France and the International Financial Crisis: The Legacy of State‐Led Finance

Despite the far‐reaching liberalization of the French banking system over the past quarter century, French banks suffered far less in the international financial crisis (2007–2009) than banks in the United Kingdom and Germany. However, the French system also suffered far more—at least in the first stages of the crisis—than the banking systems of Southern Europe. By several measures, French banks were world leaders in financial innovation, and the French banking system was highly exposed to international market movements. The limited impact of the crisis, however, owed to the specificities of French “market‐based banking.” Deliberate state action over the two decades prior to the crisis created a specific kind of banking system and encouraged forms of financial innovation, the unintentional consequence of which was the limited exposure to the securitization that caused the damage wrought during the financial crisis.     

Lobbying and lending by banks around the financial crisis by

Despite the unprecedented levels of liquidity provided by the Federal Reserve to banks during the 2007–2008 financial crisis, lending by banks slowed dramatically during and after that global episode. In this study, we propose that, given capital constraints, the lobbying expenditures by banks to combat Dodd-Frank might have crowded out lending activity. A variety of univariate and multivariate tests show that while lending by banks fell significantly around the financial crisis, lobbying rose dramatically. Our results also show that bank lobbying and lending are imperfect substitutes during non-crisis periods. Such substitutability likely is explained by the value perceived in the political connections gained through lobbying, such as the ability to influence regulation, preferential treatment on supervisory or enforcement decisions, and protection against adverse shocks in the form of government bailouts.

     

Before There Was Enron,There Was Orange County: A Study of Local Government Financial‐Oversight Committees

Recent financial scandals in some of America's largest corporations have prompted popular speculation that a similar crisis may occur within the public sector and, therefore, that government and nonprofit organizations should be required to adopt financial oversight practices similar to those that are mandated of publicly‐traded corporations in the Sarbanes‐Oxley Act of 2002. One of those mandated practices—the use of financial‐oversight committees—is already a common practice in public organizations, though little is known about its effectiveness. This study uses a national sample of local governments to examine whether financial‐oversight committees improve financial control and strengthen stakeholder confidence in financial reporting. The findings provide preliminary support for the use of financial‐oversight committees as an effective tool to improve financial accountability in local government.     

Lobbying,political connections and emergency lending by the Federal Reserve

This paper tests whether the political connections of banks were important in explaining participation in the Federal Reserve’s emergency lending programs during the recent financial crisis. Our multivariate tests show that banks that were politically connected—either through lobbying efforts or employment of politically connected individuals—were substantially more likely to participate in the Federal Reserve’s emergency loan programs. In economic terms, participation in these programs was 28–36% more likely for banks that were politically connected than for banks that were not politically connected. In our final set of tests, we attempt to identify a proper explanation for this peculiar relationship. While a broad literature speaks of the moral hazard associated with receiving bailouts, we test whether another type of moral hazard exists in the period preceding the bailout. In particular, we argue that, to the extent that political connections act as synthetic insurance, banks may have engaged in more risky behavior that lead them to the Fed’s emergency lending facilities. Tests seem to confirm this explanation.     

Learning More from Political Communication Experiments: Pretreatment and Its Effects

Research on political communication effects has enjoyed great progress over the past 25 years. A key ingredient underlying these advances is the increased usage of experiments that demonstrate how communications influence opinions and behaviors. Virtually all of these studies pay scant attention to events that occur prior to the experiment—that is, in “pretreatment events.” In this article, we explore how and when the pretreatment environment affects experimental outcomes. We present two studies—one where we control the pretreatment environment and one where it naturally occurred—to show how pretreatment effects can influence experimental outcomes. We argue that, under certain conditions, attending to pretreatment dynamics leads to novel insights, including a more accurate portrait of the pliability of the mass public and the identification of potentially two groups of citizens—what we call malleability reactive and dogmatic.     

Spotlight on the Main Actors: How Land Banks and Community Development Corporations Stabilize and Revitalize Cleveland Neighborhoods in the Aftermath of the Foreclosure Crisis

Cleveland, Ohio provides a useful case for examining and contrasting property transfer practices among certain key actors before, during, and after the foreclosure crisis. Transfers among key actors—Cleveland’s two land banks, the State of Ohio, Fannie Mae, investors, and community development corporations (CDCs)—differed considerably. This article empirically shows that inappropriate property transfer practices by financial institutions and speculator-type investors negatively impacted neighborhoods, compounding the damage brought on by the foreclosure crisis. By contrast, a case study of one of the hardest hit neighborhoods in Cleveland finds that the land banks and CDC are producing positive outcomes. A proactive land bank as a conduit and robust CDCs as a project promoter are an effective combination to cope with vacant and abandoned properties.     

The Pracademic and the Fed: The Leadership of Chairman Benjamin Bernanke

When President Barack Obama nominated Ben Bernanke for a second term as chair of the Federal Reserve Board in August 2009, he emphasized Bernanke's “bold action and outside‐the‐box thinking” in preventing the recent financial collapse from turning into another Great Depression. While many saw this renomination as providing monetary policy stability and necessary institutional continuity during the crisis, Bernanke's “bold action” has generated robust criticism, mainly because Bernanke initiated fundamental reforms of traditional Fed practices. How has Bernanke's leadership style at the Fed evolved as the financial crisis of 2008–2009 has unfolded? Did his prior academic experience influence his decisions? What are the long‐term implications of Bernanke's innovative strategies for the Federal Reserve as an independent, powerful, policy making institution, traditionally one that possesses tremendous financial and political autonomy? If you want to build a factory, or fix a motorcycle, or set a nation right without getting stuck, then classical, structured, dualistic subject‐object knowledge, although necessary, isn't enough. You have to have some feeling for the quality of the work. You have to have a sense of what's good. That is what carries you forward … It's not just “intuition,” or unexplainable “skill” or “talent.” It's the direct result of contact with basic reality … —Robert M. Pirsig, Zen and the Art of Motorcycle Maintenance There are no atheists in foxholes and no ideologues in financial crises. —Benjamin Bernanke, 2009 ¹ 1 This statement was widely cited in media news outlets from NPR to Face the Nation and the New York Times. See http://www.nytimes.com/2008/09/21/business/21paulson.html .
     

Asset quality determinants of Indian banks: Empirical evidence and policy issues

The Indian banking industry has been suffering from a huge number of nonperforming loans, and the loan asset quality has been deteriorated over the years. This has led to significant capital erosion of many banks in India. The surge in corporate defaults leading to an enormous rise in nonperforming loan assets has been impairing the performance of Indian banking industry in particular and economic growth in general. Hence, it is intuitive to ask what are the determinants of poor asset quality of Indian banks. To answer this question, using a sample of 47 commercial banks over a sample period of 2000 to 2014, our study examines the bank‐, industry‐, and macroeconomic‐specific determinants of asset quality of Indian banks. Our empirical analysis also accommodates the impact of different ownership structures (public and private sector) and the impact of financial crisis while analysing the determinants of poor asset quality of Indian commercial banks. Results reveal that bank‐, industry‐, and macroeconomic‐specific factors are responsible for the burgeoning nonperforming loan assets of Indian commercial banks. The results are qualitatively similar across different ownership structures. The findings suggest that forecasting models for nonperforming assets should also consider macroecomomic‐ and industry‐specific factors along with the bank‐ specific factors.     

Regulatory enforcement against organizational insiders: Interactions in the pursuit of individual accountability

The UK Financial Conduct Authority has developed and implemented policies targeting individuals for regulatory non-compliance in the post-2008 crisis period. This article develops a tripartite framework that differentiates between individual–firm, regulator–individual, and regulator–firm interactions to capture the complexity of these enforcement proceedings. Drawing on interviews with stakeholders, administrative decisionmaking observations, and documentary analysis, it outlines the process of individualizing responsibility for non-compliance and finds that this approach poses evidential and investigative challenges for the regulator as a result of individual and corporate responses. The evidence shows that individuals are more likely than firms to engage in an adversarial response to an investigation rather than to settle. At the same time, through an inverse process of “corporatization” of the enforcement proceedings, firms may employ resources and strategies aimed at obscuring individual responsibility or binding together more closely the corporate and the individual case. The article concludes that the prospects of a successful outcome in investigating individuals depend not only on regulators' activities but also on corporate responses and on which managers are considered assets to the firm and which may be thrown to the wolves.     

Lobbying and Taxes

Lobbying dominates corporate political spending, but comprehensive studies of the benefits accrued are scarce. Using a dataset of all U.S. firms with publicly available financial statements, we delve into the tax benefits obtained from lobbying. Firms that spend more on lobbying in a given year pay lower effective tax rates in the next year. Increasing registered lobbying expenditures by 1% appears to lower effective tax rates by somewhere in the range of 0.5 to 1.6 percentage points for the average firm that lobbies. While individual firms amass considerable benefits, the costs of lobbying-induced tax breaks appear modest for the government.     

Money Talks: The Environmental Impact of China's Green Credit Policy

This study examines the impact of China's green credit policy on the environment. In particular, we consider an initiative that requires all banks to base their loan decisions on corporate environmental performance. This is an important issue since it is globally gaining popularity to leverage bank loans as an avenue to enforce corporate environmental responsibility. Moreover, there are only a handful of empirical investigations in relation to the impacts of credit constraint on corporate environmental behaviors and strategies. This research also provides useful insights on how to enhance environmental regulation enforcement, using the Environmental Protection Bureau in partnership with local banks to exert a creditable threat of financial constraint on unfavorable environmental outcomes. Using the synthetic control method and difference‐in‐differences analysis, we find that this policy has significantly motivated firms, particularly those firms with a higher dependence on external financing, to reduce water pollution. We further discover that the policy compels firms to favor pollution prevention at the source instead of end‐of‐pipe treatments, since the policy imposes a long‐term credit constraint on pollution.     

The determinants of corporate political strategy in Chinese transition

• Corporate political strategy (CPS) formulation in Chinese transition is an area with little empirical work. We fill this gap validly and the primary focus of this study is to examine the firm‐ and industry‐level factors influencing Chinese firms' political strategy choice. Empirical support is found for the taxonomy of corporate political strategies in Chinese transition—that is direct participation strategy, financial incentive strategy, prolocutor strategy, institution innovation strategy, government association strategy and government involvement strategy. The results indicate that there is no consistently significant firm‐ and industry‐level predictor of all six political strategies and we explore what determinants are related to each specific decision independently. We also verify the random effects of industry‐level variables and our hypotheses are tested through using general evaluation equations (GEEs). Our study aims to be helpful to point managers toward both industrial environments and internal resources to consider when making appropriate political strategy choices and thus improve Chinese firms' strategy management level. Some implications of findings are also discussed finally.

Copyright © 2007 John Wiley & Sons, Ltd.     

Political Corruption and the End of two-party system after the May 2015 Spanish Regional Elections

The autonomous elections held on 25 May 2015 took place simultaneously in 13 of the 17 Spanish autonomous communities (CCAA), leading to the most profound change in the autonomous party system seen in Spain in the last 20 years. A significant number of Spanish citizens hold the two main parties—the PP and the PSOE—responsible for being unable to solve their economic problems and for having pursued their austerity policies and containment of social expenditure to the extent of giving rise to the greatest inequality experienced in Spanish society in history. Furthermore, and as important as the economic crisis, support for the new parties, Podemos and Ciudadanos, has been linked to the emergence in Spanish public debate of party regeneration and the corruption scandals that tainted the main parties and most institutions in the years prior to the elections on 25 May 2015.     

Risk and Financial Armageddon in Ireland: The Politics of the Galway Tent

This article examines Ireland's financial crisis. Thus far explanation has focused on individual or collective administrative failure: the office(r) of financial regulation singularly failed to scrutinise the banks sufficiently: it was a matter of poor risk management. While this article would agree that the (mis)management of risk was important to how the crisis unfolded, I argue that an explanation of why the crisis emerged demands an altogether different focus. Put simply, after financial regulatory reform, a reconfiguration of risk in politics took place as the locus of decision‐making about financial risk shifted from the realm of the political/legal (Cabinet/Central Bank/Department of Finance) to the economic/legal (retail banks, shareholders/consumers). It was a critical development, one that mirrored events taking place in the UK, upon which Ireland drew experience, for now assessments about risk undertaken by the banks demanded that intervention could be justified only on an ascertainable risk, not a theoretical uncertainty (or spurious fear). The evidentiary bar for intervention was therefore raised, removing the precautionary instinct implicit in the prudential governance of Central Banks.     

Innovation in the public sector: Dilemmas in the use of Ad Hoc processes

Increasingly, public sector executives are using ad hoc groups and processes—what we term “parallel processes”—as a vehicle for innovation. The central question is, however, when parallel processes are developmental and when they are bypasses that avoid critical issues. This paper reviews some potential weaknesses in the use of such groups by examining several cases that show how they can impede the actual implementation of the innovation. We propose a transitional perspective that regards parallel process as scaffolding, enabling new ideas and behaviors to grow strong enough to eventually allow their transfer to the permanent structure.     

Reputation management as an interplay of structure and agency: A strategic-relational approach

Reputation scholars in the field of regulation tend to focus on the strategic nature—or: “agency”—of reputation management. We know fairly little about the precise nature of the dynamics and conflicts between structural and agential factors that are experienced by regulators in practice, and how these dynamics impact reputation management and its outcomes. This study addresses these questions, using conceptual language from the strategic-relational approach to study the reputation management of the Belgian financial regulator during an event of high reputational salience: the global financial crisis. The results present an image of a regulator as a strategic actor who—either consciously or more intuitively—calculated its possible moves in light of a strategically selective context (which, in turn, was constantly evolving as a result of strategic actions). This contributes to a more complex and behaviorally realistic understanding of regulatory reputation management.     

Lessons from NPAs crisis in Indian banks

Nonperforming assets (NPAs) crisis in Indian public sector banks is one of the biggest challenges before the current government in 2017. The finance ministry, Government of India, and the central bank, the Reserve Bank of India, are worried about the surging NPAs in Indian public sector banks because of their huge macroeconomic impact and systemic risk to the financial system. If not paid timely attention, it can hamper the economic and financial stability of the nation. Rising NPAs in Indian public sector banks are a result of bank specific, macroeconomic, and political factors. In order to control the surging NPAs in Indian public sector banks, the government and the Reserve Bank of India have implemented new crisis management framework which however is not immune to several challenges. This paper looks at NPAs crisis from the lens of crisis management, stakeholder's engagement, government relations, and issue management. Harris and Fleisher ( 2016 ) identify crisis management, stakeholder engagement, government relations, and issues management as important organizational activities that constitute part of public affairs. This paper follows a tripartite structure where it first investigates the causes of NPAs in Indian public sector banks. Second, it examines the crisis management framework developed by the policy makers and highlights the key challenges. Third, in light of these challenges, it makes recommendations to tackle the NPAs crisis in Indian public sector banks.     

Financial and world economic crisis: What did economists contribute?

In this paper we deal with two questions, (1) what are the origins of the current financial crisis, and (2) what did economists contribute, or why did economists fail to provide a convincing answer for the origins of the crisis, and possible solutions to overcome it? The economics profession apparently was unaware of the looming worldwide financial and economic crisis, and significantly underestimated its global dimensions and consequences. A first and preliminary analysis is undertaken to explore reasons for these failures. We conclude by pointing to some consequences for economics as well as for economic policy.     

The Liquidity Crisis: The 2007–2009 Market Impacts on Municipal Securities

This article surveys developments in the municipal debt market for their practical and conceptual implications for public financial managers and scholars. It provides an overview of the market crisis of 2007–9, focusing on what fiscal stress reveals about debt costs, the incidence of risk, and management methods. The first part focuses on the systemic factors—highly leveraged subprime mortgage instruments and collateralized debt obligations—that affected credit availability, interest costs, and the changing risk profiles of the debt instruments. The second part emphasizes the new institutional architecture of the borrowing environment: the collapse of the market for variable‐rated securities, the withdrawal from the market of traditional bond insurers, the diminished availability of credit enhancement instruments from banks, the demise of the standby bond purchase agreement, and the introduction of Build America Bonds. The article presents an agenda for practitioners and scholars as they face a borrowing future that differs markedly from that of the past.     

The Tea Party and the Crisis of Neoliberalism: Mainstreaming New Right Populism in the Corporate News Media

Within months of Barack Obama's election, a putatively grass-roots conservative uprising emerged to challenge the Democratic Party's agenda. In this article, we analyze the role of cable news in the rise of the Tea Party during the current “crisis of neoliberalism”—a moment of political-economic volatility brought about by the Great Recession. We argue that the Tea Party's political purpose is to hold together the New Right coalition of business elites and white working- and middle-class Americans that undergirds the neoliberal political project. In the context of a deregulated corporate mass media, we show that both “right-wing” and “moderate” cable networks mainstreamed the Tea Party by framing it as a legitimate social movement, enabling the widespread projection of right-wing populist discourse in support of neoliberalism. In light of our study, we suggest that democratizing the mass media is crucial for a sustained progressive political response in the United States.