Environmental Niche Capacity and Peer Effect in Funding Liquidity Risk of Banks

Subject Areas : Journal of Investment Knowledge

Tayebe Bakhtiarian ¹ ( PhD student at management and accounting of Shahid Beheshti University )
Gholamhossein Asadi ² ( Associate Professor Faculty of Management and Accounting of Shahid Beheshti University )
Hossein Abdo Tabrizi ³ ( Assistant Professor Faculty of Sharif University of Technology )
Teymor Mohammadi ⁴ ( Associate Professor Faculty of Economics College of Allame Tabataba'i University )

Received: 2020-04-09 Accepted : 2020-07-25 Published : 2023-03-21

Keywords: organizational ecology, funding liquidity risk, peer effects, environmental niche capacity, Banking Industry,

Abstract :

Peer effects is a pervasive phenomenon in a business world and several theories have been proposed to explain that. Since this phenomenon can have different positive or negative consequences in different domains, therefore, in this paper using information and competition based theories and Organizational ecology theory and By defining an index called environmental niche capacity, the relationship between the index and peer influence has been investigated in banking industry of Iran in order to help to form macro prudential policy to control peer effects as a systemic risk factor in that industry. The research sample includes all active banks of Iran from 2002 to 2016 and the models used are linear regression model based on Manski's approach with unbalanced micro-panel data and two stage least squares method to estimate peer effects coefficient and linear regression model with time series data to evaluate relation between peer effects and environmental niche capacity index and also concentration and uncertainty index. The evidences shows that the correlation of niche index is significant both during boom and bust, but during recession the coefficient is increased by approximately 2/1 times, indicating the importance of liquidity management by central bank to control peer effects systemic factor and crisis formation in the banking system.

References:

پژویان، جمشید، شفیعی، افسانه، تحلیل ساختار در صنعت بانکداری ایران، فصلنامه اقتصاد مقداری، دوره پنجم، شماره چهارم، زمستان 1387، صفحات 81-105

روشه، گی، جامعه‌شناسی تالکوت پارسونز، عبدالحسین نیک گهر، تهران، نشر نی،1391.

نادعلی،سنجش میزان شکنندگی نظام بانکی در اقتصاد ایران، فصلنامه روند، سال بیست و سوم، شماره 76، زمستان 1395، صفحات 145- 172

مجاب، رامین (1395). ارزیابی سلامت بانکی و زمینه‌های رخداد بحران بانکی در اقتصاد ایران. دوماهنامه تازه‌های اقتصاد، 149، 64- 60

محمود زاده، مدنی زاده، نظام بانکی ایران:گذشته، حال و آینده، 2ماهنامه تازه‌های اقتصاد، شهریور1395، شماره 149، صفحات 28- 35

 

Acharya, V. (2009). A theory of systemic risk and design of prudential bank regulation. Journal of Financial Stability 5 (3), 224 – 255

Asaba, S., Lieberman, M.(2011). Who Imitates Whom?, Academy of Management Review,  February 19

Baum, J. A. C, Li, S. X.,Usher, J. M.( 2000). Making the Next Move: How Experiential and Vicarious Learning Shape the Locations of Chains’ Acquisitions. Administrative Science Quarterly, 45,Pages:766-801.

Benhabib,J. , Bisin,A., Jackson, M.(2006). Social Economics: A Brief Introduction to the Handbook, North Holland, 12th November-

Berger, A. N., and Bouwman, C. H. (2009). Bank  liquidity  creation. Review of  Financial Studies, 22(9)

Bettis, A., Weeks(1987). Financial Returns And Strategic Interaction: The Case Of Instant Photography, Strategic Management Journal, Vol.8 Pages:,549-563

Bikhchandani, S. & Sharma, S. (2000). Herd Behaviour in Financial Markets: a review. IMF Working Paper 48, International Monetary Fund, Wahshington, D.C.

Bonfim,Diana,(2014). Liquidity Risk in Banking Is There Herding? , University of Groningen, January 13,6-78

Bonfim, D., Kim M. (2019). Liquidity risk and collective moral hazard, International Journal of Central Banking, forthcoming

Bramoullé, Y., Djebbari, H., and Fortin, B. (2009). Identification of Peer Effects ThroughSocial networks, Journal of Econometrics, 150(1), 41-55

Cao, J. Illing, G. (2010). Regulation of Systemic Liquidity Risk. Financial Markets and Portfolio Management, 24  

Carroll, G. R. Hannan, M. T. ( 1995). Organizations in Industry: Strategy, Structure and Selection. New York: Oxford University Press

Chino, Atsushi (2012). Two Essays on Payout Policy: Strategic Interaction Effects and Union Effects, University of Washington, A dissertation for the degree of Doctor of Philosophy

Cohen, W. M.  Levinthal, D. A.(1990). Absorptive Capacity: A New Perspective on Learning and Innovation. Administrative Science Quarterly, 35: 128-152

Conlisk, John (1980), Costly optimization versus cheap imitators, Journal ofEconomic Behavior and Organization, Pages: 275-293Dimaggio, P. J.  Powell, W. W.(1983). The Iron Cage Revisted: Institutional Isomorphism and Collective Rationality in Organization Fields. American Sociological Review, 48: 147- 160

Drehmann, M, and N. Nikolaou (2008). Funding Liquidity Risk: Definition and Measurement. mimeo. Working Paper

Farhi, E. Tirol, J. (2012).Bubbly Liquidity. The Review of Economic Studies, Volume 79, Issue 2, Pages 678–706,

Gorton, G.(2015).The Maze of Banking: History, Theory, Crisis, Oxford University , Page 410

Halliday, T. J.; & Kwak, S. (2012). What is a peer? The  role  of  network  definitions in estimation of endogenous peer effects. Applied Economics , 44(3), 289-302.

Hannan,M.T. Freeman,Y(1989).Organizational Ecology, Combridge: Harvard University Press

He D. (2016). Herd Behavior in the Commercial Bank Credit Market. In: Financial Security in China. Research Series on the Chinese Dream and China’s Development Path. Springer, Singapore,  33-45

Hiass,R.(2005). Banks, Herding and Regulation: a Review and Synthesis, Europe Institute University of Economics and Business Administration, Vienna , Paper for presentation at the Workshop on Informational Herding Behavior Copenhagen, Sept. 16-18

Horvátha, R.(2014), Peer Effects in Central Banking, Institute of Economic Studies, Charles University, Prague May 2

Jain, A. and S. Gupta (1987), Some Evidence on Herding" Behavior of U. S. Banks,Journal of Money, Credit and Banking, 19(1), 78-89

Lee,L. (2007), Identification and Estimation of Spatial Econometric Models with Group Interactions, Contextual Factors and Fixed Effects,Journal of Econometrics 140,Page 333-34

Leary, M.T., Roberts, M.R.(2014), Do Peer Firms Affect Corporate Financial Policy?, The Journal of Finance , No. 1  February, 139-178

Lieberman, M. B.,  Asaba, S.(2004), Why Do Firms Imitate Each Other? Academy of Management Review, 31: 366-385

Llewellyn, D.( 2002), An Analysis of The Causes of Recent Banking Crises. European Journalof Finance 8(2), 152-175

Margaretic, P. & et al. (2019). Measuring endogenous peer effects in interbank markets. Preliminary Version, University of San Andres and Central Bank of Chile

Manski, C.(1993). Identification of Endogenous Social Effects: The Reflection Problem , Review of Economic Studies 60, 531-542

Matutes, C. & Vives, X. (2000), Imperfect Competition, Risk taking, and Regulation in Banking.European Economic Review, 44: 1-34

Milbourn, T. Boot, A. and Thakor, A. )1999(. Megamergers and expanded scope: theories of bank size and activity diversity. Journal of Banking and Finance,23: 195-214

Nakagawa, R and Uchida, H.(2007).Herd behavior in the Japanese loan market: Evidence from bank panel data, Journal of  Financial Intermediation, Volume 14, Issue 4, 555–583

Peteraf, M. A. (1993), The Cornerstones of Competitive Advantage: A Resource-Based View. Strategic Management Journal, 14: 179-192

Rochet, J. (2008). Why Are There So Many Banking Crises?: The Politics and Policy of Bank Regulation. Princeton University Press.

Rosenkopf, L. Abrahamson, E. )1999(, Modeling Reputation and Information Influences in Threshold Models of Bandwagon Innovation Diffusion. Computational and Mathematical Organizational Theory, 5: 361-384

Schmutte,M,.Ian,)2010(, Notes on the Reflection Problem, March,15

Silva,A. (2016), Strategic Complementarity in Baks’ Funding Choices And financial Stability, Working Paper Series, European Systemic Risk Board, No 19

Silva, A. (2019). Strategic liquidity mismatch and financial sector stability. Review of Financial Studies, forthcoming

Topa, G., Zenou, Y. (2014). Neighborhood and Network Effects. Handbook of Regional and Urban Economics, Volume 5,Chapter 9

Torres, R.O. (2007). Panel Data Analysis, Fixed and Random Effects. Princeton university, using Stata,v. 4.2

Yuehua, L. (2017). Peer Effect in Bank Financial Reporting: Evidence from Loan loss Provision . ( Doctoral thesis).  National  University of  Singapore