Competition and Bank Payout Policy

Posted on by

Abstract

Leveraging branch-level data on bank deposits, we provide evidence of a negative impact of branching restrictions on payout ratios, which occurs only for banks with a low charter value, as proxied by the market-to-book ratio. The results for the market-to-book ratio extend to the Lerner index, the return on assets, and the Z-score, suggesting that risk-shifting incentives drive our results rather than signaling incentives or agency costs. Our results are robust to different proxies for banking competition and identification strategies, and bootstrap simulations suggest that our results are not due to confounding factors.

Orientation and action: SME responses to customers and competitors in an international competitive business context

Posted on by
The International Journal of Entrepreneurship and Innovation, Ahead of Print.
This paper investigates strategic orientations toward three key parties (customers, domestic competitors, and foreign competitors) and considers how each pressures small- and medium-sized enterprises (SMEs) to reduce costs and innovate. We surveyed 2792 SMEs from 30 countries, about their business environment and firm innovation. Results indicate that SMEs are selective in responding to pressures from customers, and when they do respond, SMEs do so on their own terms. Further, SMEs differentiate their responses to competitive pressure based on whether pressure arises from foreign or domestic sources. Our study adds to the behavioral perspective of the market orientation literature by focusing on how customers and competitors drive SME behaviors aimed at achieving positional market advantages.

Global Banks and Synthetic Funding: The Benefits of Foreign Relatives

Posted on by

Abstract

This paper examines the effect of dislocations in foreign currency (FX) swap markets (“CIP deviations”) on bank lending. Using data from UK banks we show that when the cost of obtaining swap-based funds in a particular foreign currency increases, banks reduce the supply of cross-border credit in that currency. This effect is increasing in the degree of banks' reliance on swap-based FX funding. Access to foreign relatives matters as banks employ internal capital markets to shield their cross-border FX lending supply from the described channel. Partial substitution occurs from banks outside the UK not affected by changes in synthetic funding costs.