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Journal of Banking and Financial Economics


JBFE No 1/2017

Determinants of Banks’ Net Interest Margins in Honduras

Koffie Nassar, Edder Martinez, Anabel Pineda

 

ABSTRACT
This paper analyzes the determinants of banks’ net interest margins in Honduras during the years 1998 to 2013 – a period characterized by increasing banks’ net interest margins, foreign bank participation and consolidation. In line with findings in the previous literature, we find that operating costs are the most important drivers of banks’ net interest margins. We also find that competition among banks has led to higher concentration and that funding by parent banks positively impacts foreign banks’ net interest margins. Together, these results suggest that banks, particularly foreign banks, are under pressure to consolidate and reduce operating costs in order to offer competitive interest margins. We conclude that further structural reforms and consolidation may lower banks’ net interest margins.

 

JEL classification: E43; E44; D43
Keywords: Banks’ interest margins; Commercial banks; Panel corrected standard errors (PCSE).

DOI: 10.7172/2353-6845.jbfe.2017.1.1

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Inflation and Public Debt Reversals in the G7 Countries

Bernardin Akitoby, Ariel Binder, Takuji Komatsuzaki

 

ABSTRACT

This paper investigates the impact of low or high inflation on the public debt-to-GDP ratio in the G-7 countries. Our simulations suggest that if inflation were to fall to zero for five years, the average net debt-to-GDP ratio would increase by about 5 percentage points during that period. In contrast, raising inflation to 6 percent for the next five years would reduce the average net debtto-GDP ratio by about 11 percentage points under the full Fisher effect and about 14- percentage points under the partial Fisher effect. Thus higher inflation could help reduce the public debt-to-GDP ratio somewhat in advanced economies. However, it could hardly solve the debt problem on its own and would raise significant challenges and risks. First of all, it may be difficult to create higher inflation, as evidenced by Japan’s experience in the last few decades. In addition, an unanchoring of inflation expectations could increase long-term real interest rates, distort resource allocation, reduce economic growth, and hurt the lower–income households.

 

JEL classification: E31; F34; H63
Keywords: Inflation; debt crisis; G7; public debt; sovereign debt.

DOI: 10.7172/2353-6845.jbfe.2017.1.2

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Unstash the Cash! Corporate Governance Reform in Japan

Chie Aoyagi, Giovanni Ganelli

 

ABSTRACT

Japan’s high corporate savings might be holding back growth, by preventing a more efficient use of resources. Small and medium enterprises (SMEs) have been the main contributors to high corporate cash balances, but more recently larger companies have also increased cash holdings. This paper focuses on the causes and consequences of the current corporate behavior and suggests options for reform. In particular, Japan’s weak corporate governance – as measured by available indexes – might be contributing to high cash holdings. An empirical analysis on a panel of Japanese firms confirms that improving corporate governance would help unlock corporate savings. The main policy implication of the analysis carried out in this paper is that a more ambitious and comprehensive corporate governance reform should be a key component
of Japan’s growth strategy. Such a reform would help remove some of the bottlenecks of the legal and corporate governance framework

 

JEL classification: D22; G30; G34
Keywords:Japan; corporate cash holdings; corporate governance; growth strategy.

DOI: 10.7172/2353-6845.jbfe.2017.1.3

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Global Thermoeconomics

Mario W. Cardullo, Manhong Mannie Liu

 

ABSTRACT

This paper illustrates that basic global economic concepts can be directly related to the First and Second Laws of Thermodynamics. We believe that all economic returns are from nothing except from current and past human expenditure of human energy; this is the result of the First Law of Thermodynamics. It is shown that everything is a product of energy in the form of labor and that the basic principle of Labor Theory of Value is still valid and this principle is validated not
relying on economics and fi nance models, rather on thermodynamic principles. This is illustrated by the development of the Labor Value Equation based on the application of the First and Second Law of Thermodynamics and how it can impact employment, asset valuation, supply/demand, productivity, global confl ict, global reserve currency and global stability.

 

JEL classification: C; G; J; P; F; A
Keywords: Thermodynamics, Labor Theory of Value, Labor Value Equation, Global Reserve
Currency, Financial Stability, Employment, Asset Valuation, Productivity

DOI: 10.7172/2353-6845.jbfe.2017.1.4

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An Econometric Analysis for the Bid-Ask Spread in the Emerging Chilean Capital Market

David Cademartori-Rosso, Berta Silva-Palavecinos, Ricardo Campos-Espinoza, Hanns de la Fuente-Mella

 

ABSTRACT

The purpose of this paper is to show that different methods for calculating the spread (Bid-Ask) and the methods for annualizing intra-day data affect the results of econometric models. To achieve our goal, we analyze different econometric models in the context of:
i) the International Financial Reporting Standards (IFRS) adoption,
ii) the reduction of information asymmetry due to new corporate governance standards, and
iii) the ownership concentration that characterize the Chilean Capital Market. We test the quality
of the information delivered to the market using two information disclosure indices (DIS and
Botosan).
We find that the definition of spread and the methods for annualizing intraday data it is a key
decision and may affect the statistical significance of the variables of a specific model.

 

JEL classification:
Keywords: Spread (Bid-Ask), Econometric Modeling, IFRS, Information Asymmetry, Information
Disclosure.

DOI: 10.7172/2353-6845.jbfe.2017.1.5

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