Leverage Across Firms, Banks, and Countries

Kalemli‐Özcan, Ṣebnem; Sørensen, Bent E.; Yeşiltaş, Sevcan

doi:10.3386/w17354

Cited by 55 publications

(19 citation statements)

References 15 publications

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“…Yet, MFIs' leverage ratios remain much lower than those of traditional banks. For instance, Kalemli-Ozcan et al (2012) analyzed 180,460 banks and found a mean equity of USD 0.8 billion and a mean debt of USD 10.7 billion, which makes a debt-to-equity ratio of 13.37.…”

Section: Discussion Of the Resultsmentioning

confidence: 99%

From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?

et al. 2017

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Microfinance, which pledges to provide financial services to people without access to banking, is chiefly run by non-governmental organizations (NGOs). Little is known about the extent to which the transformation of these NGOs into shareholder-owned and, most often, regulated firms affects the way microfinance institutions (MFIs) conduct their business. By applying the event study methodology to 66 MFIs that have transformed, we quantify the effect that transformation has on the MFIs' business models. Our results suggest that portfolio yield is driven down by 3.9 percentage points due to transformation, indicating that clients get more favorable interest rates. At the same time, MFIs are able to significantly cut down their operational expenses, of which 1.1 percentage points can be attributed to transformation. Other findings include a steep increase in commercial debt leverage and deposits, a significant decrease in the fluctuation of funding costs and a sharp rise in average loan size. Profitability goes down in the short and medium term, while return on equity is driven up in the medium to long run. By exploiting within-MFI data, our approach goes beyond previous studies that mainly relied on between-MFI data. Overall, the results suggest that transformed MFIs become an attractive environment for investors, potentially encouraging a more profit-seeking behavior among transformed MFIs. Acknowledgements.We thank Victoria van Lennep and Li Yang for research assistance in data gathering data. We also AbstractMicrofinance, which pledges to provide financial services to people without access to banking, is chiefly run by non-governmental organizations (NGOs). Little is known about the extent to which the transformation of these NGOs into shareholder-owned and, most often, regulated firms affects the way microfinance institutions (MFIs) conduct their business. By applying the event study methodology to 66 MFIs that have transformed, we quantify the effect that transformation has on the MFIs' business models. Our results suggest that portfolio yield is driven down by 3.9 percentage points due to transformation, indicating that clients get more favorable interest rates. At the same time, MFIs are able to significantly cut down their operational expenses, of which 1.1 percentage points can be attributed to transformation. Other findings include a steep increase in commercial debt leverage and deposits, a significant decrease in the fluctuation of funding costs and a sharp rise in average loan size.Profitability goes down in the short and medium term, while return on equity is driven up in the medium to long run. By exploiting within-MFI data, our approach goes beyond previous studies that mainly relied on between-MFI data. Overall, the results suggest that transformed MFIs become an attractive environment for investors, potentially encouraging a more profit-seeking behavior among transformed MFIs.Word count: 210

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Section: Discussion Of the Resultsmentioning

confidence: 99%

From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?

et al. 2017

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“…Investment bank presence both in terms of number of institutions and operations is centred in these countries (Kalemli-Ozcan, 2012;Thomson Reuters, 2012). The development of investment banking activities reached its peak in 2006, when the industry's total income in the G7 and Switzerland amounted to 80.67 (US$bn).…”

Section: Introductionmentioning

confidence: 99%

What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis

Mamatzakis

Bermpei

2014

International Review of Financial Analysis

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This paper examines factors that affect the performance of investment banks in the G7 and Switzerland. In particular, we focus on the role of risk, liquidity and investment banking fees. Panel analysis shows that those variables significantly impact upon performance as derived from stochastic frontier analysis (SFA). Given our sample also comprises the financial crisis, we further test for regimes switches using dynamic panel threshold analysis. Results show different underlying regimes, in particular over the financial crisis. In addition, a strong positive effect of Z-Score on performance for banks in the regime of low default risk is reported, whilst fee-income ratio has also a positive impact for banks with low level of fees. On the other hand, liquidity exerts a negative impact. Notably, there is a clear trend of mobility of banks across the two identified threshold regimes with regards to risk a year before the financial crisis. Our results provide evidence that recent regulation reforms regarding capital adequacy and liquidity requirements are on the right track and could enhance performance.

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“…17 The relationship between efficiency, bank size and leverage in the model is consistent with the data as shown in section 5.3. See also Kalemli-Ozcan et al (2012) who find that larger banks have a higher leverage.…”

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confidence: 99%

Banking Across Borders With Heterogeneous Banks

Niepmann

2016

Int. finance discuss. pap.

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This paper develops a model of banking across borders where banks differ in their efficiencies that can replicate key patterns in the data. More efficient banks are more likely to have assets, liabilities and affiliates abroad and have larger foreign operations.Banks are more likely to be active in countries that have less efficient domestic banks, are bigger and more open to foreign entry. In the model, banking sector integration leads to bank exit and entry and convergence in the return on loans and funding costs across countries. Bank heterogeneity matters for the associated welfare gains.Results suggest that differences in bank efficiencies across countries drive banking across borders, that fixed costs are crucial for foreign bank operations and that globalization makes larger banks even larger.

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Leverage Across Firms, Banks, and Countries

Cited by 55 publications

References 15 publications

From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?

From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?

What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis

Banking Across Borders With Heterogeneous Banks

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