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The purpose of this paper is to investigate how much liquidity banks create and how liquidity creation changed over time in the MENA countries and to examine the soundness of banks in these countries based on the CAME rating system, in addition to investigating the relationship between CAME ratios and liquidity creation of these banks.

The study regresses the CAME ratios together with other control variables to model liquidity creation. The robustness of the results is evaluated by using a different measure of liquidity creation and by excluding the observations of the Islamic banks.

The results show that the CAME rating system, as an indicator of bank soundness, is negatively related to bank liquidity creation. Specifically, capital adequacy, management efficiency and earning ability ratios affect the on-balance sheet components of liquidity creation, while asset quality ratio affects its off-balance sheet component.

The paper offers insights to regulators and banks managers in terms of better understanding of the negative relationship between CAME rating system and bank liquidity creation.

This paper sheds more light on the relationship between bank soundness and liquidity creation by using the ratios of the CAMEL rating system as an indicator of bank strength and soundness.

For many corporate occupiers, commercial property constitutes one of their largest operational assets. With a desire to improve shareholder value and efficiency and to refocus on core business, the continued necessity to retain such assets on the balance sheet is now under challenge. Changes in accountancy practice and a desire to maintain flexibility are, however making the choices ever more complicated. This paper examines the current options available for corporate users seeking to extract value from their property assets.

The purpose of this paper is to examine the influence of manager ability on a firm’s choice of lease classification and the decision to capitalize vs lease firm-specific assets.

The authors use regression analysis to examine the association between manager ability, lease classification and asset specificity.

Using 31,110 firm-year observations from 1998 to 2013, the authors find a significant positive relationship between manager ability and the decision to classify leases as operating. The authors also find that high-ability managers are more likely to capitalize, rather than lease, specialized firm-specific assets.

The results imply that manager ability influences the choice of lease classification, which provides some support for the recent changes to lease accounting in Accounting Standard Update (ASU) 2016-02. The authors also show that asset specificity may serve as a mitigating factor in high-ability managers’ preference for operating leases, which implies that high-ability managers’ concerns with operational efficiency outweigh the benefits of off-balance sheet financing in their purchasing decisions if the asset in question is firm-specific.

The findings may be useful to boards of directors, investors and accounting academics concerned with the role that managerial ability plays in operational decision making and financial reporting.

The results imply that high-ability managers prefer off-balance sheet financing, which is unlikely to limit their access to external capital, but that this relationship is mitigated if the firm requires highly specialized assets.

Purpose – This chapter compares the stability of the U.S. Dual Banking system's two bank groups, national and state banks, in light of the current financial crisis. The goal of the chapter is to answer three distinct questions: first, is there a difference in the (balance sheet) fragility between the two groups and, second, to what extent has the balance sheet fragility of both groups changed after the escalation of the financial crisis beginning in August 2007? Building on that, the third question asks to whether or not the respective regulatory agencies of both bank groups are responsible for these changes in balance sheet fragility in light of the financial crisis.

Methodology – To answer these questions the chapter uses U.S. Call Report data containing full quarterly balance sheets and P&Ls of all U.S. commercial banks over the period 2005–2008. Anecdotal evidence as well as univariate and multivariate difference-in-difference methodology focusing on the immediate pre-crisis period Q1/2005–Q3/2007 and the crisis period Q3/2007–Q4/2008 are applied.

Results – Highly significant and robust results show that, ceteris paribus, national banks reduced their potential balance sheet fragility after the escalation of the crisis in August 2007 by reducing lending and liquidity creation stronger than state banks. Anecdotal evidence supports the empirical findings. Although both FDIC and OCC did not anticipate the adverse effects of the crisis, the OCC publicly showed an earlier reaction to liquidity-related problems than the FDIC.

Originality – The chapter is the first of its kind to analyze bank fragility around the escalation of the financial crisis and the role of the regulatory agencies. The chapter holds especially interesting policy implications in the light of the current discussion about the future regulation of the banking markets.

This paper uses two data sources to map trends in resource availability for trade unions in Britain. Union resources exist, on the one hand, in the form of subscription income and accumulated assets shown in union accounts and, on the other, establishment level resources secured from employers and union members. The paper documents a substantial decline in both the forms of union resource across the period 1990–2004 and attempts to explain both the reasons for this decline and its consequences for employee representation in Britain.

Islamic banks have significantly different balance sheets from their conventional counterparts, leading to different implications in relation to liquidity creation compared to conventional banks. This work, first, investigates the liquidity creation of conventional and Islamic banks in Middle Eastern and North African (MENA) countries between 2011 and 2016. It then tests the relationship between liquidity creation and performance of these banks.

It uses the data of 491 commercial banks across 18 MENA countries between 2011 and 2016. The analysis is based on panel data techniques.

The banks created US$18.596 trillion of liquidity, about 28.4% of total assets. Conventional banks created more liquidity compared with Islamic banks. Nevertheless, Islamic banks created more liquidity per asset compared with conventional banks. The regression analysis revealed a significant and negative correlation between liquidity creation and performance of the banks using return on average equity (ROAE) measure. However, no significant relationship is observed between liquidity creation and return on average assets (ROAA) of MENA banks. Moreover, there is no difference between Islamic and conventional banks in the relation between liquidity creation and bank performance.

The data are limited to the period 2011-2016; the period of this study was selected based on yearly data availability from the data source. Accounting measures were used to study the effect of liquidity creation on bank profitability, and the market-based measures were excluded, as there is no uniform sources in these countries that can be used to collect market-based data.

Bank managers must reach a trade-off between the advantages and disadvantages of liquidity creation, as well as consider the negative relationship between liquidity creation and bank performance when making their decisions.

First, to the best of the authors’ knowledge, this work is the first to analyse the relationship between the liquidity creation and performance of conventional and Islamic banks in MENA. Second, this study uses a sample of Islamic and conventional banks in MENA that have detailed information on the Orbis Bank Focus dataset, which is the most comprehensive database of commercial banks in the MENA region.

This study aims to cover an important yet largely under-explored topic: the dynamic process of bank liquidity management in a vast developing economy by considering pool of funds hypothesis, signaling hypothesis and risk management hypothesis.

The authors apply the dynamic common correlated effect (DCCE) method with an error correction model format to a long panel datasets of 84 Indonesian banks from January 2003 to August 2019, resulting in 16,800 observations.

The authors obtain convincing evidence of dynamic liquidity management with an error correction mechanism. The time needed to adjust to a liquidity shock ranges from 2.5 to 3.5 months. The empirical results strongly support the pool of funds and signaling hypotheses, whereas risk management motive appears to have secondary importance.

The regulator should also encourage banks to diversify liquidity management to include interbank money market and off-balance-sheet instruments. The current condition shows that bank liquidity management is strongly correlated with intermediation dynamics and thus is contracyclical. Banks could end up with tight liquidity in a booming economy, which would pose a severe risk to their financial standing.

To authors’ knowledge, this study is the first to analyze bank liquidity management behavior empirically using a panel error correction mechanism. Here, the authors also try to combine a practitioner perspective with a scientific one.

With the macroprudential approach, systemic risk is explained by a general equilibrium (GE) model. However, since on-balance-sheet and off-balance-sheet (OBS) risks are structurally segmented, for example annually or periodically on financial statements, the GE model might need further integration with OBS risks including ecological shocks.

This study develops a theoretical two-period model with consumption, investment and loans, which further includes carbon emissions to distinguish between loans for “green” or “brown” firms to enhance the perspective of ecological sustainability.

The paper shows how the environmental, social and governance (ESG) factors might be of relevance in the standard bank capital regulatory structure. In dealing with ecological sustainability, a new methodological framework with the green K-index introduces penalties to be paid in the capital structure related to ESG factors. The model is enhanced for screening green or brown firms related to impact investing. The integrated view of financial stability and ecological sustainability further illuminates how a wide cross-sectoral resilience of a green K-index measure for the economy might be achievable.

A stock-flow consistent model with balance-sheet methods raises the question whether all necessary variables and parameters can be computed in practice. Compared to the agent-based model (ABM), this model additionally lacks inputs from agents' behaviour, thus non-rational decisions, which may be relevant in practice. More generally, by adopting a balance-sheet structure, the model shows a coherent framework with relevant variables. The methodology of the GE model with OBS has not been scholarly explored and thus is presented for discussion rather than generalisation. The GE model with OBS provides a new interpretation of systemic risk and interbank relations with a consideration of ecological aspects. Its economic implication contributes to contemporary banking theory as well as to the sustainability discussions in the larger financial sector.

Banks and investors can more carefully measure the ecological risks in their loan portfolios and make better informed decisions leading to a better sustainability of the financial markets.

This study develops a theoretical GE model with off-balance-sheet risks. The model adds green regulation enhancing the capital regulation framework relevant to sustainability. This, in turn, enhances the role of banks in a coherent economic framework for loan decisions towards a much greener finance.