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Despite an important role of collateralized borrowing in corporate finance and financial economics, there has been little empirical research that systematically documents the prevalence and correlates of collateralized borrowing across countries. We filled this gap by investigating firms' collateralized borrowing in 131 countries between 2005–2017 using the World Bank Enterprise Surveys. Overall, 77% of loans require collateral, and the median loan‐to‐collateral value is 60%. While small firms and loans from non‐bank financial institutions are less often associated with collateral, when collateral is pledged, the type of collateral assets is strongly correlated with the loan‐to‐value ratio. When more illiquid and indivisible assets such as land and buildings are pledged as collateral, higher collateral value is required. [ABSTRACT FROM AUTHOR]

Purpose: The study explores how banks design their financial structure and asset portfolio in response to monetary policy changes. Design/methodology/approach: The authors conduct the research design for the Vietnamese banking market during 2007–2018. To ensure robust findings, the authors employ two econometric models of static and dynamic panels, multiple monetary policy indicators and alternative measures of bank leverage and liquidity. Findings: Banks respond to monetary expansion by raising their financial leverage on the liability side and cutting their liquidity positions on the asset side. Further analysis suggests that larger banks' financial leverage is more responsive to monetary policy changes, while smaller banks strengthen the potency of monetary policy transmission toward bank liquidity. Additionally, the authors document that lower interest rates induce a beneficial effect on the net stable funding ratio (NSFR) under Basel III guidelines, implying that banks appear to modify the composition of liabilities to improve the stability of funding sources. Originality/value: The study is the first attempt to simultaneously examine the impacts of monetary policy on both sides of bank balance sheets, across various banks of different sizes under a multiple-tool monetary regime. Besides, understanding how banks organize their stable funding sources and illiquid assets amid monetary shocks is an innovation of this study. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to investigate the impact of competition in financial markets on the frequency of portfolio disclosures by mutual funds and its implications for consumer search costs. Design/methodology/approach: The empirical analysis merges the Center for Research in Security Prices (CRSP) survivorship bias-free mutual fund database, the Thompson Financial CDA/ Spectrum holdings database and the CRSP stock price data. The sample covers the time period between 1993 and 2010 and OLS and logistic regressions are used to investigate the impact of competition on fund disclosures. Findings: This paper finds that mutual fund disclosures decrease with market competition and this effect is amplified for funds holding illiquid assets. These results provide empirical support for the findings of Carlin et al. (2102). Mutual funds use portfolio disclosures as a marketing tool to attract investments in a tournament-like market, where superior relative performance and greater visibility are rewarded with convex payoffs. With competition, the likelihood of receiving new investments decreases for each fund and funds respond by reducing costly voluntary disclosures. The disclosure costs are higher for funds holding illiquid assets, and hence, the effect is stronger for them. Originality/value: This paper has important policy implications for disclosures in a market where relative performance matters. The traditional view is that competition induces voluntary disclosure because entities would like to differentiate themselves from competitors, and hence, competition should increase market transparency. However, this paper sheds light on the negative consequence of competition in a tournament-like mutual fund market. [ABSTRACT FROM AUTHOR]

Credit and liquidity shocks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations. On the other hand, solvency constraints may force banks to recover lost fundings by selling their illiquid assets, resulting in effective losses in the presence of fire sales—that is, when funding shortcomings are widespread over the market. Because of the complex structure of the network of interbank exposures, these losses reverberate among banks and eventually get amplified, with potentially catastrophic consequences for the whole financial system. Inspired by the recently proposed Debt Rank, in this work we define a systemic risk metric that estimates the potential amplification of losses in interbank markets accounting for both credit and liquidity contagion channels: the Debt-Solvency Rank. We implement this framework on a dataset of 183 European banks that were publicly traded between 2004 and 2013, showing indeed that liquidity spillovers substantially increase systemic risk, and thus cannot be neglected in stress-test scenarios. We also provide additional evidence that the interbank market was extremely fragile up to the global financial crisis, becoming slightly more robust only afterwards. [ABSTRACT FROM AUTHOR]

Liquidity shocks are a core risk of the business model of commercial banks, which is founded on a liquidity mismatch between the banks' liabilities and assets. A substantial part of the banks' funding comes from short-term retail and wholesale funding, whilst a substantial part of the assets are long-term and illiquid loans. This is the source of the banks' profits, but also of their claim to fulfil an important social role. Having argued that leaving the solution to this problem to the banks alone is unsafe, this article turns to examine three regulatory strategies for reducing the incidence of liquidity shocks or making banks more resilient to them. They are: regulating the level of banks' liquidity reserves, insuring the value of the banks' long-term assets and guaranteeing the discharge of the banks' short-term liabilities. The criteria of assessment are the least impact on the banks' social role of transforming short-term deposits into long-term loans, coupled with the least incentive for banks to take excessive risk, the least subsidy to banking and the least cost to the public purse. It is suggested that insuring the value of the banks' long-term assets emerges as the most attractive strategy. [ABSTRACT FROM AUTHOR]

The financial crisis of 2007-2009 left elite university endowments with 30% less value, causing these universities to respond with dramatic budgetary restructuring. While endowments had received probing national and congressional attention in the months prior to the crisis, that attention largely gave way to the conventional view that universities were no longer able to meet their budgetary needs because of these endowment losses. This wisdom took hold despite the fact that elite universities still sat atop multibillion dollar endowments designed, at least in theory, to provide a cushion in times of financial distress. This Note explores this puzzle by looking at the legal and financial restrictions placed on endowment spending. The Note finds that, arguments to the contrary notwithstanding, the law does not meaningfully restrict elite universities in their spending, largely because the law does not apply to unrestricted funds that compose almost half of elite universities' endowments. A somewhat stronger explanation is financial: elite university investment in illiquid assets means that universities cannot cash out endowments to stabilize their budgets because of an inability to access those investments. I argue, however, that the financial explanation is still inadequate because illiquid investments likely accounted for a minority of each elite university's endowment. The Note articulates a different theory of endowment value: universities use their endowments as a symbol of prestige and a point of competition between peer institutions. The cultural value of university endowments means that universities will strive to avoid endowment liquidation to the fullest extent possible, even, counterintuitively, in times when they need their endowment funds most of all. [ABSTRACT FROM AUTHOR]

Presents abstracts on economics and finance. 'United States Disability in a Changing Environment,' by Mary C. Daly and Richard V. Burkhauser; 'Black-White Wage Inequality in the 1990s--A Decade of Progress,' by Mary C. Daly; 'Equilibrium Valuation of Illiquid Assets,' by John Krainer.