The analysis of the role of black banks in black economic development began in the early 1970s. At that time the focus was on the profitability of these institutions. Since then both the number of black banks and the research on their performance have increased significantly. This article reviews the recent literature on black banks in order to provide a conceptual framework for policies that will promote their growth and prosperity. The authors conclude that there is a clear need for future research in every area relating to black banks.
This article combines the results of three financial studies that examine capital issues affecting minority business development. The results are presented so as to explain or refute conventional wisdom regarding capital availability, cost of capital, credit market discrimination, sources of capital and differences in firm capital composition. Generally, Asian and Hispanic businesses more approximate nonminority businesses in the sources of capital, the cost of capital, total capital investment, and access to capital. Black firms, on the other hand, face credit discrimination from all sources of capital, which limits their access to capital, increases its cost, and affects firm profitability. Consequently, black firms have a smaller capital composition at startup and during operations. The only deviation from this pattern occurs where minority and nonminority financial institutions vie for black business patronage by reducing the cost of borrowing and increasing the availability of funds.
This article examines fractional processes as alternatives to random walks in emerging foreign exchange rate markets. Sowell's (1992) joint maximum likelihood is used to estimate the ARFIMA parameters and test for random walks. The results show that, in most cases, the emerging market exchange rates follow fractionally integrated processes. Forecasts of exchange rates based on the fractionally integrated autoregressive moving average models are compared to those from the benchmark random walk models. A Harvey, Leybourne and Newbold (1997) test of equality of forecast performance indicates that the ARFIMA forecasts are more efficient in the multi-step-ahead forecasts than the random walk model forecasts. The presence of fractional integration is seen to be associated with market inefficiency in the exchange markets examined. The evidence suggests that fractional integrated processes are viable alternatives to random walks for describing and forecasting exchange rates in the emerging markets.
We introduce a model in which a regulator employs mechanism design to embed her human capital beta signal(s) in a firm's capital structure, in order to enhance the value of her post career change indexed executive stock option contract with the firm. We prove that the agency cost of this revolving door behavior increases the firm's financial leverage, bankruptcy risk, and affects estimation of firm value at risk (VaR).
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