Market structure, capital regulation and bank risk taking
Reinhard H. Schmidt
- This paper discusses the effect of capital regulation on the risk taking behavior of commercial banks. We first theoretically show that capital regulation works differently in different market structures of banking sectors. In lowly concentrated markets, capital regulation is effective in mitigating risk taking behavior because banks' franchise values are low and banks have incentives to pursue risky strategies in order to increase their franchise values. If franchise values are high, on the other hand, the effect of capital regulation on bank risk taking is ambiguous as banks lack those incentives. We then test the model predictions on a cross-country sample including 421 commercial banks from 61 countries. We find that capital regulation is effective in mitigating risk taking only in markets with a low degree of concentration. The results remain robust after accounting for financial sector development, legal system effciency, and for other country and bank-specific characteristics. Keywords: Banks, market structure, risk shifting, franchise value, capital regulation JEL Classifications: G21, G28
ProtoSociology : an international journal of interdisciplinary research
- ProtoSociology is an interdisciplinary journal which crosses the borders of philosophy, social sciences, and their corresponding disciplines. Each issue concentrates on a specific topic taken from the current discussion to which scientists from different fields contribute the results of their research. ProtoSociology is further a project that examines the nature of mind, language and social systems. In this context theoretical work has been done by investigating such theoretical concepts like interpretation and (social) action, globalization, the global world-system, social evolution, and the sociology of membership. Our purpose is to initiate and enforce basic research on relevant topics from different perspectives and traditions.
Measuring shear viscosity using correlations
- Measurements of transverse momentum fluctuations can be used to determine the shear viscosity . We use current data to estimate the viscosity-to-entropy ratio in the range from 0.08 to 0.3, and discuss how future measurements can reduce this uncertainty.
Extraction of network topology from multi-electrode recordings: is there a small-world effect?
- The simultaneous recording of the activity of many neurons poses challenges for multivariate data analysis. Here, we propose a general scheme of reconstruction of the functional network from spike train recordings. Effective, causal interactions are estimated by fitting generalized linear models on the neural responses, incorporating effects of the neurons’ self-history, of input from other neurons in the recorded network and of modulation by an external stimulus. The coupling terms arising from synaptic input can be transformed by thresholding into a binary connectivity matrix which is directed. Each link between two neurons represents a causal influence from one neuron to the other, given the observation of all other neurons from the population. The resulting graph is analyzed with respect to small-world and scale-free properties using quantitative measures for directed networks. Such graph-theoretic analyses have been performed on many complex dynamic networks, including the connectivity structure between different brain areas. Only few studies have attempted to look at the structure of cortical neural networks on the level of individual neurons. Here, using multi-electrode recordings from the visual system of the awake monkey, we find that cortical networks lack scale-free behavior, but show a small, but significant small-world structure. Assuming a simple distance-dependent probabilistic wiring between neurons, we find that this connectivity structure can account for all of the networks’ observed small-world-ness. Moreover, for multi-electrode recordings the sampling of neurons is not uniform across the population. We show that the small-world-ness obtained by such a localized sub-sampling overestimates the strength of the true small-world structure of the network. This bias is likely to be present in all previous experiments based on multi-electrode recordings.
FIAS Scientific Report
Pension systems and financial systems in Europe : a comparison from the point of view of complementarity
Reinhard H. Schmidt
- At present, the question of how national pension or retirement payment systems should be organised is being hotly debated in various countries, and opinions vary widely as to what should be regarded as the optimal design for such systems. It appears to the authors of the present paper that in this entire discussion one aspect is largely overlooked: What relationships exist between the pension system and the financial system in a given country? As such relationships might prove to be important, the present paper investigates the following questions: (1) Are there differences between the national pension systems of three major European countries – Germany, France and the U.K. – and between the financial systems of these countries? (2) And if the existence of such differences can be demonstrated, is there a correspondence between the differences with respect to the various national pension systems and the differences as regards the countries’ financial systems? (3) And if such a correspondence exists, is there any kind of interrelationship between the national financial and pension systems of the individual countries which goes beyond a mere correspondence? Looking mainly at two aspects – namely, risk allocation and the incentives to create human capital – the authors of this paper argue (1) that there are indeed considerable differences between the financial and pension systems of the three countries; (2) that in both Germany and the U.K. there are also systematic correspondences between the respective pension systems and financial systems and their economic characteristics, but that such a correspondence cannot be identified in the case of France; and (3) that these parallels are, in the final analysis, based on complementarities and are therefore likely to contribute to the efficiency of the German and the British systems. The paper concludes with a brief look at policy implications which the existence of, or the lack of, consistency between national pension systems and national financial systems might have. JEL classification: G10, G34, H55, P51
News / Center for Financial Studies
- CFSnewsletter is a documentation of past, present and future CFS activities in the fields of research, executive development and events. Printed versions of all issues published since 1997 can be ordered free of charge. To download the latest issues, you need ADOBE Acrobat Reader. Contact: Lut De Moor Phone: +49-(0)69-798-30060 Fax: +49-(0)69-798-30077 media_contact (AT) ifk-cfs.de
- The Center of Excellence SAFE – “Sustainable Architecture for Finance in Europe” – is a cooperation of the Center for Financial Studies and Goethe University Frankfurt. It is funded by the LOEWE initiative of the State of Hessen (Landes-Offensive zur Entwicklung wissenschaftlich-ökonomischer Exzellenz). SAFE brings together more than 40 professors and just as many junior researchers who are all dedicated to conducting research in support of a sustainable financial architecture. The Center has two main pillars: excellent research on all important topics related to finance; and policy advice, including the dissemination of relevant research findings to European decision makers from the realms of politics, regulation and administration.
In order to promote a fruitful exchange with interested parties from politics, academia, business and the media, SAFE issues a newsletter on a quarterly basis. This aims to provide an overview of the Center‘s ongoing research and policy activities. The SAFE Newsletter succeeds the House of Finance Newsletter, which was published between 2009 and 2012.
SAFE is based at Goethe University’s House of Finance however extends beyond by drawing on scholars from other parts of Goethe University as well as from fellow research institutions. The Center builds on the reputation of the House of Finance institutions, serving as an interdisciplinary think tank on the issue of finance.
EFL quarterly : an E-Finance Lab publication
LOCKSS (Lots of Copies Keep Stuff Safe) : Vortrag am 6th Frankfurt Scientific Symposium, GNARP und wie sie die Welt sieht: Aussichten transatlantischer Partnerschaft im digitalen Zeitalter: 5.10.2006 - 7.10.2006
- The LOCKSS (Lots of Copies Keep Stuff Safe) Alliance is an international community of about 100 libraries and partners like OCLC. For almost a decade the LOCKSS open source model has been tested for its robustness against attack and for its ability to migrate formats. LOCKSS »boxes« at 150 institutions in more than 20 countries comprise a peer-to-peer system that automatically cross-checks content to ensure the accuracy and completeness of all member archives. Eighty publishers, including large publishers like Oxford University Press, are now participating in LOCKSS or actively preparing to add their journals to the program.