2,237 research outputs found
The Japanese financial keiretsu as a collective enforcement mechanism
No full textIncludes bibliographical references (p. 35-37).Eric Berglof and Enrico Perotti
State ownership - a residual role?
No full textThe author reviews the state of thinking on the governance role of state ownership. He argues that a gradual transfer of operational control and financial claims over state assets remains the most desirable goal, but it needs to be paced to avoid regulatory capture, and the capture of the privatization process itself. In addition, the speed of transfer should be timed on the progress in developing a strong regulatory governance system, to which certain residual rights of intervention must be vested. In many countries institutional weakness limits regulatory capacity and reliability, yet the author's conclusion is that in such environments, maintaining state control undermines the very emergence of institutional capacity, and so the balance should tip toward progressively less direct state control. After all, what are"institutions"if not governance mechanisms with some degree of autonomy from both political and private interests? The gradual creation of institutions partially autonomous from political power must become central to the development of an optimal mode of regulatory governance. The author offers some suggestions about creating maximum accountability in regulatory governance, in particular creating an internal control system based on a rotating board representative of users, producers, and civic organizations, to be elected by a process involving frequent reporting and disclosure.Decentralization,National Governance,Financial Crisis Management&Restructuring,Banks&Banking Reform,Municipal Financial Management,National Governance,Financial Crisis Management&Restructuring,Governance Indicators,Banks&Banking Reform,Municipal Financial Management
Lessons from the Russian Meltdown: The Economics of Soft Legal Constraints
No full textOn August 17, 1998, Russia defaulted on its domestic public debt, declared a moratorium on the private banks' foreign liabilities, which was equivalent to an outright default, and abandoned its exchange rate regime. The depth of the Russian meltdown shocked the international markets, and precipitated a period of serious financial instability. It is important to understand the roots of such a crisis to learn about possible lessons on both issues of bank supervision and international stability. While the visible cause of the crisis was an unsustainable fiscal deficit couples with massive capital flight, the critical question concerns the origin of such circumstances. This paper argues that the structure of individual incentives in the Russian legal context, compounded by the exceptional support granted by international institutions to Russia, explains the cycle of nonpayment, capital flight and fiscal unbalances leading to the dramatic 1998 crisis. We offer an interpretative model of noncompliance, cash-stripping and rational collective nonpayment, which led to the fiscal and banking crisis and ultimately to a complete meltdown. In our view, the banking sector was already insolvent prior to the crisis, and contributed directly and indirectly to it. The last section of the paper puts forward a radical medium-term policy proposal for a stable banking and payment system for Russia. Russia needs to create a basic foundation for savings and intermediation by asset restrictions and market segmentation, crude but effective rules used in all underdeveloped systems to restrain asset stripping and opportunism. Concretely, we propose a cautious extension of deposit insurance away from the monopolistic Sberbank and towards a narrow banking layer. The proposal also proposes to restore charter value in the commercial banking sector.
Liquidity insurance for systemic crises
No full textIn this new Policy Insight Enrico Perotti and Javier Suarez explain how a liquidity and capital insurance arrangement could provide emergency liquidity (and perhaps capital) and protect the economy against systemic crisis
Incentives and regulation in banking
No full textThe financial crisis of 2007-2008 has unveiled the hidden flaws in the regulatory framework of the financial sector. The rules of the game established by regulators were not stringent enough and provided bankers with wrong incentives to gamble with depositors’ money. There are two major challenges in the design of new rules in banking. First, bank assets are opaque, and regulators do not perfectly observe the risks involved. The second challenge is that bankers’ behavior changes in response to changes in regulation. This results in regulatory arbitrage. This thesis includes three essays on banking. The first two focus on the problem of bank asset opacity in the banking regulatory design. The third essay focuses on the regulatory arbitrage. The first essay "Convertible Bonds and Bank Risk-Taking" (joint with Enrico Perotti) studies the effect of going concern contingent capital on ex ante bank risk-taking incentives. The second essay "Internal Asset Transfers and Risk-Taking in Financial Conglomerates" considers the risk control decision and risk allocation choice via securitization in financial conglomerates organized as a bank holding company. The third essay "Franchise Value and Risk-Taking in Modern Banks" (joint with Lev Ratnovski and Razvan Vlahu) studies how the value of bank relationship business induces risk-shifting through investment in scalable market-based activities
Nations, conglomerates, and empires : the tradeoff between income and sovereignty
No full textOne of the apparent inconsistencies in the breakup of multinational states is that, while the republics justified their decision by claiming they wanted increased sovereignty, the new states'strong desire to join the European Union shows their intention to dissipate this sovereignty. How can the two desires be reconciled? The author explains that full sovereignty is neither reachable nor desirable for most countries. Economic sovereignty is normally limited in key areas: exchange rate policy, trade policy, labor and banking regulations, and so on. There is a tradeoff curve between sovereignty and income. The author tests the following premises: a) larger countries (measured by GDP) are more sovereign; and b) countries with abundant natural resources or skilled workers as well as democratic countries tend to be more integrated. The author finds a statistically strong impact of per capita wealth and democracy on international integration. The effect of country size is weaker. The author discusses why different countries may wish to form conglomerates. He finds that the willingness to join conglomerates is greater for countries that are relatively poor and for democracies. The country size effect is U shaped. The key gain from independence for the relatively rich republics that were former members of the Communist conglomerates was not the economic sovereignty in itself but the ability to switch from a poor to a rich conglomerate.Environmental Economics&Policies,Economic Theory&Research,Payment Systems&Infrastructure,Fiscal&Monetary Policy,Labor Policies,Environmental Economics&Policies,National Governance,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Inequality,Economic Theory&Research
Outside Finance, Dominant Investors and Strategic Transparency
No full textThis paper studies optimal financial contracts and product market competition under a strategic transparency decision. When firms seeking outside finance resort to actively monitored debt in order to commit against opportunistic behaviour, the dominant lender can influence corporate transparency. More transparency about a firm's competitive position has both strategic advantages and disadvantages: in general, transparency results in higher variability of profits and output. Thus lenders prefer less information dissemination, as this protects firms when in a weak competitive position, while equityholders prefer more disclosure to maximize profitability when in a strong position. We show that bank-controlled firms will be opaque, while shareholder- run firms prefer more transparency. In fact, we can predict a clustering of characteristics associated with bank dominance: opaqueness, low variability of profits, slightly reduced average profits, uncertainty about assets in place, and relatively high financing needs all should be observed jointly for bank controlled firms.corporate governance; transparency; bank finance; product market competition; capital structure
IDENTIFICATION OF OHS-RELATED FACTORS AND INTERACTIONS AMONG THOSE AND OHS PERFORMANCE
No full textAn enterprise can modify several factors that impact on the Occupational Health and Safety (OHS) performance. Within the implementation of the E-merging project (financed by INAIL, the Italian National Institute for Insurance against Occupational Accidents) – to improve safety in Small- and Medium-sized Enterprises (SMEs) – development context, a thorough literature review, supported by later practitioners’ suggestions, has been performed in order to identify the factors which can be related to the OHS issue. Then, the mutual interactions among the identified OHS-related factors and the interactions among the OHS-related factors and the OHS performance have been identified for SMEs and tested on the basis of two existing data sources, i.e. the INAIL most recent dataset and a survey carried out among SMEs in the metalworking industry. This allows to understand the root causes of some evidences, which enables entrepreneurs and managers to plan interventions for the improvement of the OHS performance
David Audretsch: A Source of Inspiration, a Co-author, and a Friend
No full textIn this chapter, Enrico Santarelli discusses the profound impact that David had on his career. Beginning with a conference in Budapest, Santarelli and David bocame close friends and colleagues. They went on to collaborate on many papers and projects, several of which Santarelli highlights below
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