Vicente Salas

Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks

Although credit risk is an important factor that financial institutions must cope with, the determinants of bank problem loans have been little studied. Using panel data, we compare the determinants of problem loans of Spanish commercial and savings banks in the period 1985–1997, taking into account both macroeconomic and individual bank level variables. The GDP growth rate, firms, and family indebtedness, rapid past credit or branch expansion, inefficiency, portfolio composition, size, net interest margin, capital ratio, and market power are variables that explain credit risk. However, there are significant differences between commercial and savings banks, which confirm the relevance of the institutional form in the management of credit risk. Our findings raise important bank supervisory policy issues: the use of bank level variables as early warning indicators, the advantages of bank mergers from different regions, and the role of banking competition and ownership in determining credit risk.

Deregulation, market power and risk behaviour in Spanish banks

Abstract This paper provides empirical evidence on the effects of regulatory changes in the market power of Spanish banks. It also analyses the response of banks, in terms of risk-taking behaviour, as a result of a reduction in economic profits. We find that liberalisation measures have increased competition and eroded banks’ market power. We observe that banks with lower charter values tend to have lower equity–assets ratios (lower solvency) and to experience higher credit risk. The last evidence is new in the literature and calls for strengthening regulatory concerns about credit risk management by banks in situations of increased competition.

Governance Mechanisms in Spanish Banks: Does Ownership Matter?

This paper examines the governance of Spanish banks around two main issues. First, does poor economic performance activate governance interventions that favor the removal of executive directors and the merger of non-performing banks? And second, does the relationship between governance intervention and economic performance vary with the ownership form of the bank? We fi nd a negative relationship between performance and governance intervention for banks, but the results change for each form of ownership and each type of intervention. Internal control mechanisms work for Independent Commercial banks, but Savings banks show weaker internal mechanisms of control and the only signifi cant relationship between performance and governance intervention that appears is for mergers. The Spanish Savings banks, with a peculiar form of ownership that, in fact, implies a lack of ownership, give voice to several stakeholder groups with no clear allocation of property rights. Nevertheless, their economic performance is not generally affected. Product-market competition compensates for those weaker internal governance mechanisms and non-performing banks are not fully protected from disappearing.

Strategic competition in retail banking under expense preference behavior

Abstract This paper presents a theoretical analysis of strategic competition in retail banking when some of the firms show expense preference behavior. The literature on expense preference behavior by banking firms is fairly large, but to our knowledge, so far, the strategic interaction between profit maximizing banks and banks with expense preference behavior has not been investigated. The paper has also an empirical interest since it is motivated by the current situation in Spanish retail banking where commercial banks, profit maximizers, compete with savings banks, non profit maximizers.

Nonprofit Organizations, Monopolistic Competition, and Private Donations: Evidence from Spain

This article presents an analysis of the determinants of money and time donations to Spanish nongovernmental organizations that channel aid to less developed countries. A basic model inspired by the theory of monopolistic competition is formulated and tested taking into account that some of the explanatory variables, such as fund-raising expenditure and price, are endogenous. The results show that the average donor is different for money and time donations and that government preferences differ from those of private donors. Finally, the authors find that the hypothesis of efficient fund-raising expenditures cannot be rejected.

Price formation in channels of distribution with differentiated products

Abstract This paper presents a theoretical and empirical study of price formation in markets where goods differ in two attributes, perceived quality of each variety, and service provided by the store where the good is sold. Price competition in the vertically differentiated market is modeled as a two-stage game where manufacturers choose the contract that determines wholesale prices, and retailers choose consumer prices. One important novelty of the paper is that it contemplates competition between brands of different quality in the same store, and competition between brands of the same quality sold at different stores. This is in fact the situation observed in the domestic detergent market and the predictions of the model can be used to guide the empirical analysis of the data available for such market in the area of Barcelona, Spain.

Total factor productivity and R&D capital in the spanish economy, 1965-1980

Abstract A formal model of productivity growth and technical progress is presented. The model takes into account embodied and disembodied technical progress as explanatory variables. The slowdown in productivity growth for the Spanish economy after 1972 is explained for 92% by the decline in the rate of growth of technical progress originated from domestic R&D and technology imports.

A Theoretical Basis for Inflation Accounting

Publisher Summary One of the main features characterizing western economies in recent years has been the instability of prices of goods and services. Changes in the relative prices have been accompanied by a significant rate of inflation, that is, a significant rate of increase in the overall level of prices. The concern that such changes have caused to the accounting profession can be understood only in the context of the accounting objectives. These objectives are characterized in broad terms as the measurement and reporting of the results of the operations of the firm during a selected time period in the form of resources available and their sources and in the form of income generated and costs incurred in the operation of such resources. The reported resources state the capital assets of the firm from which capital services are drawn and combined with other inputs to produce final outputs. Several input combinations produce a given output combination and similarly, several output combinations are attainable from a given set of inputs. A choice of input/output combinations is obtained when a behavioral assumption is assumed, such as profit or net income maximization, subject to the set of feasible input and output combinations. In such cases, the main determinants of the choices are the observed prices of inputs and outputs together with the parameters of the production possibility set representing the firms technology.