Ownership, Multiple Blockholders and Performance: A study of the Indonesian Banking Industry

The objective of this study is to provide empirical evidence on how ownership structure and owner’s identity affect performance, in the banking industry by using a panel of Indonesia banks over the period 2000–2009. Firstly, we analysed the impact of the presence of multiple blockholders on bank ownership structure and performance. Building on multiple agency and principal-principal theories, we investigated whether the presence and shares dispersion across blockholders with different identities (i.e. central and regional government; families; foreign banks and financial institutions) affected bank performance, in terms of profitability and efficiency. We found that the number of blockholders has a negative effect on banks’ performance, while blockholders’ concentration has a positive effect. Moreover, we observed that the dispersion of ownership across different types of blockholders has a negative effect on banks’ performance. We interpret such results as evidence that, when heterogeneous blockholders are present, the disadvantage from conflicts of interests between blockholders seems to outweigh the advantage of the increase in additional monitoring by additional blockholder. Secondly, we conducted a joint analysis of the static, selection, and dynamic effects of different types of ownership on banks’ performance. We found that regional banks and foreign banks have a higher profitability and efficiency as compared to domestic private banks. In the short-run, foreign acquisitions and domestic M&As reduce the level of overhead costs, while in the long-run they increase the Net Interest Margin (NIM). Further, we analysed NIM determinants, to asses the impact of ownership on bank business orientation. Our findings lend support to our prediction that the NIM determinants differs accordingly to the type of bank ownership. We also observed that banks that experienced changes in ownership, such as foreign-acquired banks, manifest different interest margin determinants with respect to domestic or foreign banks that did not experience ownership rearrangements.

Banking Regulation in Turkey and Russia: An Economic Analysis

The importance of the banks and financial markets relies on the fact that they promote economic efficiency by allocating savings efficiently to profitable investment opportunities.An efficient banking system is a key determinant for the financial stability.The theory of market failure forms the basis for understanding financial regulation.Following the detrimental economic and financial consequences in theaftermath of the crisis, academics and policymakers started to focus their attention on the construction of an appropriate regulatory and supervisory framework of the banking sector. This dissertation aims at understanding the impact of regulations and supervision on banks’ performance focusing on two emerging market economies, Turkey and Russia. It aims at examining the way in which regulations matter for financial stability and banking performance from a law & economics perspective. A review of the theory of banking regulation, particularly as applied to emerging economies, shows that the efficiency of certain solutions regarding banking regulation is open to debate. Therefore, in the context of emerging countries, whether a certain approach is efficient or not will be presented as an empirical question to which this dissertation will try to find an answer.

Securitization and Special Purpose Vehicles in an International Setting: a Systemic View

The present work tries to display a comprehensive and comparative study of the different legal and regulatory problems involved in international securitization transactions. First, an introduction to securitization is provided, with the basic elements of the transaction, followed by the different varieties of it, including dynamic securitization and synthetic securitization structures. Together with this introduction to the intricacies of the structure, a insight into the influence of securitization in the financial and economic crisis of 2007-2009 is provided too; as well as an overview of the process of regulatory competition and cooperation that constitutes the framework for the international aspects of securitization. The next Chapter focuses on the aspects that constitute the foundations of structured finance: the inception of the vehicle, and the transfer of risks associated to the securitized assets, with particular emphasis on the validity of those elements, and how a securitization transaction could be threatened at its root. In this sense, special importance is given to the validity of the trust as an instrument of finance, to the assignment of future receivables or receivables in block, and to the importance of formalities for the validity of corporations, trusts, assignments, etc., and the interaction of such formalities contained in general corporate, trust and assignment law with those contemplated under specific securitization regulations. Then, the next Chapter (III) focuses on creditor protection aspects. As such, we provide some insights on the debate on the capital structure of the firm, and its inadequacy to assess the financial soundness problems inherent to securitization. Then, we proceed to analyze the importance of rules on creditor protection in the context of securitization. The corollary is in the rules in case of insolvency. In this sense, we divide the cases where a party involved in the transaction goes bankrupt, from those where the transaction itself collapses. Finally, we focus on the scenario where a substance over form analysis may compromise some of the elements of the structure (notably the limited liability of the sponsor, and/or the transfer of assets) by means of veil piercing, substantive consolidation, or recharacterization theories. Once these elements have been covered, the next Chapters focus on the regulatory aspects involved in the transaction. Chapter IV is more referred to “market” regulations, i.e. those concerned with information disclosure and other rules (appointment of the indenture trustee, and elaboration of a rating by a rating agency) concerning the offering of asset-backed securities to the public. Chapter V, on the other hand, focuses on “prudential” regulation of the entity entrusted with securitizing assets (the so-called Special Purpose vehicle), and other entities involved in the process. Regarding the SPV, a reference is made to licensing requirements, restriction of activities and governance structures to prevent abuses. Regarding the sponsor of the transaction, a focus is made on provisions on sound originating practices, and the servicing function. Finally, we study accounting and banking regulations, including the Basel I and Basel II Frameworks, which determine the consolidation of the SPV, and the de-recognition of the securitized asset from the originating company’s balance-sheet, as well as the posterior treatment of those assets, in particular by banks. Chapters VI-IX are concerned with liability matters. Chapter VI is an introduction to the different sources of liability. Chapter VII focuses on the liability by the SPV and its management for the information supplied to investors, the management of the asset pool, and the breach of loyalty (or fiduciary) duties. Chapter VIII rather refers to the liability of the originator as a result of such information and statements, but also as a result of inadequate and reckless originating or servicing practices. Chapter IX finally focuses on third parties entrusted with the soundness of the transaction towards the market, the so-called gatekeepers. In this respect, we make special emphasis on the liability of indenture trustees, underwriters and rating agencies. Chapters X and XI focus on the international aspects of securitization. Chapter X contains a conflicts of laws analysis of the different aspects of structured finance. In this respect, a study is made of the laws applicable to the vehicle, to the transfer of risks (either by assignment or by means of derivatives contracts), to liability issues; and a study is also made of the competent jurisdiction (and applicable law) in bankruptcy cases; as well as in cases where a substance-over-form is performed. Then, special attention is also devoted to the role of financial and securities regulations; as well as to their territorial limits, and extraterritoriality problems involved. Chapter XI supplements the prior Chapter, for it analyzes the limits to the States’ exercise of regulatory power by the personal and “market” freedoms included in the US Constitution or the EU Treaties. A reference is also made to the (still insufficient) rules from the WTO Framework, and their significance to the States’ recognition and regulation of securitization transactions.

The use of Ground Penetrating Radar and alternative geophysical techniques for assessing embankments and dykes safety

The research is part of a survey for the detection of the hydraulic and geotechnical conditions of river embankments funded by the Reno River Basin Regional Technical Service of the Region Emilia-Romagna. The hydraulic safety of the Reno River, one of the main rivers in North-Eastern Italy, is indeed of primary importance to the Emilia-Romagna regional administration. The large longitudinal extent of the banks (several hundreds of kilometres) has placed great interest in non-destructive geophysical methods, which, compared to other methods such as drilling, allow for the faster and often less expensive acquisition of high-resolution data. The present work aims to experience the Ground Penetrating Radar (GPR) for the detection of local non-homogeneities (mainly stratigraphic contacts, cavities and conduits) inside the Reno River and its tributaries embankments, taking into account supplementary data collected with traditional destructive tests (boreholes, cone penetration tests etc.). A comparison with non-destructive methodologies likewise electric resistivity tomography (ERT), Multi-channels Analysis of Surface Waves (MASW), FDEM induction, was also carried out in order to verify the usability of GPR and to provide integration of various geophysical methods in the process of regular maintenance and check of the embankments condition. The first part of this thesis is dedicated to the explanation of the state of art concerning the geographic, geomorphologic and geotechnical characteristics of Reno River and its tributaries embankments, as well as the description of some geophysical applications provided on embankments belonging to European and North-American Rivers, which were used as bibliographic basis for this thesis realisation. The second part is an overview of the geophysical methods that were employed for this research, (with a particular attention to the GPR), reporting also their theoretical basis and a deepening of some techniques of the geophysical data analysis and representation, when applied to river embankments. The successive chapters, following the main scope of this research that is to highlight advantages and drawbacks in the use of Ground Penetrating Radar applied to Reno River and its tributaries embankments, show the results obtained analyzing different cases that could yield the formation of weakness zones, which successively lead to the embankment failure. As advantages, a considerable velocity of acquisition and a spatial resolution of the obtained data, incomparable with respect to other methodologies, were recorded. With regard to the drawbacks, some factors, related to the attenuation losses of wave propagation, due to different content in clay, silt, and sand, as well as surface effects have significantly limited the correlation between GPR profiles and geotechnical information and therefore compromised the embankment safety assessment. Recapitulating, the Ground Penetrating Radar could represent a suitable tool for checking up river dike conditions, but its use has significantly limited by geometric and geotechnical characteristics of the Reno River and its tributaries levees. As a matter of facts, only the shallower part of the embankment was investigate, achieving also information just related to changes in electrical properties, without any numerical measurement. Furthermore, GPR application is ineffective for a preliminary assessment of embankment safety conditions, while for detailed campaigns at shallow depth, which aims to achieve immediate results with optimal precision, its usage is totally recommended. The cases where multidisciplinary approach was tested, reveal an optimal interconnection of the various geophysical methodologies employed, producing qualitative results concerning the preliminary phase (FDEM), assuring quantitative and high confidential description of the subsoil (ERT) and finally, providing fast and highly detailed analysis (GPR). Trying to furnish some recommendations for future researches, the simultaneous exploitation of many geophysical devices to assess safety conditions of river embankments is absolutely suggested, especially to face reliable flood event, when the entire extension of the embankments themselves must be investigated.