1,721,140 research outputs found
Into the Unknown. The Extent and Boldness of Firms' International Footprint
No full textFirms make footprints as they internationalize. Going beyond simple measures of firms' internationalization, we conceptualize and measure the extent of a firm's international footprint as the number of location-mode combinations it is active in, whereas the boldness of the footprint shows how widespread (across modes and locations) firms' international activities are, compared to other firms with similar extent. Extent describes the complexity of international activities, and boldness captures the risk-taking associated with operating in less know contexts. Consistent with a microfoundations lens on global strategy, we find that boldness correlates with managerial risk-taking attributes, while the extent of internationalization strongly correlates with capabilities conducive to managing more complex operations. These measures offer a highly suitable tool for analyzing the relationship between internationalization and performanc
Perceived basis risk and the heterogeneous demand for weather derivatives in Southern Ethiopia
Full text linkThis paper investigates the role of basis risk in decisions to buy derivatives that protect against drought risk. We conducted a discrete choice experiment on a sample of Ethiopian farmers. The results suggest that there is an inverted U-shaped relationship between the contractual frequency of severe drought and the market share of insurance. In other words, when the contractual frequency differs from the average perceived frequency, demand decreases. This relationship is not verified for moderate drought insurance. These findings point to the necessity to design insurance for moderate drought events and for risk aggregators that can diversify the idiosyncratic risk component
Shocks and credit choice in Southern Ethiopia
No full textPurpose – The purpose of this paper is to examine how shocks suffered by rural households in Ethiopia influence their decision to borrow and the source of credit. Design/methodology/approach – First, suppose a household faces a set of four borrowing alternatives: only formal borrowing, only informal borrowing, both formal and informal borrowing, and non-borrowing. Second, the paper assumes that the random component is independently and identically distributed in accordance with the extreme value distribution. These assumptions lead to the multinomial logit model. The paper estimates the model using data from a survey of 350 rural households in Southern Ethiopia. Findings – The paper finds that shocks are important factors in explaining both the decision to borrow and the source of credit. In particular, negative shocks that affect household’s assets, such as the seizing of farmland and theft, or human capital, such as the death of the family head, reduce the probability of borrowing from formal lenders or from both formal and informal lenders at the same time. The study supports only to some extent the assumption that informal credit contributes to smooth consumption. Last, networking effect is very significant and demonstrates how the two markets interact. Research limitations/implications – A model that would consider dynamic consumption patterns would have been more appropriate. In fact, one of the limitations of the study is the reliance on a cross-section analysis and the data is limited to just one village. Further research would extend the data set geographically and across time. Practical implications – The formal lenders are not willing to provide contingent loans, maybe because of a limited ability to assess and diversify risk. Besides, the available formal credit products are not proper to finance long term risk management strategies but pesticides, fertilizers and improved seeds that are entirely used in every agricultural cycle. In this regard, proper risk transfer strategies and instruments, as well as better tailored loan products, are needed in order to increase outreach into the rural areas. Originality/value – To the authors’ knowledge, this is the first paper that investigates how shocks influence the decision to borrow and the source of credit in Ethiopia
Recommended from our members
L’internazionalizzazione della produzione in Italia: caratteristiche delle imprese ed effetti sul sistema economico
No full textMortgage-backed Securitization and SME Lending During the Financial and Economic Crisis: Evidence from the Italian Cooperative Banking System
Full text linkI investigate the determinants of the securitization activities of Italian cooperative banks during the financial and economic crisis (2007–2014) and the impact of securitization on the supply of loans to SMEs. The less deposit-funded, less profitable and less capitalized cooperative banks are, the more likely they are to securitize and the more likely it is that they will securitize to a larger extent. Furthermore, I find that securitization has not directly affected the supply of new SME loans. However, there is strong evidence of a risk-rebalancing effect of securitization on the balance sheet, especially in the period 2010–2014
Geographic diversification and credit supply in times of trouble: Evidence from microlending
No full textThis paper investigates the impact of geographic diversification on the provision of credit during a financial crisis. We analyse in particular the microlending crisis that occurred in Nicaragua from mid-2008. We find that during the crisis, lenders reduced overall credit provision but to a lesser extent to those geographic areas that contributed most to geographic diversification in the boom period. This mitigation effect was greater for those lenders that were more geographically diversified before the onset of the crisis. Furthermore, we discover that lenders with major loan monitoring problems, that is lenders with larger credit officers’ portfolios, cut lending relatively less to those geographic areas that contributed most to geographic diversification. Overall, our results suggest that geographic diversification can support lending when a credit boom ends in a crisis
Financial decisions and risk management of low-income households in disaster-prone areas: Evidence from the portfolios of Ethiopian farmers
No full textDesigning optimal financial products for rural households in poor countries remains a challenge, especially in a risk management perspective in disaster-prone areas. In addition to financial intermediaries' difficulties with reaching potential customers efficiently, information asymmetries prevent fully understanding customers and developing suitable products for them. The clientele's weak information systems, coupled with cultural aspects often unfamiliar to the supplier of financial services, make the analysis difficult and costly. This article builds on a financial statement approach to empirically explore the combination of farmers' financial and non-financial strategies, in a portfolio risk management perspective, with a focus on shock-type risk exposure. It emerges that farmers' decisions follow a sequential process with different combinations of savings, credit, and insurance that interact with non-financial strategies to help managing risks. The study relies on panel data collected in Ethiopia. The empirical analysis confirms the vulnerability of sample households to natural systemic shocks and entails that the conclusions of this paper can be considered part of the broad literature on the disaster risk management of low-income households
An analysis of the demand of weather index-based insurance with flexible attributes in a risk management framework
Full text linkWe propose a rural household’s risk management framework to investigate whether the low take-up of index-based insurance may depend, first, on the heterogeneity of the product’s attributes and, second, on a substitution effect between the insurance and on-farm and off-farm risk management strategies. We conducted a discrete choice experiment in Ethiopia with a sample of farmers using a weather security with fixed compensation in case of drought. We offered securities with different combinations of attributes: premium, compensation, preferred season, frequency of drought, sale location, and time of premium payment, allowing for interest payment and administration and distribution costs. We used a Mixed Logit Model. We find that while available risk management strategies are not important in the decision to buy insurance, heterogeneity in the demand is remarkable and relies on the indemnity and home delivery attributes, the type of drought insurance (for moderate or severe drought), and the capacity to appreciate the value of insurance
Multimarket Banks, Local Economic Shocks, and Lending Behavior: When the Effect is on Cost but not on the Amount of Deposit Fundings
No full textWe investigate how local deposit shocks affect bank lending in nonaffected markets for the case where banks mostly neutralize that shock. Colombian banks in oil-producing municipalities experienced deposit outflows after the collapse of oil prices in 2014–2015. Following the shock, we observe that the affected banks increased their credit to non-oil-producing markets by reducing the price of consumer loans and by using market power in both commercial and consumer loans. This paper contributes to understanding how multimarket banks transmit local deposit shocks to other geographic markets to mitigate deposit outflows
- …
