Journal of Financial Regulation and Compliance最新文献

{"title":"Corruption in least developed countries and ESG (responsible) investment: Standard Chartered Bank in Nepal","authors":"Tim Gocher, Wen Li Chan, Jayalakshmy Ramachandran, Angelina Seow Voon Yee","doi":"10.1108/jfrc-07-2023-0112","DOIUrl":"https://doi.org/10.1108/jfrc-07-2023-0112","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This study aims to explore the effects of responsible international investment in a least developed country (LDC) on ethics and corruption in the local industry. While investment growth in least developed countries (LDCs) is essential to meet the United Nations Sustainable Development Goals, international investment in LDCs poses challenges, including corruption. The authors explore perspectives from relevant stakeholders on the influence, if any, on an LDC’s banking sector, of investment in the LDC by a multinational bank with an environmental, social and governance focus – using a case study of Standard Chartered Bank (SCB) in Nepal.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>The authors conducted thematic analysis on: focus groups with current and former SCB Nepal management; semi-structured interviews with Nepal banking regulator representatives; senior staff from SCB global divisions; and management of other commercial banks in Nepal.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>Knowledge transfer, organisational enablers and constructive international competition contributed to the dissemination of best practices within the Nepal banking sector, supporting the notion of beneficial spill-over effects of multinationals on LDC host countries.</p><!--/ Abstract__block -->\u0000<h3>Practical implications</h3>\u0000<p>Practical insights will aid LDC governments, international businesses, investment funds and donor organisations seeking to invest in/assist LDCs with economic development.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>To the best of the authors’ knowledge, this may be the first case study on ethics and anti-corruption practices of a multinational bank in a LDC. Through a practice-driven focus, the authors provide “on-the-ground” insights to better understand the complex nature of corruption.</p><!--/ Abstract__block -->","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2024-02-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139977783","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Risk governance and regulatory adjustments in the public commercial banks of OECD","authors":"Muddassar Malik","doi":"10.1108/jfrc-06-2023-0090","DOIUrl":"https://doi.org/10.1108/jfrc-06-2023-0090","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This study aims to explore the relationship between risk governance characteristics (chief risk officer [CRO], chief financial officer [CFO] and senior directors [SENIOR]) and regulatory adjustments (RAs) in Organization for Economic Cooperation and Development public commercial banks.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>Using principal component analysis (PCA) and regression models, the research analyzes a representative data set of these banks.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>A significant negative correlation between risk governance characteristics and RAs is found. Sensitivity analysis on the regulatory Tier 1 capital ratio and the total capital ratio indicates mixed outcomes, suggesting a complex relationship that warrants further exploration.</p><!--/ Abstract__block -->\u0000<h3>Research limitations/implications</h3>\u0000<p>The study’s limited sample size calls for further research to confirm findings and explore risk governance’s impact on banks’ capital structures.</p><!--/ Abstract__block -->\u0000<h3>Practical implications</h3>\u0000<p>Enhanced risk governance could reduce RAs, influencing banking policy.</p><!--/ Abstract__block -->\u0000<h3>Social implications</h3>\u0000<p>The study advocates for improved banking regulatory practices, potentially increasing sector stability and public trust.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>This study contributes to understanding risk governance’s role in regulatory compliance, offering insights for policymaking in banking.</p><!--/ Abstract__block -->","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2024-02-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139956994","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Free banking theory: literature review and relevance to the regulation of cryptocurrencies debate","authors":"Simon D. Norton","doi":"10.1108/jfrc-10-2023-0176","DOIUrl":"https://doi.org/10.1108/jfrc-10-2023-0176","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>Free banking theory, as developed in Adam Smith’s 1776 treatise, “The Wealth of Nations” is a useful tool in determining the extent to which the “invisible hand of the market” should prevail in regulatory policy. The purpose of this study is to provide a timely review of the literature, evaluating the theory’s relevance to regulation of financial technology generally and cryptocurrencies (cryptos) specifically.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>The methodology is qualitative, applying free banking theory as developed in the literature to technology-defined environments. Recent legislative developments in the regulation of cryptocurrencies in the UK, European Union and the USA, are drawn upon.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>Participants in volatile cryptocurrency markets should bear the consequences of inadvisable investments in accordance with free banking theory. The decentralised nature of cryptocurrencies and the exchanges on which these are traded militate against coordinated oversight by central banks, supporting a qualified free banking approach. Differences regarding statutory definitions of cryptos as units of exchange, tokens or investment securities and the propensity of these to transition between categories across the business cycle render attempts at concerted classification at the international level problematic. Prevention of criminality through extension of Suspicious Activity Reporting to exchanges and intermediaries should be the principal objective of policymakers, rather than definitions of evolving products that risk stifling technological innovation.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>The study proposes that instead of a traditional regulatory approach to cryptos, which emphasises holders’ safety and compensation, a free banking approach combined with a focus on criminality would be a more effective and pragmatic way forward.</p><!--/ Abstract__block -->","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2024-02-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139924312","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Do cryptocurrency investors in the UK need more protection?","authors":"Yanqing Wang","doi":"10.1108/jfrc-03-2023-0036","DOIUrl":"https://doi.org/10.1108/jfrc-03-2023-0036","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>The existing literature offers various perspectives on integrating cryptocurrencies into investment portfolios; yet, there is a gap in understanding the behaviours, attitudes and cross-investment links of individual investors. This study, grounded in the modern portfolio theory and the random walk theory, aims to add empirical insights that are specific to the UK context. It explores four hypotheses related to the influence of socio-demographics, digital adoption, cross-investment behaviours and financial attitudes on cryptocurrency owners.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>This study uses a logistic regression model with secondary data from the Financial Lives Survey 2020 to assess the factors impacting cryptocurrency ownership. A total of 29 variables are used, categorized into four groups aligned with the hypotheses. Additionally, hierarchical clustering analysis was conducted to further explore the cross-investment links.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>The study reveals a significant lack of diversification among UK cryptocurrency investors, a pronounced inclination towards high-risk investments such as peer-to-peer lending and crowdfunding, and parallels with gambling behaviours, including financial dissatisfaction and a propensity for risk-taking. It highlights the influence of demographic traits, risk tolerance, technological literacy and emotional attitudes on cryptocurrency investment decisions.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>This study provides valuable insights into cryptocurrency regulation and retail investor protection, underscoring the necessity for tailored financial education and a holistic regulatory approach for investment products with comparable risk levels, with the aim of minimizing regulatory arbitrage. It significantly enhances our understanding of the unique dynamics of cryptocurrency investments within the evolving financial landscape.</p><!--/ Abstract__block -->","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2024-01-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139516357","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Does promoters’ holding influence the liquidity risk of banks?","authors":"G. Pinto, Shailesh Rastogi, Bhakti Agarwal","doi":"10.1108/jfrc-09-2023-0144","DOIUrl":"https://doi.org/10.1108/jfrc-09-2023-0144","url":null,"abstract":"\u0000Purpose\u0000This paper aims to evaluate whether promoter holding influences a bank’s liquidity in India’s leading emerging market. Furthermore, it also evaluates the moderating role of risk-weighted assets (RWA) on the relationship between promoter holding and liquidity.\u0000\u0000\u0000Design/methodology/approach\u0000The data consists of 24 banks for the period of 12 years from 2010 to 2021. Static panel data is used to analyze the relationship between the liquidity coverage ratio (LCR) as the dependent variable, the promoter used as an explanatory variable and RWA used as a moderating variable in this study.\u0000\u0000\u0000Findings\u0000This study concludes that an increase in promoter holding helps to improve the liquidity of Indian banks. Moreover, it also shows that using RWA as a moderating term enhances the relationship between promoter holdings and Indian banks’ liquidity.\u0000\u0000\u0000Research limitations/implications\u0000This study evaluated the impact of promoter ownership solely on the LCR, a statistic used to measure the short-term liquidity of banks in the Indian setting. Additional corporate governance factors, such as the makeup of the board of directors, relevant ownership concentration factors and external factors with the potential to affect the liquidity position of banks, could potentially be the subject of future investigations.\u0000\u0000\u0000Practical implications\u0000This paper has both managerial and policy-level implications. It shows that it is advantageous for banks’ ownership composition to include more enormous promoter holdings to enhance banks’ liquidity. Policymakers can, thus, formulate policies to encourage banks to have more extensive promoter holdings.\u0000\u0000\u0000Originality/value\u0000The impact of promoter ownership on bank liquidity has not been evaluated in earlier research projects. Furthermore, the use of RWA as a moderating variable to determine this link has not been fully investigated, particularly in the context of a developing country like India.\u0000","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2024-01-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139608048","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Shadow banking and non-performing loans: international evidence","authors":"Mugabil Isayev, Omar Farooq","doi":"10.1108/jfrc-07-2023-0105","DOIUrl":"https://doi.org/10.1108/jfrc-07-2023-0105","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This paper aims to document the impact of shadow banking on non-performing loans (NPLs) of publicly listed banks in an international setting.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>This paper uses the data from 27 countries and various estimation strategies to test the arguments presented in this paper. The sample covers the period between 2002 and 2020.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>The empirical results suggest that banks headquartered in countries with high shadow banking activity have fewer NPLs than otherwise similar banks headquartered in countries with low shadow banking activity. The findings remain qualitatively the same in different sub-samples and after replacing the main variables with their alternate proxies. The paper also shows that this relationship is sensitive to bank-specific characteristics. Moreover, the paper also indicates that the stringency of banking regulations weakens the relationship between shadow banking and NPLs.</p><!--/ Abstract__block -->\u0000<h3>Research limitations/implications</h3>\u0000<p>The study’s data limitations prevent a detailed year-by-year analysis of NPLs and shadow banking, restricting insights into their evolving dynamics. In addition, the focus on country-level shadow banking data limits the exploration of how multinational banks’ activities in various jurisdictions impact individual banks’ NPLs.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>The paper not only documents the effect of shadow banking on NPLs but also shows that the relationship between shadow banking and NPLs weakens as banking regulations become more stringent.</p><!--/ Abstract__block -->","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2024-01-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"139373832","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Factors and determinants affecting banking sector stability: empirical evidence from conventional and Islamic banks listed on the Palestine stock exchange","authors":"N. Badwan, Besan Saleh, Montaser Hamdan","doi":"10.1108/jfrc-07-2023-0108","DOIUrl":"https://doi.org/10.1108/jfrc-07-2023-0108","url":null,"abstract":"\u0000Purpose\u0000This paper aims to investigate the determinants that contribute to the financial stability and banking sector of Palestinian banks listed on the Palestine Stock Exchange (PEX) by using yearly data for the years 2012–2022.\u0000\u0000\u0000Design/methodology/approach\u0000Pooled ordinary least squares (OLS) and two-stage least squares (2SLS) were used to identify the variables and factors affecting the financial stability and banking sector of Palestinian banks. The study’s data were collected from the banks listed on PEX and from the yearly reports posted on the Palestine Monetary Authority’s (PMA) webpage over the years from 2012–2022. According to this research’s analysis, SMEs loans and capital sufficiency have a statistically significant positive impact on the stability of Palestinian banks. Unobserved heterogeneity, simultaneity and dynamic endogeneity are taken into account when using the 2SLS regression approach to adjust for the study endogeneity factor.\u0000\u0000\u0000Findings\u0000The study’s findings show that some factors and determinants might have both good and negative effects on financial stability and banking sector. Loans to small and medium-sized businesses (SMEs) and enough capital are two characteristics that statistically have a major favourable impact on the stability of Palestinian banks since they help the banks withstand deficits. A further potential discovery relates to the favourable effects of financial inclusion (FI) and digital financial services (DFS) on the stability of banks.\u0000\u0000\u0000Research limitations/implications\u0000This research has faced some limitations, such as the lack of a defined index from the regulatory organizations, this research is based on information from bank annual accounts. It has mostly relied on self-developed or World Bank indexes. Furthermore, the research solely used information from the supply side (banks); demand-side data were not taken into consideration.\u0000\u0000\u0000Practical implications\u0000This paper has managerial implications for stability of banking sector. The Palestine Monetary Authority, as the central bank, must increase the percentage of bank loans directed to small and medium-sized companies and oblige bank management to adhere to adequate capital standards, which contributes to strengthening the Palestinian banking sector and increasing its profits. The study findings advise banks that are enjoying financial stability to speed up the pace of FI and DFSs because most of these reliable banks have relatively low FI ratios. PMA is responsible for preserving the stability of the financial system. PMA, decision makers and banks management must retain adequate liquidity in their institutions and raise client collateral expectations to raise credit conditions.\u0000\u0000\u0000Originality/value\u0000This paper adds some contributions to the literature. To adjust for discrepancies between various types of banks, the authors concentrate on conventional and Islamic banks, which enables us to use a homogenous data set as opposed to depending on dichoto","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-12-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138943641","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Ethical governance and the board’s moderating role in Zakat avoidance effects on firm value in muslim nations","authors":"Ines Kateb, Khoula Ftouhi","doi":"10.1108/jfrc-03-2023-0034","DOIUrl":"https://doi.org/10.1108/jfrc-03-2023-0034","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This paper aims to examine the impact of Zakat avoidance on firm value and investigates how board characteristics moderate this relationship within the context of Saudi Arabia, a Muslim nation.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>Using panel data from 2009 to 2020, encompassing 78 nonfinancial firms listed on the Saudi Stock Exchange, this study constructs an enhanced measure of Zakat avoidance that integrates insights from tax avoidance research, Shariah principles and the regulations of the Zakat, Tax and Customs Authority. This research uses empirical techniques, including panel data regressions and interaction analysis to investigate how board characteristics may influence this relationship.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>Descriptive analysis reveals pervasive Zakat compliance, underscoring the effectiveness of Saudi Arabia’s robust Zakat system. Regression results indicate a positive association between Zakat payment and firm value. Remarkably, board characteristics exhibit no significant link to Zakat avoidance, emphasizing the potency of the Zakat system and religious adherence. However, the moderation analysis reveals that board independence and meeting frequency positively moderate the relationship between Zakat avoidance and firm value.</p><!--/ Abstract__block -->\u0000<h3>Practical implications</h3>\u0000<p>The study emphasizes the vital importance of upholding Zakat obligations to cultivate trust among stakeholders and amplify firm value. It advocates for governance frameworks that foster vigilant oversight and independence, ultimately enhancing a firm’s overall worth. Furthermore, the study’s findings provide valuable insights for corporate leaders, investors, policymakers and society as a whole, facilitating the promotion of ethical financial conduct and driving holistic economic development.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>This research introduces novel insights by scrutinizing the intricate interplay of Zakat avoidance, board dynamics and firm value within the context of a culturally distinctive emerging economy. The development of a distinct Zakat avoidance metric, along with comprehensive empirical assessment, contributes to the originality of the study. Moreover, the investigation into the moderating influence of board characteristics adds value to the existing body of knowledge.</p><!--/ Abstract__block -->","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138717606","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Dark side of decentralised finance: a call for enhanced AML regulation based on use cases of illicit activities","authors":"Vladlena Benson, Umut Turksen, Bogdan Adamyk","doi":"10.1108/jfrc-04-2023-0065","DOIUrl":"https://doi.org/10.1108/jfrc-04-2023-0065","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This paper aims to focus on the need for an enhanced anti-money laundering (AML) regulation for decentralised finance (DeFi) to protect the integrity of global financial systems against illicit activities. Research highlights the requirement for a robust regulatory strategy for the fast-paced DeFi evolvement.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>This study used doctrinal legal research by analysing legislation, which involved creating use cases to illustrate different aspects of potential illicit activities via the DeFi ecosystem. Various DeFi applications were assessed for the potential regulatory responses and outcomes.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>This paper offers valuable insight into the regulatory challenges presented by DeFi. This study addresses the blind spots leveraged by criminals afforded by the DeFi’s decentralised nature. This paper offers a comprehensive examination of DeFi regulatory challenges based on use-case scenarios and provides recommendations for regulators on how to address them effectively.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>This paper proposes measures for regulatory authorities to minimise money laundering risks through new channels such as decentralised exchanges, non-custodial wallets and cross-chain bridges. This study concludes with the future directions for DeFi regulation and AML compliance.</p><!--/ Abstract__block -->","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138546214","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The role of inside debt in banks’ M&A choices: wealth expropriation or conflict resolution?","authors":"Ziyun Yang, Lanyi Yan Zhang, Claire J. Yan","doi":"10.1108/jfrc-05-2023-0070","DOIUrl":"https://doi.org/10.1108/jfrc-05-2023-0070","url":null,"abstract":"<h3>Purpose</h3>\u0000<p>This study investigates the impact of bank CEOs’ inside debt on shareholder benefits in the context of bank mergers and acquisitions (M&amp;A) before the 2008–2009 financial crisis.</p><!--/ Abstract__block -->\u0000<h3>Design/methodology/approach</h3>\u0000<p>Employing an event-study methodology, this analysis delves into market reactions to bank M&amp;A announcements during 2006–2007, encompassing 105 M&amp;As by 79 public commercial banks. This era witnessed heightened risk-taking behavior on the verge of the financial crisis. We explore the relation between relative inside debt and market abnormal returns at M&amp;A announcements and the association between relative inside debt and cash payment preferences in M&amp;As.</p><!--/ Abstract__block -->\u0000<h3>Findings</h3>\u0000<p>Evidence suggests that M&amp;A announcements from banks where acquiring CEOs hold a substantial inside debt experience favorable stock market reaction, particularly for smaller banks. Additionally, banks with elevated CEO inside debt tend to favor cash as a payment mode for M&amp;As.</p><!--/ Abstract__block -->\u0000<h3>Research limitations/implications</h3>\u0000<p>One limitation of this study is the short period of data availability. The data used in this study covers only 2006 and 2007, the periods marked by notable risk-taking activities on the verge of the financial crisis. Although this period is perfectly suitable for our investigation, given the prevalence of conflicts between equity and debt holders, it is essential to acknowledge that our findings may not capture changes or trends over time. Nevertheless, the results offer valuable insights into the factors that influence the behavior of the studied population. Future research could employ a longitudinal design to address this limitation and gain a more comprehensive understanding of the dynamics over extended periods.</p><!--/ Abstract__block -->\u0000<h3>Practical implications</h3>\u0000<p>Our study has significant implications for businesses and policymakers as it provides insights into the factors contributing to financial crises and how compensation mechanisms can be used to moderate bank risk-taking. We propose that CEO inside debt compensation presents a plausible mechanism that boards of directors can incorporate into bank executive compensation contracts. By doing so, they can promote value-enhancing investments and moderate excessive risk-taking, thereby safeguarding the financial stability of individual banks and overall financial system.</p><!--/ Abstract__block -->\u0000<h3>Originality/value</h3>\u0000<p>Our study sheds light on the beneficial role of bank CEO inside debt for shareholders, contributing empirical backing to the conflict resolution viewpoint in the discourse on wealth appropriation. From a regulatory stance, our findings advocate for the inclusion of bank CEO inside debt in executive remuneration agreements. Such a strategy can empower boards of directors to mitigate undue risk and enhance shareholder value in","PeriodicalId":44814,"journal":{"name":"Journal of Financial Regulation and Compliance","volume":null,"pages":null},"PeriodicalIF":0.9,"publicationDate":"2023-11-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138517240","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}