This paper examines the determinants of currency derivatives use among Czech financial institutions between 2020 and 2022, using 980,000 transactions from 1,700 institutions reported under the European Market Infrastructure Regulation (EMIR). Larger, group-affiliated institutions with higher foreign exposure are more likely to use currency derivatives. Unlike existing literature, financially stronger institutions—with higher liquidity and lower leverage—participate more actively, reflecting the Czech financial system’s resilience. This pattern varies by sector: banks’ use is insulated from leverage effects, while liquidity is decisive for investment funds. Group affiliation’s effect is state-dependent, shaped by FX volatility and money markets.
In this study, we investigate the relationship between Fintech and financial inclusion. The empirical analysis consists of panel data regressions on 111 countries and a k-means cluster of 28 European countries. The data cover the period from 2011 to 2021. The results show that digital payments are positively associated with financial inclusion. However, mobile-phone payments have heterogeneous effects on financial inclusion by complementing or partially substituting traditional banking depending on economic development. Overall, the study highlights the importance of institutional and economic context to the relationship between Fintech and financial inclusion and underlines the need for differentiated policies across countries.
Research suggests that societal secrecy is associated with preferences for confidentiality and limited information disclosure. In this paper, we examine the relationship between societal secrecy and financial inclusion. Using the World Bank Global Findex database, we find that individuals in secretive societies are less likely to access and use formal financial services. Among unbanked respondents, we find that individuals in more secretive societies are more likely to cite lack of trust and lack of documentation as reasons for being unbanked. We also document that individuals in more secretive societies are more likely to rely on informal credit sources. Further analysis reveals that the relationship between societal secrecy and financial inclusion varies across institutional environments. The negative association remains consistent across several robustness tests.
We use micro-simulations to estimate consumer adoption of a central bank digital currency (CBDC) for payments. This requires extending a theoretical model of consumer choice among payment methods with a measure of individual digital preferences. The model defines four types of consumers with different propensities to adopt CBDC. We use data from the 2022 SPACE study of payment attitudes to simulate individual consumer CBDC take up and then aggregate. Our micro-simulation classifies 1
We examine whether stronger cost-based competition is associated with financial soundness in underwriting-intensive non-life insurance markets using insurer-level data from 10 Asia-Pacific countries during 2011–2019. Competition is measured using the Boone indicator, a profit–cost elasticity measure. Stronger cost-based competition is associated with higher Z-scores, mainly through higher risk-adjusted profitability and lower earnings and loss ratio volatility. Capitalization does not respond robustly, suggesting that competitive discipline in non-life insurance is reflected primarily through performance stabilization rather than capital accumulation. The relationship is observed across developed and developing markets and is stronger where property rights protection is higher.
This paper investigates the relationship between the optimal level minimum capital requirements aimed at preventing moral hazard by banks and banks’ incentives to invest in process innovation aimed at improving operational efficiency. We extend Hellmann et al. (2000)’s dynamic model of banking competition to show that the imposition of minimum effective capital requirements aimed at preventing excessive risk-taking by banks supports, rather than hinders, investment in process innovation, thanks to the longer time-horizon over which banks can expect to benefit from the efficiency improvement thereof. This is because investments in process innovation will be more valuable if banks act prudently. This in turn reduces the incentive for moral hazard with implications for the optimal level of minimum capital requirements.
Growing financial innovation has led to the expansion of non-bank financial intermediation (NBFI) as a key ingredient for new entrepreneurs dealing with limited access to traditional finance. In this study, we seek to identify the effect of NBFI’s development on new business creation, in contrast to that of traditional banking. To this end, we examine a panel of 21 European countries over the period 2006–2021 using two-way fixed-effects panel regression models and annual data drawn from several publicly available databases. We employ two alternative measures of entrepreneurship: total early-stage entrepreneurship, which includes both formal and informal entrepreneurship, and new business registration, which captures formal businesses only. The results indicate that the development of NBFI matters more for informal entrepreneurship, while traditional banking is more relevant to businesses operating in the formal sector. This finding is particularly evident in the period after 2017, which coincides with the consolidation of Basel III standards in Europe. Informal entrepreneurs may rely primarily on informal sources of finance in the early stages of business creation and turn to traditional banks only later, as their businesses become formalised. Moreover, new business creation occurs mainly when the two financial intermediaries act more as complements rather than substitutes.
Assessing the impact of public support programmes is key to fine-tune their design, increase their accountability and to assess their performance. There is little empirical evidence, however, on the impact of intermediated lending activities and their heterogeneous effect across businesses. This paper aims to fill this gap by assessing the impact on firms’ performance of EIB-backed intermediated loans to circa 100,000 SMEs and mid-caps in the EU over the period 2008-2017. The results show that, relative to their peers, beneficiaries of the publicly supported loan programme experience significantly higher employment growth, firm growth and investment. Our findings also show that EIB lending provides stronger impulses when firms are closer to the borrowing limit. Firms in less developed regions benefit substantially more from the lending, relative to beneficiaries located in more developed regions. The underlying mechanism driving these outcomes is the improved access to finance facilitated by the loans, which enable financial institutions to extend credit to firms that are marginally excluded from traditional bank lending.
Using data on publicly traded U.S. bank holding companies from 1992 to 2019, we examine whether disparities between CEO and non-CEO executive pay affect banks’ liquidity creation. We find that banks with larger CEO pay gaps create more liquidity, but this positive association emerges only after the global financial crisis. A difference-in-differences analysis around the 2011 implementation of the Dodd-Frank Act corroborates these findings: the interaction between post-2011 and the pay-gap measures is positive and significant, implying that post-crisis compensation and governance reforms strengthened the incentive role of pay inequality. The effect is concentrated in on-balance-sheet liquidity creation and in banks with stronger risk-absorbing capacity, low market competition, and sound governance. Together, the results reveal a dynamic link between executive pay structure and bank behavior, suggesting that post-crisis reforms amplified the motivational channel of pay disparity while overly restrictive pay limits could unintentionally dampen banks’ liquidity-creation capacity.
In this study, we examine the relationship between the central banks’ assessments of the economic outlook and corporate cash holdings. When a central bank has a relatively optimistic view of the economy, we find that firms tend to increase cash holdings through equity and debt issuances. As a result, they increase capital and R D expenses that lead to better financial outcomes and innovations. Firms with higher competition and sales growth are more sensitive to central bank information, while financial constraints do not drive the results. Investors’ increased preference for cash further strengthens strategic cash holdings. Overall, the results indicate that there are strategic motives for cash holdings; firms tend to raise cash for an innovation race when the assessments of the future economy are bright.
This paper introduces the special issue of the Journal of Financial Services Research titled “Social and Environmental Financial Services: Where do we Stand?” which highlights recent advancements in social and environmental finance. We draw on five contributions that collectively expand our understanding of how targeted financial interventions, disclosure practices, and regulatory frameworks affect inclusion, firm performance, and sustainability. The social finance papers emphasize the importance of microfinance “plus” services, subsidized lending, and tax incentive programs in increasing access to financing and promoting development. The environmental finance papers examine how banks’ environmental disclosures and the European Union Taxonomy affect credit allocation and pricing. By bridging the social and environmental dimensions, this introduction outlines the emerging challenges, regulatory shifts, and directions for further research to create more integrated and impact-oriented financial services.
In this study, we use data from 22,822 women-led firms across 50 countries spanning 2010 to 2020 to challenge the belief that corporate political activities (CPAs) facilitate credit access. We demonstrate that CPAs do not improve access to credit for women-led firms. Furthermore, we provide evidence that these results hold in legal, social, and cultural environments that are unfavorable to women, particularly if they display stronger discrimination. Our findings support the hypothesis that women get more discouraged about credit access because their CPAs provide them with knowledge of the discrimination they face. Our results hold across various robustness checks.
We study the effect of public-guaranteed loans (PGLs) on bank risk-taking during the COVID-19 pandemic in France. The presence of guarantee schemes may foster riskier lending, pushing banks to lend to riskier borrowers or worsening incentives to prevent write-offs of loans. Yet, we find that the partial government guarantee (between 70
We examine the impact of religiosity on credit union member benefits and document a positive association between local religiosity and member benefits. Members of credit unions in more religious counties enjoy lower interest rates on loans, higher interest rates on deposits, and consequently lower interest spreads. The effect varies by credit union types, and results suggest a stronger association between religiosity and member benefits for credit unions with a narrower field of membership. Further analysis indicates local religiosity is associated with improved operating performance, lower non-interest expenses, and higher quality earning assets, but increased liquidity risk. The results are robust to various model specifications, subsamples, and economic conditions.
Our aim in this paper is to gain a better understanding of the potential moderating role of the peer effect in loan officers’ decision-making. We use data from a French cooperative bank with several business branches from 2012 to 2016 and show that when loan officers work with peers who share similar views on soft information, the peer effects reinforce their own preferences. Conversely, these effects sometimes mitigate the preferences for hard information. In addition, we find that the influence of peers is more pronounced for women, for less experienced loan officers, and in environments with high socialization levels, while financial literacy does not seem to have effect.
The opportunity zone (OZ) tax incentive program was introduced under the Tax Cuts and Jobs Act in 2017. Its aim is to stimulate investment in low- to moderate-income communities by offering tax benefits to investors. In this study, we evaluate the effect of the OZ program on small business lending and bank deposits in OZ-designated tracts. We use a dataset of tract-level small business loans and deposits from 2016 to 2021 with a difference-in-differences estimator on matched treatment (OZ-designated) and control (OZ-eligible but not designated) US Census tracts. Our findings indicate a modest increase in the total amount and number of originations of small business loans, translating to approximately $100 per tract resident. Additionally, OZ-designated tracts experienced a 6 to 10% increase in deposits relative to matched control groups, indicating enhanced economic activity. These results underscore the potential of the OZ program to foster economic growth and financial inclusion in underserved communities.
Microfinance institutions (MFIs) expand financial inclusion by providing credit and savings services to low-income households excluded from formal finance. Because the poor face multiple needs, many MFIs offer “plus” services—either financial (e.g., insurance, remittances) or nonfinancial (e.g., education, business training, health promotion, gender empowerment). We use a doubly robust, random-forest–based approach to obtain semiparametrically efficient estimates of the average treatment effect (ATE), estimating the ATE of each plus service on both outreach (social mission) and financial performance, while accounting for heterogeneity in MFI characteristics and operating environments. The results show that nonfinancial plus services enable MFIs to both deepen and broaden outreach. By contrast, MFIs that add only financial plus products serve fewer and less-poor clients, consistent with mission drift. The policy implications are that, to advance financial inclusion, stakeholders should prioritize nonfinancial ‘plus’ services and be cautious about promoting only bank-like financial products.
We define FinTech as banks' integration of technology into the broker intermediation model. Unlike traditional dealer banks relying on leveraged balance sheets for intermediation, FinTech banks adopt a technology-driven broker model. Using nonlinear and machine learning algorithms, we develop an empirical "FinTech score" that shows on-balance sheet lending for low-FinTech-score banks versus securitization, brokered deposits, and non-interest income for high-score banks. Using two complementary measures of operational efficiency, we find that this technology-driven shift in business models (either holistically or via mergers) helps explain reductions in the cost of financial intermediation. Our bank-specific, time-varying FinTech score provides insights into the distribution of FinTech integration into U.S. banking.
In this study, we investigate the effects of macroprudential policies on banks’ net interest margins (NIMs) using 3000 banks in 28 European Union countries from 1996 to 2019. Macroprudential tightening results in an immediate 2 basis point (bp) decrease in the NIMs, an increase in interest income (IIEA) of 7 bp, and an increase in interest expense (IEEA) of almost 10 bp. But the last two decline by 10.5 and 10.1 bp respectively 1–2 years later. The effect depends on the instrument type and varies based on the capital ratio and credit risk, but holds in high- and low-rate environments.
