Financial Globalization and the Transmission of Bank Liquidity Shocks: Evidence from an Emerging Market

2010 ◽  
Author(s):  
Philipp Schnabl
Keyword(s):  
Emerging Market ◽  
Financial Globalization ◽  
Liquidity Shocks

Globalization in the World of Finance: An Analytical History

2006 ◽  
Vol 6 (1) ◽  
pp. 1850081 ◽  
Author(s):  
Dilip K. Das
Keyword(s):  
Capital Markets ◽  
Capital Flows ◽  
Financial Integration ◽  
Emerging Market ◽  
Insurance Companies ◽  
Emerging Market Economies ◽  
Financial Globalization ◽  
Middle Income ◽  
Market Economies ◽  
Bretton Woods

One of the many definitions of financial globalization is integration of domestic financial system of a country with the global financial markets and institutions. Enabling framework of financial globalization essentially includes liberalization and deregulation of the domestic financial sector as well as liberalization of the capital account. As economies progressively integrate globally, pari passu the financial structures of markets and the world of finance change. Financial globalization cannot be considered a novel phenomenon. Trans-country capital movements are centuries old. The oil shock of 1973 and the collapse of the Bretton Woods system, both of these developments were momentous and were responsible for laying the foundation of the contemporary era of financial globalization. After the collapse of the Bretton Woods system, some middle-income developing economies began to liberalize and open up for greater capital mobility, while keeping an autonomous control over their monetary policy. Advances in IT and computer technology are cited as one of the most important factors driving and supporting financial globalization. Transnational corporations (TNCs) also helped in global financial integration. They expanded their networks by merging with or acquiring other national and international firms. The prime movers in financial globalization are governments, borrowers, investors, and financial institutions. Each one of these market participants propelled economies towards financial integration in a proactive manner. Financial globalization has caused dramatic changes in the structure of national and international capital markets. The most significant change in the capital markets was in the banking system, which went through a process of dis-intermediation. This was a market transformation of fundamental nature. Contagions and crises are the downsides of financial globalization. Economic and financial crises of the 1990s portend to the fact that financial globalization is not a win-win game, and that it can potentially lead to serious disorder and high cost in terms of bank failures, corporate bankruptcies, stock market turbulence, depletion of foreign exchange reserves, currency depreciation and increased fiscal burden. A unique characteristic of globalized financial markets is reversal of capital flows when market perception regarding the creditworthiness of the borrowing entity changes. Cross-country financial flows to the emerging market economies were low, at during the mid-1970s. They increased at a healthy clip during the decades of 1980s and 1990s, peaking in 1997. They suffered a sharp decline after that because of the Asian and Russian financial and economic crises. The composition of external capital underwent a dramatic transformation during this period. Official flows either stagnated or declined. As a result their relative significance in global capital flows dwindled. In their place, private capital flows became the major source of external finance for a good number of emerging market economies. FDI became an important and dependable source of finance for the emerging markets and other middle-income economies during the decade of the 1980s and 1990s. Portfolio investment in stocks and bond markets also increased substantially. Global institutional investors found this channel of investment functional and profitable. Mutual funds, insurance companies, and pension funds channeled large amounts through portfolio investment into the emerging market economies. As financial globalization progressed, presence of international financial intermediaries has expanded considerably. This applies more to international commercial banks than to investment banks, insurance companies and mutual funds. It is incorrect to say that their global expansion has been uniform because this has occurred unevenly. International bond issuance activity by emerging market economies recorded a sharp spurt in 1993. Emerging market economies began using ADRs and GDRs for raising capital from the global capital markets in 1990 in a small way.

The External Financing of Emerging Market Countries: Evidence From Two Waves of Financial Globalization

2006 ◽  
Vol 06 (205) ◽  
pp. 1 ◽  
Author(s):  
Aleksandar Zaklan ◽  
Paolo Mauro ◽  
Martín Minnoni ◽  
André Faria ◽  
◽  
...  
Keyword(s):  
Emerging Market ◽  
Financial Globalization ◽  
External Financing ◽  
Emerging Market Countries

scholarly journals Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market

2008 ◽  
Vol 98 (4) ◽  
pp. 1413-1442 ◽  
Author(s):  
Asim Ijaz Khwaja ◽  
Atif Mian
Keyword(s):  
Financial Distress ◽  
Small Firms ◽  
Emerging Market ◽  
Credit Market ◽  
Large Firms ◽  
Liquidity Shocks ◽  
Political Ties ◽  
Nuclear Tests ◽  
The Impact ◽  
Do So

We examine the impact of liquidity shocks by exploiting cross-bank liquidity variation induced by unanticipated nuclear tests in Pakistan. We show that for the same firm borrowing from two different banks, its loan from the bank experiencing a 1 percent larger decline in liquidity drops by an additional 0.6 percent. While banks pass their liquidity shocks on to firms, large firms—particularly those with strong business or political ties—completely compensate this loss by additional borrowing through the credit market. Small firms are unable to do so and face large drops in overall borrowing and increased financial distress. (JEL E44, G21, G32, L25)

scholarly journals Basel III LCR Requirement and Banks’ Deposit Funding: Empirical Evidence from Emerging Markets

2019 ◽  
Vol 8 (2) ◽  
pp. 101-128
Author(s):  
Tafirei Mashamba ◽  
Rabson Magweva
Keyword(s):  
Emerging Markets ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Basel Iii ◽  
Short Term ◽  
Liquidity Shocks ◽  
Coverage Ratio ◽  
Banking Institutions ◽  
The Impact

Abstract In December 2010, the Basel Committee on Baking Supervision introduced the liquidity coverage ratio (LCR) standard for banking institutions in response to disturbances that rocked banks during the 2007/08 global financial crisis. The rule is aimed at enhancing banks’ resilience to short term liquidity shocks as it requires banks to hold ample stock of high grade securities. This study attempts to evaluate the impact of the LCR specification on the funding structures of banks in emerging markets by answering the question “Did Basel III LCR requirement induced banks in emerging market economies to increase deposit funding more than they would otherwise do?” The study found that the LCR charge has been effective in persuading banks in emerging markets to garner more stable retail deposits. This response may engender banking sector stability if competition for retail deposits is properly regulated.

scholarly journals Econometric Analysis of the Influence of Macroeconomic Factors on Capital Structure of Russian Corporations under Crisis Conditions

2020 ◽  
Author(s):  
Valeria Valeryevna Metelskaya
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
Structure Formation ◽  
Emerging Market ◽  
Financial Globalization ◽  
Macroeconomic Factors ◽  
Optimal Capital Structure ◽  
Corporate Capital ◽  
Corporate Capital Structure ◽  
Optimal Capital

Abstract The study reveals the influence of macroeconomic factors on decisions about the optimal capital structure formation under financial globalization, in view of ever-changing factors of the external economic and geopolitical environment. The study is aimed at empirical testing of hypotheses on how the level of financial leverage of corporations depends on traditional determinants during and after the financial crisis under the emerging market conditions in Russia. The study deals with a large data set of 49 public joint stock companies from 7 leading Russian economic sectors for the period from 2011 to 2017. According to the correlation-and-regression analysis results, (1) the use of traditional theories of capital structure under the conditions of current financial globalization in a country with a developing economy proves to be ineffective for the optimal capital structure formation (2) the corporate capital structure formation is strongly influenced by macroeconomic factors, which is most evidently manifested during and after the crisis, (3) the financial crisis exerts a strong influence on the corporate capital structure, (4) the determinant of stock market development has a significant influence on leverage and plays a prominent role in making financial decisions after the financial crisis.

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