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Article
Publication date: 19 March 2018

Hannes Köster and Matthias Pelster

The purpose of this paper is to analyze the impact of financial penalties on the stability of the banking sector.

Abstract

Purpose

The purpose of this paper is to analyze the impact of financial penalties on the stability of the banking sector.

Design/methodology/approach

A unique database of 671 financial penalties imposed on 68 international listed banks between 2007 and 2014 and a fixed-effects panel data approach were used.

Findings

The results show that financial penalties increase banks’ systemic risk exposure but do not significantly affect banks’ contribution to systemic risk. Additionally, the link between financial penalties and systemic risk exposure is weaker in regulatory and supervisory systems with more prompt corrective power among national authorities. By contrast, supervisory authorities’ stronger power to declare insolvency and a greater external monitoring culture exacerbate the positive effects of financial penalties on systemic risk exposure.

Practical implications

The punishment of misconduct should correct the social harm and prevent future misconduct while ensuring the banking system’s stability. Therefore, authorities should punish misconduct by implementing penalties against the financial institutions at a specific amount that offsets the damages of misconduct but does not threaten systemic stability. Penalties against institutions may be complemented by financial penalties against upper management to induce a more responsible culture in banks.

Originality/value

This paper is the first to study the effect of financial penalties on the stability of the financial system. The results contribute to the ongoing debate on the appropriateness of financial penalties and address the question of whether bank regulators reduce or contribute to banks’ systemic risk.

Details

The Journal of Risk Finance, vol. 19 no. 2
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 18 June 2018

Chun-Miin (Jimmy) Chen

The purpose of this paper is to examine service level agreements (SLAs) in the retail industry and uses empirical data to draw conclusions on the relationships between SLA…

Abstract

Purpose

The purpose of this paper is to examine service level agreements (SLAs) in the retail industry and uses empirical data to draw conclusions on the relationships between SLA parameters and retailer financial performance.

Design/methodology/approach

Based on prior SLA theories, hypotheses about the impacts of SLA confidentiality, choice of chargeback mechanisms and chargeback penalty on retailer inventory turnover are tested.

Findings

Retailer inventory turnover could vary by the level of SLA confidentiality, and the variation of retailer inventory turnovers could be explained by chargeback penalty.

Research limitations/implications

The research findings may not be readily applicable to SLAs outside of the retail industry. Also, most conclusions were drawn from publicly available SLAs.

Practical implications

The significant relationships between SLA parameters and retailer inventory turnover imply that a retailer could improve its financial performance by leveraging its SLA design.

Originality/value

Not only does this study contribute to the understanding of retail SLA design in practice, but it also extends prior theories by investigating the implications of SLA design on the retailer inventory turnover.

Details

The International Journal of Logistics Management, vol. 29 no. 4
Type: Research Article
ISSN: 0957-4093

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Article
Publication date: 9 July 2018

Ismaila Yusuf and Damola Ekundayo

The purpose of this study is to examine regulatory sanctions from an emerging economy perspective and analyzing the impact of regulators imposed monetary sanctions on…

Abstract

Purpose

The purpose of this study is to examine regulatory sanctions from an emerging economy perspective and analyzing the impact of regulators imposed monetary sanctions on banks’ performance.

Design/methodology/approach

The study adopted correlational research design to examine the effect of regulatory penalties on the performance of deposit money banks in Nigeria. This study used panel data from a sample of 15 deposit money banks in Nigeria for the period of 2006-2015. Multiple regression analysis was carried out.

Findings

Results showed that penalties imposed by regulators in the Nigerian banking industry have no significant impact on the bottom line of the defaulters. Penalties imposed on foreign exchange and international trade related infraction showed that the cost of penalties is below the benefits enjoyed from such infractions.

Practical implications

The insignificant impact of penalties on performance implies that deposit money banks have considered penalties imposed by regulators as operational expenses and transferred such to customers.

Originality/value

The study differs from other studies that examined regulatory penalties on performance by focusing on financial performance and using data from an emerging economy perceived to have weak regulatory environment.

Details

Journal of Financial Regulation and Compliance, vol. 26 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Content available
Article
Publication date: 1 October 2021

Abdullah Masum and S M Shariful Islam

The purpose of this study is to critically analyze the Financial Compensation Funds being accumulated by Islamic Banks of Bangladesh in credit-based transactions. In this…

Abstract

Purpose

The purpose of this study is to critically analyze the Financial Compensation Funds being accumulated by Islamic Banks of Bangladesh in credit-based transactions. In this connection, due to the evolved liquidity crisis amidst the COVID-19, industry opinions are observed that suggest including the compensations or the donation funds directly into the bank's income account. But the Sharīʿah does not permit it. Such alternative proposals of using compensation or donation fund during crises are scrutinized under Sharīʿah principles to come to a logical conclusion.

Design/methodology/approach

The approach followed in the study is textual and discourse analysis through descriptions of ideal Sharīʿah-compliant methods for handling late payment of credit and comparison with the industry practices.

Findings

It is observed that there are conceptual gaps in the industry as is reflected in the Islamic Banking Guideline of Bangladesh. The funds collected from the debtor due to late payment are named as compensation (Ta‘wīḍ) whereas the nature of the transaction is a donation (Tabarru'). The misconception can lead to various Sharīʿah non-compliant activities later with the funds. The proposals brought out in the industry to use such compensation/donation funds during a crisis are a consequence of this. The proposals of using such funds for banks' purposes in any situation are not supported by Sharīʿah principles and are against the Islamic banking philosophy.

Originality/value

The study is very relevant to the current crisis of COVID-19 in the domestic Islamic Banking Industry and also instrumental for the future guidance to stick to the Sharīʿah principles in managing compensation or donation funds by the Islamic Banks.

Details

Islamic Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1319-1616

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Book part
Publication date: 29 August 2017

David Chaikin

The principal issue that will be considered in this chapter is how the banking sector facilitates the crimes of money laundering and tax evasion. This will entail asking a…

Abstract

The principal issue that will be considered in this chapter is how the banking sector facilitates the crimes of money laundering and tax evasion. This will entail asking a series of related questions. Does the assistance of the banking sector in financial crime involve a small number of wayward employees at the periphery of banking? Or are multinational financial institutions willing participants in the systemic evasion of global antifinancial crime standards? In exploring these questions, the theory and practice of money laundering will be explored by focusing on the three stages of the money laundering cycle. The global anti-money laundering standards that apply to the banking sector, and the role of bank secrecy in promoting tax evasion, will be examined through a series of case studies. It will be argued that there is strong empirical evidence that the banking sector is a systemic offender facilitating financial crimes, despite the enactment of international and national antifinancial crime standards and criminal prosecutions of financial institutions.

Details

The Handbook of Business and Corruption
Type: Book
ISBN: 978-1-78635-445-7

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Article
Publication date: 5 January 2015

James F. Gilsinan, Muhammed Islam, Neil Seitz and James Fisher

– The purpose of this paper is to understand the reasons why some financial crises do not result in extensive criminal prosecutions.

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787

Abstract

Purpose

The purpose of this paper is to understand the reasons why some financial crises do not result in extensive criminal prosecutions.

Design/methodology/approach

The authors examine three major events: the crash of 1929 leading to the Great Depression, the collapse of the US Savings and Loan industry circa 1990 and the sub-prime mortgage meltdown. The authors explain how circumstances surrounding these financial collapses led to stark differences in criminal prosecutions.

Findings

This review of prosecutions during three financial crises underscores the contingent nature of seeking criminal penalties for financial wrongdoing. The decision is influenced by a number of factors, including a prosecutor’s level of risk tolerance (probable win test); the potential economic impact of a successful conviction; the number of laws and regulations available in the prosecutorial tool kit; and the desired outcome which can range from new regulatory structures, to prosecutions that fix blame and satisfy the desire for scapegoats, to seeking financial penalties that shore up the government’s bottom line.

Research limitations/implications

This study covers three crises and focuses on the US responses. A broader study could look across countries.

Practical implications

Regulators and lawmakers are interested in avoiding future crises. Because crises are not anticipated, responses are determined by conditions of the moment. A frequent result is that laws and regulations are not in place. Decisions about likely preferred responses would allow anticipatory legislation and regulations.

Social implications

Financial crises obviously have major implications for ordinary citizens far removed from the centers of finance. Improved responses to mitigate or avoid disasters would have profound impacts on people’s quality of life.

Originality/value

The three crises have been studied individually. This work is different in that it examines the impact of a common set of factors over three crises covering a span of 80 years.

Details

Journal of Financial Crime, vol. 22 no. 1
Type: Research Article
ISSN: 1359-0790

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Article
Publication date: 6 May 2014

Gary L. Moore

This paper aims to analyze thoroughly all of the sources of research used to develop the money laundering (ML) and terrorist financing (TF) low-risk rating, a rating…

Abstract

Purpose

This paper aims to analyze thoroughly all of the sources of research used to develop the money laundering (ML) and terrorist financing (TF) low-risk rating, a rating attained by Norway according to the Basel Institute of Governance, and determine the reasons why Norway is one of only two countries in the world according to the 2012 report, with the other being Estonia, to gain an overall low-risk ML and TF rating.

Design/methodology/approach

The differences between the USA and Norway which has obtained a low-risk ranking, were compared and contrasted.

Findings

Beginning with the Basel Institute Rating index as a legitimate source for use in assessing anti-money-laundering (AML)/TF risk, and the amount of documentation used in the index’s methodology, it has been proven that the low-risk rating Norway has received is well deserved, and that the US rating of medium risk is also deserved for the time the report was published. Achieving a low-risk rating is not as ambiguous as recently thought and neither is its application on a global scale.

Originality/value

The paper identifies practical areas of improvement and concerns in addressing the overall issue of ML and terrorist financing.

Details

Journal of Money Laundering Control, vol. 17 no. 2
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 18 February 2019

Kostas Selviaridis and Wendy van der Valk

The purpose of this paper is to investigate the effects that the framing of contractual performance incentives have on supplier’s behavioural and relational responses and…

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1049

Abstract

Purpose

The purpose of this paper is to investigate the effects that the framing of contractual performance incentives have on supplier’s behavioural and relational responses and on the buyer–supplier relationship.

Design/methodology/approach

The authors conducted three in-depth case studies of contractual relationships, which exhibit differences in terms of how performance incentives are framed, i.e., using promotion, prevention and “hybrid” frames, respectively. The study involved 38 semi-structured interviews and content analysis of contract agreements.

Findings

First, while promotion-framed incentives lead to positive supplier responses and improved relationships, prevention-framed incentives result in negative responses and deteriorating relations. Second, hybrid-framed incentives can lead to productive supplier responses when positive ex ante expectations are met, although the creation of such positive expectations in the first place depends on the proportionality of bonus and penalty elements. Third, promotion- and hybrid-framed incentives do not by default lead to positive effects, as these are contingent on factors pertaining to contractual clarity. Fourth, the overarching purpose of the contract moderates the effects of contract framing on supplier responses.

Research limitations/implications

The study contributes to contracting research by showing how the framing of performance incentives influences supplier behavioural and relational responses. It also extends the existing literature on contract framing by examining the effects of hybrid-framed incentives, and stressing that contract framing should be considered in joint with the clarity and overall purpose of the contract to elicit desired supplier behaviours.

Practical implications

Managers of buying firms may differentiate their approach to contract framing depending on the type of supplier relationship in focus. Furthermore, effective design of promotion- and hybrid-framed incentives requires attention to: realistic performance targets (on the short, medium and long term); salient bonuses related to these targets; incentive structures that appropriately balance rewards and risks; and: mechanisms that explicate and consider uncontrollable factors in the calculation of bonus–malus payments.

Originality/value

The paper extends the literature stressing the psychological impact of contracts on buyer–supplier relationships by highlighting that contractual clarity and the overarching purpose of the contract moderate the effects of contract framing on supplier behavioural and relational responses.

Details

International Journal of Operations & Production Management, vol. 39 no. 2
Type: Research Article
ISSN: 0144-3577

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Book part
Publication date: 21 July 2005

Kay-Yut Chen

Companies are starting to capitalize on the potential of experimental economics as a decision-making tool. Hewlett-Packard (HP) is one of such pioneering companies…

Abstract

Companies are starting to capitalize on the potential of experimental economics as a decision-making tool. Hewlett-Packard (HP) is one of such pioneering companies. Experiments, conducted at HP Labs, were used to test retailer contract policies in three areas: return, minimum advertised-price (MAP), and market development funds. The experimental design models the multifaceted contemporary market of consumer computer products. While the model is quite complex, participants were found to be effective decisions-makers and that their behavior is sensitive to variations in policies. Based on the experimental results, HP changed its policies; for example, it made the consequences for minimum advertisement price violations forward-looking as well as backward-looking. This line of research appears promising for complex industrial environments. In addition, methodological issues are discussed in the context of differences between business and academic economics experiments. Finally, the author speculates about potential future business applications.

Details

Experimental and Behavorial Economics
Type: Book
ISBN: 978-0-76231-194-1

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Article
Publication date: 1 February 1999

John C. Edmunds and Mark E. Potter

The gap between wealthy and poor is widening, in part due to the epochal rise in the value of financial assets. Middle‐class savers channel their monthly contributions…

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2500

Abstract

The gap between wealthy and poor is widening, in part due to the epochal rise in the value of financial assets. Middle‐class savers channel their monthly contributions into mutual funds, which in turn invest the money in stocks and bonds. These accounts then accumulate, and the gains are largely tax‐free until they are liquidated. Savers who began contributing early, or who set aside more each month before the stock market rally, are now massively ahead of those in their cohort who did not. The accumulated stock market holdings, and the hair‐trigger switches from one mutual fund to another, make the stock market a mammoth and fickle force. Over the next 20 years the value of financial assets may exceed five times the value of world output. Its power to reward and punish corporate managers and governments is unprecedented. The financial wealth accumulation dynamic is now entrenched, and will continue. Managers can assess its implications, and adjust their plans accordingly.

Details

Marketing Intelligence & Planning, vol. 17 no. 1
Type: Research Article
ISSN: 0263-4503

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