Bank relationships and firms’ financial performance: the Italian experience

We examine the connection between the number of bank relationships and firms’ performance using a unique data set on Italian small firms for which banks are a major source of financing. Our evidence indicates that return on equity and return on assets decrease as the number of bank relationships increases, the effects being stronger for small firms than for large firms. We also find that the ratio of interest expense to assets increases as the number of relationships increases. Particularly for small firms, these results are consistent with finding that suggest that having fewer bank relationships reduces the information asymmetries and agency problems and outweighs the hold-up problems.bank relationships; small business lending; firms’ performance

Investment analysts' forecasts of earnings

The literature on investment analysts' forecasts of firms' earnings and their forecast errors is enormous. This paper summarizes the evidence on the distribution of analysts' forecasts and forecast errors using data for all U.S. firms from 1990 to 2004. The evidence indicates substantial asymmetry of earnings, earning forecasts, and forecast errors. There is strong support for average and median earning forecasts being higher than actual earnings a year before the earnings announcement. Such differences between earnings and forecasts also exist across time periods and industries. A month before the earnings announcement, the mean and median differences are small.Investments ; Forecasting

Bank performance, efficiency and ownership in transitition countries

Using data from 1996 to 2000, we investigate the effects of ownership, especially by a strategic foreign owner, on bank efficiency for eleven transition countries in an unbalanced panel consisting of 225 banks and 856 observations. Applying stochastic frontier estimation procedures, we compute profit and cost efficiency scores taking account of both time and country effects directly. In second-stage regressions, we take these efficiency measures along with return on assets as dependent variables with dummy variables for ownership type, a variable controlling for bank size, and dummy variables for year and country effects as explanatory variables. Methodologically, our results demonstrate the importance of including fixed effects, especially country effects, and also suggest a preference for efficiency measures over financial measures of bank performance in empirical work on transition countries. With respect to the impact of ownership, we conclude that privatization by itself is not sufficient to increase bank efficiency as government-owned banks are not appreciably less efficient than domestic private banks. Our results do support the hypothesis that foreign ownership leads to more efficient banks in transition countries. We find that foreign-owned banks are more cost-efficient than other banks and that they also provide better service, in particular if they have a strategic foreign owner. Moreover, the participation of international institutional investors is shown to have a considerable additional positive impact on profit efficiency, which is consistent with the notion that these investors facilitate the transfer of technology and know how to newly privatized banks. In addition, we find that the remaining government-owned banks are less efficient in providing services, which is consistent with the hypothesis that the better banks were privatized first in transition countries. Finally, efficiency declines with bank size, which could call into question government-orchestrated bank consolidation strategies. We conjecture that the presence of many small and efficient foreign greenfield operations in these transition countries may be responsible for this result.

Water flow risks and stakeholder impacts on the choice of a dam site

This study evaluates three alternative locations for building a fresh water dam in the Yeşilirmak Valley of North Cyprus. Each of the three sites has different investment costs, water storage capabilities and socio‐political repercussions. These kinds of trade‐offs have in recent years characterised much of the worldwide debate surrounding the construction of electricity and irrigation dams. Another issue raised in this paper is the appropriate treatment of the risk and variability associated with the availability of water to fill the dam through time. This paper demonstrates how an integrated financial‐economic‐stakeholder analysis can provide the inputs needed by decision‐makers in such situations to make rational political and economic choices.Resource /Energy Economics and Policy,

Bank relationships and small firms’ financial performance

We examine the relationship between the number of bank relationships and firms’ performance, evaluating possible differential effects related to firms’ size. Our sample of firms from Italy includes many small firms, 99 percent of which are not listed and for which bank debt is a major source of financing. In the sample, 4 percent of the firms have a single bank relationship, and 66 percent of them have five or fewer relationships. We find that return on equity and return on assets decrease as the number of bank relationships increases, with a stronger relationship for small firms than for large firms. We also find that interest expense over assets increases as the number of relationships increases. Particularly for small firms, our results are consistent with analyses indicating that fewer bank relationships reduce information asymmetries and agency problems, which outweigh negative effects connected to holdup problems.

Are domestic banks' pass through higher than foreign banks? Empirical evidence from Pakistan

This study contributes to the literature by estimating Interest Rate Pass Through (IRPT) using Pakistani aggregate banks’ lending and deposit rate data. Lending and deposit rates are estimated to be sluggish in terms of their response to a change in monetary policy rate. There is also evidence of asymmetry in the pass through of four types of banks (i.e., privatized, nationalized, foreign and specialized). Overall, the domestic banks’ pass through is estimated to be higher than that of foreign bank. Although the IRPT is estimated to be incomplete, the degree of lending rate pass- through is not very low. This study provides evidence of an increase in the adjustment speed when the lending rate is below equilibrium after January 2005. However, there was no significant change in the pass through after January 2005 which coincided with the constant increase in the Treasury bill rate by the State Bank of Pakistan.Monetary policy, Treasury Bill rate, pass thropugh

Optimal control of light propagation through multiple-scattering media in the presence of noise

We study the control of coherent light propagation through multiple-scattering media in the presence of measurement noise. In our experiments, we use a two-step optimization procedure to find the optimal incident wavefront. We conclude that the degree of optimal control of coherent light propagation through a multiple-scattering medium is only determined by the number of photoelectrons detected per single speckle spot. The prediction of our model agrees well with the experimental results. Our results offer opportunities for imaging applications through scattering media such as biological tissue in the shot noise limit