Journal of Banking and Financial Economics

Journal Information
ISSN / EISSN : 2353-6845 / 2353-6845
Published by: University of Warsaw (10.7172)
Total articles ≅ 72
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Matthias Pöferlein, University of Bayreuth
Journal of Banking and Financial Economics, Volume 2021, pp 5-24;

Using the dictionary-based approach to measure the sentiment of finance-related texts is primarily focused on English-speaking content. This is due to the need for domain-specific dictionaries and the primary availability of those in English. Through the contribution of Bannier et al. (2019b), the first finance-related dictionary is available for the German language. Because of the novelty of this dictionary, this paper proposes several reforms and extensions of the original word lists. Additionally, I tested multiple measurements of sentiment. I show that using the edited and extended dictionary to calculate a relative measurement of sentiment, central assumptions regarding textual analysis can be fulfilled and more significant relations between the sentiment of a speech by a CEO at the Annual General Meeting and subsequent abnormal stock returns can be calculated.
Kamil Polak, Kozminski University
Journal of Banking and Financial Economics pp 72-90;

The purpose of this research is to examine the impact of sentiment derived from news headlines on the direction of stock price changes. The study examines stocks listed on the WIG-banking sub-sector index on the Warsaw Stock Exchange. Two types of data were used: textual and market data. The research period covers the years 2015–2018. Through the research, 7,074 observations were investigated, of which 3,390 with positive sentiment, 2,665 neutral, and 1,019 negative. In order to examine the predictive power of sentiment, six machine learning models were used: Decision Tree Classifier, Random Forest Classifier, XGBoost Classifier, KNN Classifier, SVC and Gaussian Naive Bayes Classifier. Empirical results show that the sentiment of news headlines has no significant explanatory power for the direction of stock price changes in one-day time frame.
Guizhou Wang, University of Stavanger,
Journal of Banking and Financial Economics pp 104-133;

The article analyzes how conventionalists, pioneers and criminals choose between a national currency (e.g. a central bank digital currency) and a global currency (e.g. a cryptocurrency such as Bitcoin) that both have specific characteristics in an economy. Conventionalists favor what is traditional and historically common. They tend to prefer the national currency. Pioneers (early adopters) tend to break away from tradition, and criminals prefer not to get caught. They both tend to prefer the global currency. Each player has a Cobb-Douglas utility with one output elasticity for each of the two currencies, comprised of backing, convenience, confidentiality, transaction efficiency, financial stability, and security. The replicator equation is used to illustrate the evolution of the fractions of the three kinds of players through time, and how they choose among the two currencies. Each player’s expected utility is inverse U-shaped in the volume fraction of transactions in each currency, skewed towards the national currency for conventionalists, and towards the global currency for pioneers and criminals. Conventionalists on the one hand typically compete against pioneers and criminals on the other hand. Fifteen parameter values are altered to illustrate sensitivity. For parameter values where conventionalists go extinct, pioneers and criminals compete directly with each other. Players choose volume fractions of each currency and which kind of player to be. Conventionalists go extinct when criminals gain more from criminal behavior, and when the parameter values in the conventionalists’ expected utility are unfavorable, causing competition between pioneers and criminals.
, National Economics University, Phương Linh Bui, Minh Huong Le
Journal of Banking and Financial Economics pp 56-71;

From 2008 to 2019, this research examines the effect of equity capital on the profitability of 24 Vietnamese commercial banks. The research findings indicate that, when ROAA and ROAE are used to measure the bank's profit, the equity capital ratio (CAP) has a statistically significant positive effect on the ROAA while having a negative effect on the ROAE. Between 2013 and 2019, the CAP variable has a positive effect on the ROAA and ROAE, indicating that banks with a larger equity capital ratio achieved higher profitability. Furthermore, the deposits-to-assets ratio (DTA) and loan-loss reserves ratio (LLR) both have a negative effect on both proxies for bank profitability, although bank size (SIZE) has a negligible effect on bank profits in the majority of circumstances. Additionally, the rate of GDP growth and inflation (INF) have a beneficial effect on the bank's profitability. The study's objective is to present some critical policy implications for bank executives about the importance of adequate equity capital for the bank's sustainability development.
Richard Van Horne, Poznan University of Economics and Business,
Journal of Banking and Financial Economics pp 91-103;

This paper demonstrates how the Sharpe Ratio can be modified by altering the measure of “total risk” in the denominator of the Sharpe Ratio (i.e., the standard deviation) to include liquidity risk, a major risk for investors in hedge funds that is missing from the standard Sharpe Ratio formulation. We refer to our liquidity-risk-adjusted performance ratio as the LRAPR. The results of our analysis of 1186 hedge funds alive in 2012-2020 show that funds with higher liquidity risk exhibit higher Sharpe Ratios and higher Alphas (as estimated in a 7-factor model that does not incorporate liquidity risk). We posit that analysts and investors should not necessarily take these higher Sharpe Ratios and higher Alphas as indications of fund superiority; what appears to be superior manager skill may rather be a compensation for bearing liquidity risk. Our LRAPR is a tool that analysts or investors could use to compare funds on a more equal footing, adjusting for differential liquidity risk across funds.
Aleksy Klimowicz, University of Warsaw, Krzysztof Spirzewski
Journal of Banking and Financial Economics pp 25-55;

Numerous applications of AI are found in the banking sector. Starting from the front-office, enhancing customer recognition and personalized services, continuing in the middle-office with automated fraud-detection systems, ending with the back-office and internal processes automatization. In this paper we provide comprehensive information on the phenomenon of peer-to-peer lending in the modern view of alternative finance and crowdfunding from several perspectives. The aim of this research is to explore the phenomenon of peer-to-peer lending market model. We apply and check the suitability and effectiveness of credit scorecards in the marketplace lending along with determining the appropriate cut-off point. We conducted this research by exploring recent studies and open-source data on marketplace lending. The scorecard development is based on the P2P loans open dataset that contains repayments record along with both hard and soft features of each loan. The quantitative part consists in applying a machine learning algorithm in building a credit scorecard, namely logistic regression.
, SGH Warsaw School of Economics
Journal of Banking and Financial Economics, Volume 1/2021, pp 5-13;

After last global financial crisis from a decade ago, financial market have been experiencing significant increase in number of regulations. This was especially visible in the banking sector, in which number of post-crisis new regulations amounted to thousands per year. It was not only challenging for banks, that have been spending increasingly more financial resources on compliance, but also for supervisory entities that have to keep track of compliance for every entity on financial market. Due to the fact that supervisory process relies mostly on manual process, it can be both time consuming and inefficient. This is why, not only banks have been exploring new technologies in compliance with regulations (Reg Tech), but also supervisory authorities have been doing the same with the aim of increasing their efficiency (Sup Tech). The research paper aims to test hypothesis, which is as follows: – Sup Tech is becoming an innovative tool for banking supervision and is expected to have increasingly larger role in banking supervision For the purpose of the paper, the following methods have been applied: critical analysis of literature and research papers as well as descriptive method and comparative analysis of presented data.
, Warsaw University
Journal of Banking and Financial Economics, Volume 1/2021, pp 14-24;

The political system always has a significant impact on economic indicators. Currency exchange is one of the indicators, which is influenced directly or indirectly by political developments. Investors and economic agents make investment decisions by not only economic outcomes but also political developments. Turkey is one of the countries, which can be an example of a domestic currency losing value significantly due to undemocratic political actions since the 2017 referendum. Therefore, in this study, the impact of the new presidential system on the Turkish Lira is investigated using the Bayesian structural time-series model in R software. According to the literature search, this study is the first article that analyzes how much the Turkish Lira decoupled negatively from peers and how badly the Turkish presidential system harms the Turkish Lira. According to the result, the undemocratic and unorthodox economic and political implementations cause the Turkish Lira to have dropped sharply and have decoupled negatively from other currencies significantly.
Kay Chung, International Monetary Fund, Michael G. Papaioannou
Journal of Banking and Financial Economics, Volume 1/2021, pp 59-87;

This paper analyzes the effects of including collective action clauses (CACs) and enhanced CACs in international (nondomestic law-governed) sovereign bonds on sovereigns’ borrowing costs, using secondary-market bond yield spreads. Our findings indicate that inclusion of enhanced CACs, introduced in August 2014, is associated with lower borrowing costs for both noninvestment-grade and investment-grade issuers. These results suggest that market participants do not associate the use of CACs and enhanced CACs with borrowers’ moral hazard, but instead consider their implied benefits of an orderly and efficient debt resolution process in case of restructuring.
Ahmed L. M. Ahmed, Cracow University of Economics
Journal of Banking and Financial Economics, Volume 1/2021, pp 44-58;

This paper aims to assess the current condition of the Egyptian banking sector, based on the past reforms of the 2000s. This analysis is based on data from the Central Bank of Egypt (CBE), data from the Egyptian banking sector and the literature review. The main fi nding is that despite many changes in the political and economic scene that drove the country into a crisis, the Egyptian banking sector was able to work well in the post-2008 period, achieving high growth rates. This study contributes to the academic literature on factors infl uencing fi nancial development in emerging counties, based on the analysis of the Egyptian banking.
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