Can bank health affect investment? Evidence from Japan

Article Abstract:

A study was conducted to examine whether a weakness in the banking industry has any impact on the real economy. The data used were drawn for 18 Japanese banks with credit ratings ranging from AA+ to A+, over the period 1991-92. Bank weakness was measured not only in terms of credit ratings, but also in terms of capital ratios and nonperforming loans. Controlling for stock market valuation and cash flow, tests were run to determine the sensitivity of a company's investment to the financial health of its main bank. The results revealed that firms with unhealthy banks had fewer investments than companies with healthier banks. However, findings also indicated that problems in the Japanese banking sector do not have any significant impact on the economy, mainly because the weakest banks deal with only a small number of companies.

Banking Institutions, Depository Credit Intermediation, Foreign investments, Japan, Banks (Finance), Investments, Corporations, Corporations, Japanese

---

Bank regulation and deposit insurance

Article Abstract:

Taking the arguments posed by Kareken an additional step, the need for for government deposit insurance is undesirable as well as unnecessary. The example of money market mutual funds demonstrates that the use of short term instruments is an effective and safe means of protecting deposited funds. Since such a radical departure from existing policy is not viable in the foreseeable future other intermediate policy reforms might include: (1) adoption of risk-rated insurance; (2) insurance protection only up to the legal deposit amounts, or (3) provide only partial government insurance such as 95 cents on the dollar letting the remainder be covered by private insurance.

United States, Interpretation and construction, Criticism and interpretation, Banking law, Deposit insurance, Karaken, John H., Federal Deposit Insurance Corp.

---

Stock market reaction to regulatory action in the Continental Illinois crisis

Article Abstract:

The effect that the Continental Illinois National Bank crises had on the banking industry's performance is investigated. The stock prices and the volume of stock sales are examined for sixty-eight actively traded banks. In the weeks after the crisis, the trading volume of the banks increased by approximately 50%, and 42 of the 67 banks had negative abnormal returns, with more pronounced effects on banks with questionable solvency. This reaction could be attributable to either a market adjustment to the information which was disclosed during the crises or to a fear of a run on banks.

Finance, Stock-exchange, Stock exchanges, Bank stocks, Continental Illinois National Bank and Trust Co.

Similar abstracts:

• Abstracts: You can't expect rationality from pregnant men: reflections on multi-disciplinarity in management research. Beyond managism: negotiated narratives and critical management education in practice
• Abstracts: A theory of individual creative action in multiple social domains. Causation and effectuation: toward a theoretical shift from economic inevitability to entrepreneurial contingency
• Abstracts: Knowledge management and competition in the consulting industry. Global competition: the new reality
• Abstracts: Selecting product development projects: pioneering versus incremental innovation strategies. R&D cooperation between firms - a perceived transaction cost perspective
• Abstracts: A closer look at halo error in performance ratings. Managerial reactions to employee dissent: the impact of grievance activity on performance ratings

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.