Increasing investment in human resource relative to information technology system in retail banking delivery channels increases the optimal bank interest margin and decreases the default risk in the bank¡¯s equity returns during a financial crisis. Raising the regulatory barrier inducing a...

We study the optimal bank interest margin and default risk under the capped ratio schedule of government capital instruments in the Basel III Capital Adequacy Accord and the Deposit Insurance Fund arrangement program. We show that an increase in the capped ratio (a decrease in the capped...

Previous research on market-based evaluation of bank equity with government bailout has modelled the bank as a corporate firm with risky assets and liabilities. No attempt was made to analyse explicitly equity quality expressed as a situation when the carrying value of the bank's equity book is...

Rescue packages adopted to stabilize the banking system are generally divided into three categories: government purchases of distressed assets, government guaranteed debt issuance programs, and direct equity capital injections. Countries afflicted by the recent financial crisis launched general...

The banking industry is experiencing a renewed focus on retail banking, a trend often attributed to the stability and profitability of retail activities. This article examines the impact of retail banking on performance by liquidity providing and branch network strategies. Our findings suggest...

This paper examines the relationships among electronic finance (e-finance), entry deterrence, and the potential entrant's optimal loan interest rate in a two-stage model where the sunk costs are the entry barriers. The two key findings are: (i) in the loan rate determination stage, the potential...

This article proposes a framework for bank default risk measure under government capital injection explicitly coinciding with an adverse signal that a rescued bank is expected to have significant future losses. A bank facing a serious problem of early closure may have a strong incentive to...

Our paper focuses on a pattern of bank interest margin determination with entry competition in which a bank with home brand identity extends its advantage to an imperfectly competitive target market. We show that the bank with brand perception advantage subsequently has a lower equity return...

The main purpose of this paper is to model bank spread behavior under capital regulation and deposit insurance. Comparative static results show that an increase in the capital-to-deposits ratio or the deposit insurance decreases the bank's interest margin or spread. It is also shown that an...

Since banks often lend via commitments, their lending and deposit-taking may be two manifestations of one primitive function: the provision of liquidity on demand. We explore this function under a cap-based valuation. We find that (i) the strike price of the cap-based valuation increases the...