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Int. J. Financial Stud., Volume 6, Issue 3 (September 2018)

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Open AccessArticle Technical Efficiency of Banks in Central and Eastern Europe
Int. J. Financial Stud. 2018, 6(3), 66; https://doi.org/10.3390/ijfs6030066
Received: 8 May 2018 / Revised: 2 July 2018 / Accepted: 3 July 2018 / Published: 17 July 2018
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Abstract
The purpose of this article is to examine what affected the technical efficiency of banks in Central and Eastern European countries during the financial crisis. Firstly, this article analyzes the technical efficiency of banks in the selected countries in Central and Eastern Europe
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The purpose of this article is to examine what affected the technical efficiency of banks in Central and Eastern European countries during the financial crisis. Firstly, this article analyzes the technical efficiency of banks in the selected countries in Central and Eastern Europe during the period 2006–2013. In this article, the technical efficiency of Central and Eastern European banks is explored in respect to the size of the banks (large or small) and their belonging in a specific group of countries. The results of the analysis show a strong association between the numbers of efficient banks and belonging of banks in the group of V4 countries (Visegrad countries are the Czech Republic, Hungary, Poland, and Slovakia). The banks in Balkan countries have a negative association with the number of efficient banks in the group; the banks in this group of countries have the highest average efficiency (when the output was net interest margin). There is a weak association between the number of efficient banks and their belonging in the group of Baltic countries. The bank efficiency and the size of the bank’s assets are also weakly associated. Secondly, the results of panel regression models for the specific groups of countries (V4, Baltic, and Balkan countries), as well as for the whole group of Central and Eastern European countries show that the customer deposits had a positive impact on the technical efficiency of banks during the financial crisis. Full article
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Open AccessArticle The Impact of Brexit on Financial Markets—Taking Stock
Int. J. Financial Stud. 2018, 6(3), 65; https://doi.org/10.3390/ijfs6030065
Received: 7 March 2018 / Revised: 23 June 2018 / Accepted: 6 July 2018 / Published: 16 July 2018
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Abstract
The UK’s withdrawal from the EU will have far-reaching consequences on the European economy. However, the ultimate consequences of Brexit, especially for financial markets, depend on the final agreement, which is still under negotiation. Currently, regulated financial services can be provided across borders
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The UK’s withdrawal from the EU will have far-reaching consequences on the European economy. However, the ultimate consequences of Brexit, especially for financial markets, depend on the final agreement, which is still under negotiation. Currently, regulated financial services can be provided across borders under simplified conditions. Without a special agreement, these EU passports cease to apply for business activities between both jurisdictions after Brexit. The EU third-country regimes for non-EEA companies are too few and too unsecure for intensive relations in trade and services. Knowing that London is the leading global financial center, an adequate agreement needs to be found, to ensure affordable and sufficient financial services for business, investors, and consumers. Unfortunately, it appears almost impossible to find solutions for the often contrary interests and various thematic areas in the remaining negotiating period—a no deal scenario becomes more likely. As a result, market participants have started to adapt structures and processes accordingly, by relocating certain functions to the EU27. Nevertheless, it is up to the negotiators to reach an agreement, which achieves the best possible outcome for all affected parties taking into account the opportunity costs of a failure in present Brexit negotiations. Full article
(This article belongs to the Special Issue Impact of Brexit on Financial Markets)
Open AccessArticle Performance of Exchange Traded Funds during the Brexit Referendum: An Event Study
Int. J. Financial Stud. 2018, 6(3), 64; https://doi.org/10.3390/ijfs6030064
Received: 21 June 2018 / Revised: 3 July 2018 / Accepted: 3 July 2018 / Published: 13 July 2018
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Abstract
In today’s interrelated economies, financial information travel at speed of light to reach investors around the globe. Global financial markets experience regular shocks that transmit negative waves to other equity markets and different asset classes. Given the unique characteristics of exchange-traded funds (ETFs),
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In today’s interrelated economies, financial information travel at speed of light to reach investors around the globe. Global financial markets experience regular shocks that transmit negative waves to other equity markets and different asset classes. Given the unique characteristics of exchange-traded funds (ETFs), this paper examines how different ETFs that are traded on London Financial center reacted to the Brexit event in 23 June 2016. The unexpected referendum result the day after is viewed as the next significant financial event since 2008. The paper employs an event study market model on daily and abnormal returns of the selected ETFs with respect to FTSE 250 around the event date. Contrary to what is expected, the world equities fund experienced significant positive abnormal return on the event day. Emerging markets again proved to be a preferred investment destination in times of financial turmoil; the emerging equities fund gained 3% while enjoying an 11.5% positive significant abnormal returns. The US T-Bond fund recorded a 9% return with a significant 7.2% abnormal return. The gold fund soared as much as 4% as investors seeks refuge from Brexit, and the oil fund retraced 1% amid concerns of slowing global demand. Full article
(This article belongs to the Special Issue Impact of Brexit on Financial Markets)
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Open AccessArticle Bank Interest Margin, Multiple Shadow Banking Activities, and Capital Regulation
Int. J. Financial Stud. 2018, 6(3), 63; https://doi.org/10.3390/ijfs6030063
Received: 6 June 2018 / Revised: 6 June 2018 / Accepted: 26 June 2018 / Published: 3 July 2018
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Abstract
In this paper, we develop a contingent claim model to evaluate a bank’s equity and liabilities that integrates the premature default risk conditions with loan rate-setting behavioral mode and multiple shadow banking activities under capital regulation. The barrier options theory of corporate security
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In this paper, we develop a contingent claim model to evaluate a bank’s equity and liabilities that integrates the premature default risk conditions with loan rate-setting behavioral mode and multiple shadow banking activities under capital regulation. The barrier options theory of corporate security valuation is applied to the contingent claims of a bank. The barrier reports that default can occur at any time before the maturity date. We focus on a type of earning-asset portfolio, consisting of balance-sheet banking activities of loans and liquid assets and shadow banking activities of wealth management products (WMPs) and entrusted loans (ELs). The optimal bank interest margin, i.e., the spread between the loan rate and the deposit rate, is derived and analyzed. The results provide an alternative explanation for the decline in bank interest margins, which better fits the narrative evidence on bank spread behavior under capital regulation in particular during a financial crisis. Raising either WMPs or ELs leads to a transfer of wealth from equity holders to the debt holders, and hence increases the deposit insurance liabilities. We also show that the multiple shadow banking activities of WMPs and ELs captured by scope equities may produce superior return performance for the bank. Tightened capital requirements may reinforce the superior return performance by a surge in shadow banking activities that makes the bank less prudent and more prone to risk-taking at a reduced margin, thereby adversely affecting banking stability. We demonstrate that financial disturbance may be created because of the potential for shadow banking activities to spill over to regular banking activities and damage the real economy. Full article
(This article belongs to the Special Issue Finance, Financial Risk Management and their Applications)
Open AccessArticle A Continuous-Time Inequality Measure Applied to Financial Risk: The Case of the European Union
Int. J. Financial Stud. 2018, 6(3), 62; https://doi.org/10.3390/ijfs6030062
Received: 29 May 2018 / Revised: 15 June 2018 / Accepted: 19 June 2018 / Published: 25 June 2018
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Abstract
In this paper, we apply information theory measures and Markov processes in order to analyse the inequality in the distribution of the financial risk in a pool of countries. The considered financial variables are sovereign credit ratings and interest rates of sovereign government
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In this paper, we apply information theory measures and Markov processes in order to analyse the inequality in the distribution of the financial risk in a pool of countries. The considered financial variables are sovereign credit ratings and interest rates of sovereign government bonds of European countries. This paper extends the methodology proposed in our previous work, by allowing the possibility to consider a continuous time process for the credit rating evolution so that complete observations of rating histories and credit spreads can be considered in the analysis. Obtained results suggest that the continuous time model fits real data better than the discrete one and confirm the existence of a different risk perception among the three main rating agencies: Fitch, Moody’s and Standard & Poor’s. The application of the model has been performed by a software we developed, the full code is available on-line allowing the replication of all results. Full article
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Open AccessFeature PaperArticle Why Is the Correlation between Crude Oil Prices and the US Dollar Exchange Rate Time-Varying?—Explanations Based on the Role of Key Mediators
Int. J. Financial Stud. 2018, 6(3), 61; https://doi.org/10.3390/ijfs6030061
Received: 26 January 2018 / Revised: 14 May 2018 / Accepted: 20 June 2018 / Published: 25 June 2018
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Abstract
Using DCC-GARCH model, this paper finds that, since 1990, the relationship between crude oil prices and the US dollar index is time-varying, demonstrating a process of ‘very weak correlation—negative correlation—enhanced negative correlation—weakening negative correlation’, but the existing research does not provide enough reasonable
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Using DCC-GARCH model, this paper finds that, since 1990, the relationship between crude oil prices and the US dollar index is time-varying, demonstrating a process of ‘very weak correlation—negative correlation—enhanced negative correlation—weakening negative correlation’, but the existing research does not provide enough reasonable explanation. Therefore, this paper proposed a ‘key mediating factors’ hypothesis which points out that whether there is a common ‘key mediating factor’ is important source of the time-varying relationship between two assets. We argue that market trend and financial market sentiment undertook the role of ‘key mediating factor’ during the period of the 2002 to the financial crisis and financial crisis to 2013, while other periods lack the ‘key mediating factors’. Full article
(This article belongs to the Special Issue Asset Pricing and Portfolio Choice)
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Open AccessFeature PaperReview Review of Research into Enterprise Bankruptcy Prediction in Selected Central and Eastern European Countries
Int. J. Financial Stud. 2018, 6(3), 60; https://doi.org/10.3390/ijfs6030060
Received: 17 April 2018 / Revised: 5 June 2018 / Accepted: 13 June 2018 / Published: 22 June 2018
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Abstract
In developed countries, the first studies on forecasting bankruptcy date to the early 20th century. In Central and Eastern Europe, due to, among other factors, the geopolitical situation and the introduced economic system, this issue became the subject of researcher interest only in
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In developed countries, the first studies on forecasting bankruptcy date to the early 20th century. In Central and Eastern Europe, due to, among other factors, the geopolitical situation and the introduced economic system, this issue became the subject of researcher interest only in the 1990s. Therefore, it is worthwhile to analyze whether these countries conduct bankruptcy risk assessments and what their level of advancement is. The main objective of the article is the review and assessment of the level of advancement of bankruptcy prediction research in countries of the former Eastern Bloc, in comparison to the latest global research trends in this area. For this purpose, the method of analyzing scientific literature was applied. The publications chosen as the basis for the research were mainly based on information from the Google Scholar and ResearchGate databases during the period Q4 2016–Q3 2017. According to the author’s knowledge, this is the first such large-scale study involving the countries of the former Eastern Bloc—which includes the following states: Poland, Lithuania, Latvia, Estonia, Ukraine, Hungary, Russia, Slovakia, Czech Republic, Romania, Bulgaria, and Belarus. The results show that the most advanced research in this area is conducted in the Czech Republic, Poland, Slovakia, Estonia, Russia, and Hungary. Belarus Bulgaria and Latvia are on the other end. In the remaining countries, traditional approaches to predicting business insolvency are generally used. Full article
(This article belongs to the Special Issue Bankruptcy Prediction)
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