The Review of Finance and Banking

7-18

Authors: Sankharaj Roy

The present study assesses the factors that are significantly related to the use of financial services among the people living in the North-Eastern States of India. This part of the geographical area has a low penetration of banking and financial services as reported in various documents by the regulators. The use of financial services gives a precise picture of the inclusiveness of the financial system. Financial inclusion does not merely mean having a bank account but using that bank account to derive benefits from various financial services. The present study will try to find out the factors acting as impediments towards the use of financial services and affecting the choice of using or not using any such financial services and products. The study is based on the primary data collected using a questionnaire from 1,948 respondents spreading across three states of North East India. Tobit regression analysis is used as the censored regression model to find out the linear relationship between variables affecting the use of financial services. Fitting Tobit regression model, it is found that, the critical factors that are significant towards the use of financial services are financial awareness, economic status of the members, the suitability of financial products, income, education, age of the user and presence of banking correspondents.

31-48

Authors: Nilufer Ozdemir

A majority of commercial banks in the U.S. are affiliated with a bank holding company. They rely on their internal capital markets for satisfying daily liquidity needs. Did these internal capital markets actually help affiliates during the sub-prime mortgage crisis? By implementing the difference-in-difference technique, this paper measures the role of internal markets. Results show that flows between parent institutions and banks, as well as flows among banks affiliated with the same parent were not effective in preventing a decline in lending during the crisis. On the other hand, banks that had access to non-bank affiliate funds continued to lend.

63-78

Authors: Akinlo A. Enisan

Nigerian economy depends mainly on oil. The country produces and exports crude oil and at the same time, imports refined oil as input into domestic production. Consequently, changes in oil price will have a major effect on phenomenon such as unemployment rate. This paper assesses the impacts of changes in oil price on the unemployment rate. Applying the standard linear Autoregressive Distributed Lag (ARDL) approach, the result shows that shock to oil price has no significant long-run effect on the rate of unemployment. However, when the non-linear ARDL (NARDL) is applied, the results provide evidence of log-run but asymmetric effects of oil price shocks on the rate of unemployment. This finding suggests that the best way of modelling the unemployment-oil price nexus is NARDL that allows for short-run symmetry with long-run asymmetry.

43-58

Authors: Simeon Papadopoulos

This paper investigates the implications of market power on issues of bank efficiency and stability in African developing countries. Using data from 229 banks in 7 African economies over the period 2009-2016, we calculate market power, bank efficiency and stability estimates at the bank level. We employed different specifications of the conventional Lerner indicator to measure the degree of market power and the Z-index to account for bank stability. Bank efficiency scores were estimated with the stochastic frontier analysis. Our results show that a higher degree of market power results in profit efficiency gains and enhanced bank stability, despite significant cost efficiency losses. Further, as banks gain market power, they also benefit from greater firm stability and reduced risk potential. This result supports the traditional view that increased competition may undermine bank stability. Our results also seem to suggest that efficiency Granger-causes market power indicating, that changes in profit efficiency precede changes in market power. Banks that are able to operate more profit efficiently will gain greater market power in comparison with their peers. Overall, our findings seem to suggest that higher degrees of market power bring about greater profit rates and enhanced bank stability.

79-90

Authors: Kedar Mukund Phadke and Manoj S Kamat

Securities and Exchange Board of India (SEBI) launched compulsory grading of IPOs in May-2007. The listing day and long-run performance of IPOs are analyzed to examine the effects of IPO certification among underpriced graded IPOs listed in India listed between fiscal years 2006 and 2013. Using a sample of 114 underpriced graded IPOs, this study reveals that (1) the effects of certification are demonstrated with higher-grade IPOs underpriced the least, (2) certification effects do not continue to persist over the long run, and (3) Price corrections are extreme over the long run with lower grade IPOs.

7-13

Authors: Cristina Ganja

The main purpose of this study is to investigate the existence of a liquidity premium on the Polish stock market, using the liquidity-adjusted CAPM. In order to measure the influence of the liquidity of stocks returns, there was constructed a liquidity factor using the newest high-low spread liquidity measure, developed by Corwin and Schultz (2012). The results have showed that there is a significant liquidity premium positively influencing the excess returns of stocks from the Poland market, and the premium is growing from the most liquid portfolio to the less liquid one.

24-36

Authors: Matthew O. Gidigbi, Kehinde M. Bello, Gbenga F. Babarinde

Energy pricing did not only have an implication on the indigent but on the national government as well. Petroleum subsidy tolerance impacts the government revenue of certainty but the extent of its impact needs to be determined. Therefore, it becomes imperative to assess the contribution of the petroleum subsidy on tax volatility. Data were sourced from the NNPC Annual Statistical Bulletin (ASB) for the year 1997, 2005, 2008 and 2016; Central Bank of Nigeria (CBN) Statistical Bulletin and Statement of Accounts and Annual Reports. An exploratory analysis was conducted on extracted data to generate other variables of interest such as subsidy on premium motor spirit, tax revenue volatility before proceeding to Lease Squares analyses. ARCH and GARCH models were applied to ascertain the volatility of tax revenue. Petroleum subsidy positively impacts tax revenue volatility; the impact was minimal but statistically significant at 1 per cent significance level. Exchange rate increased the tax revenue volatility by 5.10 point in the long-run, likewise gross domestic savings by 0.4 point in the long-run and both estimates were statistically significant at 1 per cent respectively. Both government expenditure and gross fixed capital formation reduced the tax revenue volatility at 0.05 and 0.03 point respectively and the estimates were statistically significant at 10 per cent and 1 per cent. The ECM showed that any deviation in the estimates would be restored within a year and this is statistically significant at 1 per cent. It was therefore recommended that the government should do more to manage and maintain appropriate exchange rate policy and keep up improving on its expenditure towards capital formation and investment in order to manage tax revenue volatility.

65-76

Authors: Yi-Pei Chen, Askar Koshoev

Using a sample of rapidly developing “Four Tigers” (i.e. Hong Kong, Singapore, South Korea, and Taiwan), this paper investigates the influence of the cross-listing effect and the payout policy on a firm performance and valuation. While the payout policy does not significantly affect abnormal returns for both cross-listed and non-cross-listed companies, the payout policy of cross-listed firms is positively correlated with earnings growth. Further investigation reveals that the companies with higher investment opportunities, represented by Tobin’s Q, get positive reaction by foreign investors when they signal about future prospects by paying out more cash dividends. Interestingly, the domestic investors do not share the same opinion and prefer the firms to accumulate the funds for the execution of future investment projects instead of dividend distribution. The results provide evidence that the firms with investment opportunities in combination with positive payouts better stimulate earnings growth if they are cross-listed.

95-108

Authors: Dan Gabriel Anghel

In the ongoing quest to better understand investor psychology and behavior, we study the effects of popular sporting events on investor sentiment and, consequently, on market returns in the frontier stock market of Romania. We analyze sporting events that involve teams–football (soccer) and handball–and also ones that center on individuals–tennis. We find some signs that negative outcomes significantly alter post-event investor sentiment, which in turn influences market prices. However, the impact is small from an economic perspective and it is not persistent in time, being reversed in at most three trading days. Overall, we find that investor sports sentiment in Romania is weak.

7-26

Authors: Michael Becker, Rüdiger Buchkremer

This paper provides new insights on the relevance of new information technologies for the risk and regulatory compliance management of financial institutions in Germany. For this purpose, 62 executive risk managers and compliance officers have been surveyed with respect to risk categories, regulatory requirements as well as new technologies with an emphasis on artificial intelligence. The results of this survey are compared to the scientific literature and to four existing studies of 2016 and 2017, respectively. This research shows that artificial intelligence, big data and cybersecurity technologies are on top of the agenda of financial institutions in Germany. Moreover, the majority of participants are convinced that artificial intelligence solutions will widely be implemented and used in the risk and regulatory compliance environment by the end of 2022.

47-58

Authors: Elena Valentina Tilica

Numerous studies investigated patters in daily stocks returns, considering many possible manifestations, like the day-of-the-week (DOW) and turn-of-the-month (TOM)effects. This study analyses the possibility that they represent the same effect, but have been described as different patterns due to the methodologies employed. The results show that both effects are present on the Romanian market. However, a profitable DOW effect is linked to the existence of the TOM effect, while the TOM effect seems to be able to also create positive returns in an individual manner. Thus, investors should base their strategies mainly on the TOM effect.