stock market reaction to two key features of this instrument: sukuk type and characteristics of the shari’a scholar certifying the issue. We use the event study methodology to measure abnormal returns for a sample of 131 sukuk from eight countries over the period 2006-2013 and find that Ijara sukuk structures exert a positive influence on the stock price of the issuing firm. We observe a similar positive impact from shari’a scholar reputation and proximity to issuer. Overall our results support the hypotheses that the type of sukuk and the choice of scholars hired to certify these securities matter for the market valuation of the issuing company. Publication keywords: financial instruments, Islamic finance, shari’a scholars
  • Fungáčová, Zuzana; Solanko, Laura; Weill, Laurent (2013)
    BOFIT Discussion Papers 17/2013
    Published in Journal of Banking & Finance, Volume 49, December 2014, p. 356–366 as Does competition influence the bank lending channel in the euro area?
    This paper examines how bank competition influences the bank lending channel in the Euro area countries. Using a large panel of banks from 12 euro area countries over the period 2002?2010 we analyze the reaction of loan supply to monetary policy actions depending on the degree of bank competition. We find that the effect of monetary policy on bank lending is dependent on bank competition: the transmission of monetary policy through the bank lending channel is less pronounced for banks with extensive market power. Further investigation shows that banks with less market power were more sensitive to monetary policy only before the financial crisis. These results suggest that the bank market power has a significant impact on monetary policy effectiveness. Therefore, wide variations in the level of bank market power may lead to asymmetric effects of a single monetary policy. JEL Codes: E52, G21. Keywords: bank competition, bank lending channel, monetary policy, euro area.
  • Fungáčová, Zuzana; Shamshur, Anastasiya; Weill, Laurent (2017)
    Journal of Banking and Finance October
    BOFIT Discussion Papers 6/2016
    Despite the extensive debate on the effects of bank competition on economic welfare and growth, only a handful of single-country studies deal with the impact of bank competition on the cost of credit. We contribute to the literature by investigating the impact of bank competition on the cost of credit in a cross-country setting. Using a panel of firms from 20 European countries covering the period 2001–2011, we consider a broad set of measures of bank competition, including two structural measures (Herfindahl–Hirschman index and CR5), and two non-structural indicators (Lerner index and H-statistic). We find that bank competition increases the cost of credit and observe that the positive influence of bank competition is stronger for smaller companies. Our findings accord with the information hypothesis, whereby a lack of competition incentivizes banks to invest in soft information and conversely increased competition raises the cost of credit. This positive impact of bank competition is however influenced by the institutional and economic framework, as well as by the crisis.
  • Fungáčová, Zuzana; Shamshur, Anastasiya; Weill, Laurent (2016)
    BOFIT Discussion Papers 6/2016
    Published in Journal of Banking and Finance, 83, October, 2017, 104–120
    Despite the extensive debate on the effects of bank competition, only a handful of single-country studies deal with the impact of bank competition on the cost of credit. We contribute to the literature by investigating the impact of bank competition on the cost of credit in a cross-country setting. Using a panel of firms from 20 European countries covering the period 2001–2011, we consider a broad set of measures of bank competition, including two structural measures (Herfindahl-Hirschman index and CR5), and two non-structural indicators (Lerner index and H-statistic). We find that bank competition increases the cost of credit and observe that the positive influence of bank competition is stronger for smaller companies. Our findings accord with the information hypothesis, whereby a lack of competition incentivizes banks to invest in soft information and conversely increased competition raises the cost of credit. This positive impact of bank competition is however influenced by the institutional and economic framework, as well as by the crisis.
  • Fungáčová, Zuzana; Kerola, Eeva; Weill, Laurent (2021)
    BOFIT Discussion Papers 3/2021
    This work examines the impact of bank efficiency on the bank lending channel in China. Using a sample of 175 Chinese banks over the period 2006–2017, we investigate how the reaction of the loan supply to monetary policy actions depends on a bank’s efficiency. While bank efficiency does not exert an impact on the effectiveness of monetary policy transmission overall, it does favor the transmission of monetary policy for banks with low loan-to-deposit ratios. In addition, the expansion of shadow banking activities has been associated with a positive impact of bank efficiency on monetary policy transmission. These results suggest that bank efficiency may influence the bank lending channel in certain cases.