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Book part
Publication date: 2 March 2011

Ki C. Han, Sukhun Lee and David Y. Suk

When faced with a financial crisis, debtor countries rarely choose to default on their international financial obligations. Instead, they typically choose to renegotiate their…

Abstract

When faced with a financial crisis, debtor countries rarely choose to default on their international financial obligations. Instead, they typically choose to renegotiate their debt service obligations. According to a number of economists, the main motivating factor behind borrowers' and creditors' willingness to restructure is the benefit associated with preserving international trade ties. This raises an interesting question: is the benefit associated with maintaining international trade ties shared equally between the borrower and creditor banks? Or is the outcome dependent on a so-called ‘bargaining game’ between the borrower and creditor banks, and if so, can we identify these variables? According to our analysis, as a borrower's trade ties with developed countries strengthen, the borrower's (and/or creditor's) bargaining power diminishes (strengthens) and it thereafter agrees to restructure at less favourable terms. However, even after controlling for trade ties, we found that major borrowers were able to extract more concessions from the lenders.

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The Impact of the Global Financial Crisis on Emerging Financial Markets
Type: Book
ISBN: 978-0-85724-754-4

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Book part
Publication date: 2 December 2013

Angelina Nikitenko Christie

To provide a selective review of most recent developments in experimental economics of banking and lending and to summarize and synthesize the experiment designs and results in…

Abstract

Purpose

To provide a selective review of most recent developments in experimental economics of banking and lending and to summarize and synthesize the experiment designs and results in banking under asymmetric information.

Methodology

The review includes recently published or working papers (2006–2013) that exclusively employ experimental economics methodology, especially for studying the impact of formal or informal institutions on lending in credit markets.

Findings

The results of the reviewed experimental studies provide support for the important role of both informal (e.g., relationship banking and reputation) and formal (e.g., third-party enforcement; collateral) institutions and their impact on credit market performance, as well as the importance of studying the interaction of the two types of institutions.

Research limitations/implications

The number of studies reviewed is fairly small but growing, indicating that this is the area of growing significance.

Practical implications

Controlled economic experiments are better able to address the questions regarding the direction of causality in empirical relationships. Economic experiments are particularly useful in studying complex markets like credit and capital and in eliciting specific effects of institutions on credit market performance. Such well-established empirical relationships will be able to provide guidance for policy making for financial market reform.

Originality/value

This is the first review of laboratory research in banking and lending under asymmetric information that aims to call attention to this area of research and serves as a starting point for an interested researcher and provide future direction.

Details

Experiments in Financial Economics
Type: Book
ISBN: 978-1-78350-141-0

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Book part
Publication date: 1 October 2014

Ike Mathur and Isaac Marcelin

Pledging collateral to secure loans is a prominent feature in financing contracts around the world. Existing theories disagree on why borrowers pledge collateral. It is even more…

Abstract

Pledging collateral to secure loans is a prominent feature in financing contracts around the world. Existing theories disagree on why borrowers pledge collateral. It is even more challenging to understand why in some countries collateral coverage exceeds, for example, 300% of the value of a loan. This study looks at the association between collateral coverage and country-level governance and various institutional proxies. It investigates the economic implications of steep collateral coverage and sketches policy options to lower ex-ante asymmetric information and ex-post agency problems. Within this framework, should a lender collect the debt forcibly on default and liquidated assets fetch prices below outstanding loan values, the lender’s loss is covered through credit insurance, which would significantly reduce the need for steep collateral coverage. This proposal may increase level of private credit, investment and growth; particularly, in a number of developing countries where collateral spread is the main inhibitor of finance.

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Risk Management Post Financial Crisis: A Period of Monetary Easing
Type: Book
ISBN: 978-1-78441-027-8

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Book part
Publication date: 1 January 2009

Dean Karlan, Tomoko Harigaya and Sara Nadel

In the past decade, microfinance institutions (MFIs) have experienced a boom in innovations of lending products, partly fueled by donors who see microfinance as the next promise…

Abstract

In the past decade, microfinance institutions (MFIs) have experienced a boom in innovations of lending products, partly fueled by donors who see microfinance as the next promise to alleviate poverty. Examples of these new products are the combination of credit with health or life insurance, business and health education, savings products, and the adoption of (or conversion to) individual loan liability. The add-on features generally aim at reducing the vulnerability of clients while contributing to asset creation, hence improving repayment rates and the sustainability of the service. The product innovations typically result from organizations striving to extend outreach, increase impact, and promote sustainability. As in other industries, MFIs typically decide whether to adopt new strategies based on other MFIs’ success with the innovations. Many new microlending products and approaches continue to be developed. However, MFIs must generally rely on qualitative and descriptive case studies and anecdotal evidence on the effectiveness of these innovations to decide whether to implement the new strategies. The usual case study approach does not provide tangible evidence that can enable other organizations to know what changes can be expected if they were to adopt similar product changes.

Details

Moving Beyond Storytelling: Emerging Research in Microfinance
Type: Book
ISBN: 978-1-84950-682-3

Book part
Publication date: 24 June 2011

Laura A. Patterson and Cynthia A. Koller

The 2000–2006 housing market bubble conformed to a classic boom–bust scenario that triggered the most serious and costly financial crisis since the Great Depression. The 2008…

Abstract

The 2000–2006 housing market bubble conformed to a classic boom–bust scenario that triggered the most serious and costly financial crisis since the Great Depression. The 2008 subprime mortgage collapse leveraged a financial system that privatizes profits and socializes risks. Several factors converge to set up the subprime mortgage market as an easy target for industry insiders to exploit. Enabling legislation expanded the potential pool of borrowers eligible for subprime mortgages and structured incentives to lenders willing to assume the risks. The securitization of subprime mortgages transformed bundles of high-risk loans into mortgage-backed securities that were in demand by domestic and foreign investors. Pressure to edge out competition produced high-risk loans marketed to unqualified borrowers. The final piece in the setup of the subprime lending crisis was a move from an origination model to a distributive model by many financial institutions in the business of lending. We find that the diffusion and totality of these business practices produced a criminogenic opportunity structure for industry insiders to profit at the expense of homebuyers and later investors.

Details

Economic Crisis and Crime
Type: Book
ISBN: 978-0-85724-801-5

Book part
Publication date: 14 December 2018

Mamunur Rashid, Shi Min How and Abul Bashar Bhuiyan

This chapter explores the determinants of satisfaction of the Islamic microcredit borrowers in Bangladesh. A total of 245, mostly educated and young, borrowers of rural…

Abstract

This chapter explores the determinants of satisfaction of the Islamic microcredit borrowers in Bangladesh. A total of 245, mostly educated and young, borrowers of rural development scheme, the largest Islamic microcredit institution (MCI) in the world, were included in a survey using a structured questionnaire. Factors were extracted using exploratory factor analysis. Multiple regression analysis was conducted to identify influential determinants of satisfaction of microcredit borrowers. Borrowers have identified the activities and interaction in the “center,” which includes weekly/monthly meetings, investment-related training, and group performance review, as the most vital factor influencing their overall satisfaction. Competence of the microcredit staffs and officials is the second important determinant. Trust plays the next important role in overall satisfaction of the borrowers with the Islamic microcredit institutions. Convenience, of applying for loan, getting an approval, and paying instalments, is the other influential determinant of the borrower’s satisfaction. The findings imply that given the competition and social need of the Islamic microcredit institutions globally, policymakers must ensure greater investment in human capital, in creating awareness about products and services of the Islamic microcredits, and in initiating a prudent change in the regulation so that Islamic microcredit can become a tool for sustainable socioeconomic development. Use of a proper marketing strategy can also help the MCIs to support the financial inclusion policy of the government. Satisfaction of the borrowers of the Islamic microcredit institutions is yet to arrive in Islamic marketing literature. The proposed borrower-centric model can help reduce poverty and the internal loan-shark problem through adequate engagement of relevant stakeholders.

Details

Management of Islamic Finance: Principle, Practice, and Performance
Type: Book
ISBN: 978-1-78756-403-9

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Book part
Publication date: 21 December 2010

John Liederbach

The concept of state-corporate crime developed during the late 1980s and early 1990s in a series of papers authored by Michalowski and Kramer (Kramer, 1990; Kramer & Michalowski

Abstract

The concept of state-corporate crime developed during the late 1980s and early 1990s in a series of papers authored by Michalowski and Kramer (Kramer, 1990; Kramer & Michalowski, 1990; Michalowski & Kramer, 1987). They specifically define state-corporate crime as:Illegal or socially injurious actions that result from a mutually reinforcing interaction between (1) policies and/or practices in pursuit of goals of one or more institutions of political governance and (2) policies and/or practices in pursuit of goals of one or more institutions of economic production and distribution. (Michalowski & Kramer, 2006a, 2006b, p. 15)

Details

Social Control: Informal, Legal and Medical
Type: Book
ISBN: 978-0-85724-346-1

Book part
Publication date: 1 January 2009

Frank R. Gunter

The Government of Iraq (GoI) and the U.S.-led coalition in Iraq have used microfinance institutions (MFIs) as part of their counterinsurgency campaign. This raises several…

Abstract

The Government of Iraq (GoI) and the U.S.-led coalition in Iraq have used microfinance institutions (MFIs) as part of their counterinsurgency campaign. This raises several questions. What role can MFIs play in counterinsurgency? Are the economic or civilian and military motivations for supporting microfinance convergent or divergent? What constraints does conflict impose on microfinance borrowers, lenders, and institutions and how can an MFI ameliorate these constraints? Analyzing these issues is the core of this chapter.

Details

Moving Beyond Storytelling: Emerging Research in Microfinance
Type: Book
ISBN: 978-1-84950-682-3

Book part
Publication date: 20 January 2022

Brian P. Reschke and Ming D. Leung

Since initial demonstrations that categories are consequential for evaluation, scholars of organizations and markets have attended to dynamics in audience evaluations of category…

Abstract

Since initial demonstrations that categories are consequential for evaluation, scholars of organizations and markets have attended to dynamics in audience evaluations of category spanning. We consider how heterogeneity in evaluator engagement in a market may alter their evaluation of atypical candidates. In markets where evaluators self-propagate theories of diversification, atypical candidates are advantaged because they present a distinct and efficient opportunity to diversify. We argue that evaluator market engagement will (positively) moderate valuations of atypicality, as such evaluators will be better positioned to recognize atypical candidates and their alignment with prevailing theories of value. We find support for our contentions with data from an online peer-to-peer lending market, Prosper.com. Consistent with our hypothesis, we find that lender evaluation of these atypical borrowers is increasing in their market engagement: whereas lenders new to the market devalue atypical candidates, those who have made many evaluations evaluate atypicality positively.

Details

The Generation, Recognition and Legitimation of Novelty
Type: Book
ISBN: 978-1-80117-998-0

Keywords

Book part
Publication date: 28 September 2016

Jennifer L. Kent and Robyn Dowling

Technological and cultural changes of the past decade have revealed new ways to use the object of the car as demand responsive yet not private. Cars are increasingly able to…

Abstract

Purpose

Technological and cultural changes of the past decade have revealed new ways to use the object of the car as demand responsive yet not private. Cars are increasingly able to fulfil the aims of demand responsive transport (DRT), by providing equitable access to flexible, yet sustainable, transport. This chapter outlines the conceptual and empirical case for this increasingly dynamic form of DRT and labels it ‘cars on demand’.

Design/methodology/approach

A review of literature and practice is used to detail characteristics of cars on demand, and the reasons for its emergence. Key features are illustrated using examples from around the world.

Findings

Cars on demand is a rapidly changing field. New economic models of provision are emerging, yet not all are designed to fulfil the aims of DRT by making transport more sustainable or equitable. These models do, however, contribute to making cars on demand work by encouraging transition from a culture of private-car ownership, to one where the car is an object ‘just’ for use. Cars on demand can therefore contribute to the fracturing of the powerful system of private-car use. Its relationship with decreased vehicle kilometres travelled (VKT) and transport disadvantage is, however, complex and vulnerable to erosion. This vulnerability can be mitigated by regulation and better understanding through research.

Originality/value

This chapter provides a novel conceptualisation of the way the object of the car is used in a demand responsive way. It contributes to understandings of regulatory issues surrounding shared mobility, and provides directions for future research.

Details

Paratransit: Shaping the Flexible Transport Future
Type: Book
ISBN: 978-1-78635-225-5

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