We document increased stock price comovement for companies added to major indices around the world. Using data on forty developed and emerging markets for 10 years, we find that in most markets, when added to a major index, firms experience an increase in their beta (especially if their pre-inclusion beta is low) and in the extent to which market returns explain firm stock returns (R2). Stock turnover and analyst coverage also typically increase upon inclusion. Various empirical tests suggest that the category/habitat views of Barberis, Shleifer and Wurgler explain most of these results, although information-related factors also account for some findings.

Interest rates in many advanced economies have been low for almost a decade now and are often expected to remain so. This creates challenges for banks. Using a sample of 3385 banks from 47 countries from 2005 to 2013, we find a one percentage point interest rate drop implies an 8 basis points lower net interest margin, with this effect greater (20 basis points) at low rates. Low rates also adversely affect bank profitability, but with more variation. And for each additional year of “low-for-long”, margins and profitability fall by another 9 and 6 basis points, respectively.

Using a recent IMF survey and expanding on previous studies, we document the use of macroprudential policies for 119 countries over the 2000–2013 period, covering many instruments. Emerging economies use macroprudential policies most frequently; especially foreign exchange related ones while advanced countries use borrower-based policies more. Usage is generally associated with lower growth in credit, notably in household credit. Effects are less in financially more developed and open economies, however, and usage comes with greater cross-border borrowing, suggesting some avoidance. And while macroprudential policies can help manage financial cycles, they work less well in busts.

Stijn Claessens, George Pennacchi, Estimating the Likelihood of Mexican Default from the Market Prices of Brady Bonds, The Journal of Financial and Quantitative Analysis, Vol. 31, No. 1 (Mar., 1996), pp. 109-126

Using novel indicators of political connections constructed from campaign contribution data, we show that Brazilian firms that provided contributions to (elected) federal deputies experienced higher stock returns than firms that did not around the 1998 and 2002 elections. This suggests that contributions help shape policy on a firm-specific basis. Using a firm fixed effects framework to mitigate the risk that unobserved firm characteristics distort the results, we find that contributing firms substantially increased their bank financing relative to a control group after each election, indicating that access to bank finance is an important channel through which political connections operate. We estimate the economic costs of this rent seeking over the two election cycles to be at least 0.2% of gross domestic product per annum.

In countries with more secure property rights, firms might allocate resources better and consequentially grow faster as the returns on different types of assets are more protected against competitors' actions. Using data on sectoral value added for a large number of countries, we find evidence consistent with better property rights leading to higher growth through improved asset allocation. Quantitatively, the growth effect is as large as that of improved access to financing due to greater financial development. Our results are robust using various samples and specifications, including controlling for growth opportunities.

This paper investigates how bank-specific characteristics have affected credit growth in five Latin American countries (Brazil, Chile, Colombia, Mexico and Peru). We use detailed credit registry data and apply a common empirical strategy to analyse the pre- and post-crisis periods. We find that large and well-capitalised banks with low risk indicators, stable sources of funding and a commercial business model generally supply more credit. Such banks are also more sheltered from monetary and global shocks, with the role of specific characteristics varying by the type of shock.

We examine the separation of ownership and control for 2,980 corporations in nine East Asian countries. In all countries, voting rights frequently exceed cash-flow rights via pyramid structures and cross-holdings. The separation of ownership and control is most pronounced among family-controlled firms and small firms. More than two-thirds of firms are controlled by a single shareholder. Managers of closely held firms tend to be relatives of the controlling shareholder's family. Older firms are generally family-controlled, dispelling the notion that ownership becomes dispersed over time. Finally, significant corporate wealth in East Asia is concentrated among a few families.

Using 7900 bank observations from 80 countries for the 1988–1995 period, this paper examines the extent and effect of foreign presence in domestic banking markets. We investigate how net interest margins, overhead, taxes paid, and profitability differ between foreign and domestic banks. We find that foreign banks have higher profits than domestic banks in developing countries, but the opposite is the case for developed countries. Estimation results suggest that an increased presence of foreign banks is associated with a reduction in profitability and margins for domestic banks.

Central banks around the world are exploring the possibility of Central Bank Digital Currencies (CBDCs) for retail and wholesale use. While no major economy is yet to fully introduced a CBDC, some countries have begun pilot programs. The purpose of this paper is to highlight the potential benefits and risks associated with CBDCs, including challenges and opportunities associated with proposed CBDC regulation in the United States and the European Union. The paper also discusses the CBDC landscape in Asia. It highlights some of the key findings of the research presented in this special issue on FinTech and CBDCs. Lastly, the paper offers thoughts for potential future research in areas such as the actual designs of CBDCs and their uses, ‘DeFi’ versus ‘CeFi’, their interoperability and stability, and concerns over cybercrime.