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Article
Publication date: 20 February 2017

Yiming Hu, Ying Yang and Pengfei Han

The purpose of this paper is to examine the difference of credit enhancement of variously secured bonds issued by local government financing platform bond (LGFPB).

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Abstract

Purpose

The purpose of this paper is to examine the difference of credit enhancement of variously secured bonds issued by local government financing platform bond (LGFPB).

Design/methodology/approach

The approaches to secure the bonds usually include mortgage, collateral, guarantee, etc.

Findings

Using a sample of LGFPBs issued during the 2007-2013 period, the authors find that all of the approaches to secure the bonds would increase the bond rating and that compounded approaches have a higher credit enhancement effect than single approaches. Among these approaches, the requirement of collateral has the strongest enhancement effect. Moreover, the authors find that the guarantee provided by a state-owned bank or enterprise increases the bond rating more than the guarantee provided by other local government financing platforms.

Research limitations/implications

The findings in this study suggest that the credit enhancement would be deeply affected by the approach used to secure the bond.

Practical implications

These results can help the local government make better decisions when issuing bond.

Originality/value

This study empirically analyzes the different credit enhancement approaches for securing LGPFBs for the first time and contributes to the literature regarding credit ratings of local government bonds.

Details

China Finance Review International, vol. 7 no. 1
Type: Research Article
ISSN: 2044-1398

Keywords

Article
Publication date: 11 August 2021

Yunlong Duan, Yan Liu, Yilin Chen, Weiqi Guo and Lisheng Yang

This study aims to focus on the impact of multi-level knowledge sharing between and within organizations on the risk control of rural inclusive finance. The paper presents…

Abstract

Purpose

This study aims to focus on the impact of multi-level knowledge sharing between and within organizations on the risk control of rural inclusive finance. The paper presents a synergistic risk control system integrating external and internal factors for rural inclusive finance by constructing different knowledge-sharing platforms in an environment, which is full of many uncertainties.

Design/methodology/approach

This study is based on survey methods. To achieve the research objectives, the authors adopt a single case study approach. For data collection, the authors apply a wide variety of methods such as semi-structured interviews, field visits, second-hand databases and official websites.

Findings

The results emphasize that using multi-level knowledge sharing such as the inter- and intra-organizational level, can facilitate the risk control of rural inclusive finance during the post-COVID-19 era. Furthermore, it is also noted that achieving knowledge sharing at different levels by building diverse knowledge-sharing platforms can promote the risk control of rural inclusive finance from the individual-organization level to the chain level of multi-organization collaboration, which contributes to the formation of symbiotic risk control ecology.

Research limitations/implications

The authors have formed the “Chinese wisdom” to deal with inclusive financial risks and to promote in-depth development in relation to the “last mile” practice of inclusive finance, which means the final and the most important phase of a project. The conclusions contribute to enriching the outcomes regarding the risk control of rural inclusive finance, provide experiences to its sustainable development and offer a reference to other countries with their risk control of rural inclusive finance.

Originality/value

Drawing on the knowledge-sharing approach, this study creatively resolves the persistent problems in the risk control of rural inclusive finance, which forms a powerful supplement to the extant literature. Meanwhile, the paper combines the two contextual factors of the post-COVID-19 era and emerging economies, which can be deemed as a novel attempt.

Details

Journal of Knowledge Management, vol. 28 no. 3
Type: Research Article
ISSN: 1367-3270

Keywords

Open Access
Article
Publication date: 11 May 2022

Muhammad Ayub Mehar

This article examines the effects of credit to private sector on the business and trade activities. The effectiveness of rapid expansion in public and private borrowing through…

22316

Abstract

Purpose

This article examines the effects of credit to private sector on the business and trade activities. The effectiveness of rapid expansion in public and private borrowing through state's intervention after COVID-19 pandemic has been assessed in this study.

Design/methodology/approach

The model to determine the role of credit expansion is based on four equations estimated through panel least square technique on 18 years data of 186 countries.

Findings

It is concluded that credit to private sector and external debt improve the investment in infrastructure, which is a significant determinant of gross domestic product growth. Empirical evidences corroborate that higher number of firms using banks to finance their investment and the volume of broad money determine the magnitude of credit to private sector.

Originality/value

This study explores some new evidences and aspects of the credit financing which have not been discussed in this way before.

Details

Asian Journal of Economics and Banking, vol. 7 no. 1
Type: Research Article
ISSN: 2615-9821

Keywords

Article
Publication date: 5 June 2017

Bashir Olanrewaju Ganiyu, Julius Ayodeji Fapohunda and Rainer Haldenwang

This study aims to identify and establish effective housing financing concepts to be adopted by government in achieving its mandate of providing sustainable affordable housing for…

1734

Abstract

Purpose

This study aims to identify and establish effective housing financing concepts to be adopted by government in achieving its mandate of providing sustainable affordable housing for the poor to decrease the building of shacks, as well as proposing solutions to the housing deficit in South Africa. A rise in demand and shortage in supply of housing calls for the need to address issues of affordable housing in South Africa, and developing countries in general, to ensure a stable and promising future for poor families.

Design/methodology/approach

Literature has revealed that the South African government, at all levels, accorded high priority to the provision of low-cost housing. Thus, government has adopted subsidy payment as a method of financing affordable housing to ensure that houses are allocated free to the beneficiaries. This also addresses the historically race-based inequalities of the past, but unfortunately, this has not been fully realised. This study uses a sequential mixed method approach, where private housing developers and general building contractors were the research participants. The qualitative data were analysed using a case-by-case analysis, and quantitative data were analysed using a descriptive statistical technique on SPSS.

Findings

The results of the qualitative analysis reveal a gross abuse of the housing subsidies system by the beneficiaries of government-funded housing in South Africa. This is evident from illegal sale of the houses below market value. This has led to a continual building of shacks and an increased number of people on the housing waiting list instead of a decrease in the housing deficit. The results from quantitative analysis affirm the use of “Mortgage Payment Subsidies, Mortgage Payment Deductions, Down-Payment Grant and Mortgage Interest Deductions” as viable alternatives to subsidy payment currently in use to finance affordable housing projects by the South African Government.

Practical implications

At the moment, the focus of the South African National Government is continual provision of free housing to the historically disadvantage citizens, but the housing financing method being used encourages unapproved transfer of ownership in the affordable housing sector. This study thus recommends the use of an all-inclusive housing financing method that requires a monetary contribution from the beneficiaries to enable them take control of the process.

Originality/value

The relational interface model proposed in this study will reduce pressure on government budgetary provision for housing and guarantee quick return of private developers’ investment in housing. Government must, as a matter of urgency, launch a continuous awareness programme to educate the low-income population on the value and the long-term benefits of the housing.

Details

International Journal of Housing Markets and Analysis, vol. 10 no. 3
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 1 January 2005

Hue Hwa Au Yong, Keryn Chalmers and Robert Faff

This study investigates Asia Pacific banks' annual report disclosures on derivatives using the Basel Committee and IOSCO joint recommendations as the derivative and risk…

Abstract

This study investigates Asia Pacific banks' annual report disclosures on derivatives using the Basel Committee and IOSCO joint recommendations as the derivative and risk management disclosure benchmark. Based on our constructed disclosure index, the mean score is 35%, suggesting that many of the disclosure recommendations are not being adopted by the banks in our sample. Cross‐country and regional variation exists in the disclosure practices, with the variation associated with the extent to which accounting regulations for derivative instruments are operational. Hong Kong banks have the highest mean disclosure scores while the Philippines banks have the lowest mean disclosure scores. Australasian banks generally provide more disclosures than East Asian and South East Asian banks, and banks in developed countries generally have a higher level of disclosure relative to developing countries. The transparency of derivative activities by the banks is expected to improve as Asia Pacific countries promulgate accounting regulations congruent with international accounting standards.

Details

Asian Review of Accounting, vol. 13 no. 1
Type: Research Article
ISSN: 1321-7348

Keywords

Case study
Publication date: 20 January 2017

Craig Furfine

In October 2008, in the midst of a financial crisis, Anthony Keating, investment manager at the Boston private bank Billingsley, Blaylock, and Montgomery, was searching for an…

Abstract

In October 2008, in the midst of a financial crisis, Anthony Keating, investment manager at the Boston private bank Billingsley, Blaylock, and Montgomery, was searching for an investment strategy to recommend to his high-net-worth clients. Traditional investments in the equity markets were being decimated, and Keating’s clients would be looking to him for ideas. Inspired by the success of Paulson and Co., Keating began to explore the possibility of entering a trade that would profit as homeowners defaulted on their mortgages. The more Keating learned about the trade, the more he realized that he needed to know about mortgage-backed securities and credit default swaps. The case provides instructors with a chance to introduce these financial instruments, while at the same time providing lessons applicable to students interested in value investing or real estate finance.

After reading and analyzing the case, students will be able to:

  • Explain how home mortgages are securitized into financial instruments that are traded in public markets

  • Describe how credit default swaps can be used to speculate on the value of an underlying financial instrument

  • Identify potential mispricing across related financial instruments

  • Understand the potential risks and rewards of various financial investment strategies that look to capitalize on defaults on subprime mortgages

Explain how home mortgages are securitized into financial instruments that are traded in public markets

Describe how credit default swaps can be used to speculate on the value of an underlying financial instrument

Identify potential mispricing across related financial instruments

Understand the potential risks and rewards of various financial investment strategies that look to capitalize on defaults on subprime mortgages

Article
Publication date: 1 January 2000

Richard Cantor and Stanislas Rouyer

Although issuers may benefit generally from securitization, some asset securitizations transfer more credit risk than others. When a lender uses securitization to replace…

1075

Abstract

Although issuers may benefit generally from securitization, some asset securitizations transfer more credit risk than others. When a lender uses securitization to replace on‐balance‐sheet financing, that lender transfers to investors some of the risks, and, in the form of credit enhancements, some of the offsetting, i.e., claims‐paying, economic resources (e.g., assets, cashflows), as well. Therefore, securitization only reduces an issuer's net (i.e., residual) exposure to credit losses when a securitization has transferred proportionately more credit risk than claims‐paying assets. The authors discuss the distinction between “gross” versus “net” transfers of credit risk. To illustrate this point, they provide conceptual examples of the net effect of an asset securitization on the residual credit risk retained by an issuer. In these examples, providing credit enhancement (e.g., overcollateralization, subordination) may implicitly lever or delever an issuer's balance sheet. The authors outline the general conditions under which this indirect economic recourse to the issuer, in effect a form of “self‐insurance,” may result in a net dilution of the claims of unsecured creditors.

Details

The Journal of Risk Finance, vol. 1 no. 2
Type: Research Article
ISSN: 1526-5943

Article
Publication date: 1 March 2005

Andreas Jobst

This paper provides a comprehensive overview of the gradual evolution of the supervisory policy adopted by the Basel Committee for the regulatory treatment of asset…

1329

Abstract

This paper provides a comprehensive overview of the gradual evolution of the supervisory policy adopted by the Basel Committee for the regulatory treatment of asset securitisation. The pathology of the new “securitisation framework” is carefully highlighted to facilitate a general understanding of what constitutes the current state of computing adequate capital requirements for securitised credit exposures. Although a simplified sensitivity analysis of the varying levels of capital charges depending on the security design of asset securitisation transactions is incorporated, the author does not engage in a profound analysis of the benefits and drawbacks implicated in the new securitisation framework.

Details

Journal of Financial Regulation and Compliance, vol. 13 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 5 August 2021

Amal Yamani, Khaled Hussainey and Khaldoon Albitar

This study aims to investigate the impact of financial instrument disclosures under the International Financial Reporting Standard (IFRS) 7 on the cost of equity capital (COEC).

Abstract

Purpose

This study aims to investigate the impact of financial instrument disclosures under the International Financial Reporting Standard (IFRS) 7 on the cost of equity capital (COEC).

Design/methodology/approach

The sample consists of 56 banks listed in the Gulf cooperation council (GCC) stock markets over 7 years from 2011 to 2017. A self-constructed index is used to measure the compliance level in addition to quantitative methods and panel data regression adopted to test the research hypotheses.

Findings

The authors find that the compliance level with IFRS 7 does not improve from 2011 until 2017 in the GCC banks. The authors also find that compliance with IFRS 7 disclosures reduces the COEC.

Originality/value

The authors also provide new empirical evidence that the level of mandatory financial instruments disclosures under IFRS 7 reduces the COEC. The findings offer policy implications. It shows that compliance with IFRS 7 disclosure requirements leads to desirable economic consequences.

Details

International Journal of Accounting & Information Management, vol. 29 no. 4
Type: Research Article
ISSN: 1834-7649

Keywords

Article
Publication date: 1 September 2006

Andreas A. Jobst

The paper surveys the risks and rewards of asset securitisation and illustrates how this structured finance technique can lift credit constraints to small‐ and medium‐sized…

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Abstract

Purpose

The paper surveys the risks and rewards of asset securitisation and illustrates how this structured finance technique can lift credit constraints to small‐ and medium‐sized enterprises (SMEs) as banks to turn more conservative in their lending in response to more risk‐sensitive capital requirements for credit risk.

Design/methodology/approach

The mechanics of securitisation provide an analytical framework and perspective for our analysis of conditions for sustainable SME securitisation and its potential contribution to greater risk diversification of both issuers and investors. The paper also elicits lessons to be learned for essential regulatory and policy measures to guide a sound development of securitisation markets from an empirical review of SME securitisation in Germany.

Findings

The paper finds that the structural versatility of securitisation offers economic benefits irrespective of the configuration of the financial system. The development of a viable securitisation market for SME‐related claims in a bank‐based financial system is likely to require financial sector initiatives, whose scope and intensity might be enhanced by development agencies. Orchestrated policy efforts make for a benign strategy to incubate SME securitisation in a timely fashion, while keeping legal uncertainty and economic attrition to a minimum.

Originality/value

As opposed to previous papers, the paper defines and discusses SME securitisation from both the perspective of bank‐ and firm‐sponsored securitisation and issue hands‐on recommendations for its efficient implementation.

Details

Managerial Finance, vol. 32 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

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