A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, In partial fulfilment of the requirements for the degree of Master of Management (Finance and Investment), March 2016 / DFIs play a very important role in economic development of most countries. In South Africa (SA), they have an additional role of addressing socio-economic development and transformation problems that were created by the previous Apartheid system. In particular, DFIs in SA address unemployment, redistribution of income, private sector development and manufacturing sector growth. However, it is not clear whether these DFI’s are having a positive impact on the socio-economic transformation as they are expected to, given the amount of money that the government budget for them each year. The aim of this research is to investigate whether SA DFI’s have significant impact on the country’s socio-economic development and transformation. DFI credit extension is found to have positive and significant impact on economic growth in in both South African and in emerging markets. Also, in both South Africa and in emerging markets, government consumption has negative impact on economic growth. An additional analysis further shows that DFI credit extension promotes increase in manufacturing-toGDP in SA and in other emerging markets. DFI has significantly positive impact on HDI in South Africa but not in emerging markets. There is a positive (albeit not significant) impact of DFI credit extension on poverty in South Africa, worse still, the relationship is significantly negative in other emerging countries. The results show that the government should bolster the DFI funding as these DFIs play a significant role in the economic development of the country. / GR2018

A melhoria de processos e práticas de gestão tornou-se essencial aos bancos que operam no Brasil, em presença da rápida evolução das atividades econômicas e do mercado de crédito. Diante disso, a Controlaria, bem como as informações por ela disponibilizadas, ganha mais espaço e importância nas instituições financeiras. Nesse sentido, este trabalho teve como principal objetivo verificar se, e em que medida, as práticas de Controladoria dos maiores bancos que operam no Brasil se refletem em uma Estrutura Conceitual Básica de Controladoria (ECBC). Dessa forma, realizou-se uma revisão da ECBC proposta por Borinelli (2006), com uma complementação das funções e atribuições da Controladoria voltadas para instituições financeiras, de acordo com literatura específica sobre esse assunto. Também foi realizada uma pesquisa empírica, a qual se utilizou de entrevistas e questionários, para investigar a aplicação da teoria na prática de Controladoria dos maiores bancos que operam no Brasil, bem como uma análise da aderência dessas práticas à ECBC. No que diz respeito aos achados deste trabalho, quanto às funções gerais da Controladoria atribuídas pela ECBC, verificou-se que as funções de Contabilidade Societária, Contabilidade Fiscal, Gestão das Informações e Atendimento a Usuários Externos, são funções típicas da área de Controladoria nos bancos pesquisados, o que está aderente às recomendações feitas pela ECBC. Entretanto, as funções de Riscos, Controles Internos e Finanças não foram apresentadas pelos bancos pesquisados como desempenhadas pela área de Controladoria, sendo essas inconsistentes com a sistematização da ECBC. Além das funções gerais, este trabalho, igualmente, investigou o papel da Controladoria em processos específicos nas instituições financeiras. As respostas obtidas mostraram que, para os processos de Orçamento, Mensuração, Análise e Controle de Custos, bem como no Planejamento Tributário, a Controladoria é considerada como a área responsável ou coordenadora. Porém, para os processos de Planejamento Estratégico, Análises de Ambientes e Viabilidades, Avaliação de Desempenho e Controle de Riscos, a Controladoria não é considerada como responsável ou coordenadora desses processos e, em muitos casos, apenas fornece apoio/suporte informacional, não aderindo à ECBC. Não obstante, optou-se, ainda, por estratificar os dados obtidos entre diferentes grupos de instituições, o que permitiu realizar uma comparação da prática de Controladoria entre os grupos distintos. O que se encontrou, nessas estratificações, foi que a prática de Controladoria de alguns grupos parece ser mais aderente aos elementos que integram a ECBC, do que em outros grupos, sem que, entretanto, algum grupo pudesse refletir, completamente, esses elementos na prática. Por fim, conclui-se que os resultados encontrados evidenciaram que as práticas de Controladoria dos maiores bancos que operam no Brasil refletem, parcialmente, os elementos que integram uma Estrutura Conceitual Básica de Controladoria. / Improving management practices and processes has become an essential need for banks operating in Brazil, due to the fast-paced evolution of the economic activities and the credit market. In this context, Controllership, as well as the information it provides, has gained increased importance and prominence within financial institutions. In this sense, the main goal of this paper is to verify if and to what extent Controllership practices adopted by major banks in Brazil reflect a Basic Conceptual Structure of Controllership (Estrutura Conceitual Básica de Controladoria - ECBC). To that end, a revision of the ECBC proposed by Borinelli (2006) was carried out, including Controllership functions and duties aimed at financial institutions, as per the specific literature on this topic. An empirical research was also conducted through interviews and questionnaires in order to investigate and analyze how Controllership practices in major banks with operations in Brazil reflect the theory and adhere to the ECBC. The findings of this paper regarding general Controllership functions laid out by the ECBC reveal that Corporate Accounting, Tax Accounting, Information Management and External User Service are typical activities for the Controllership area in the banks investigated, which complies with the ECBC recommendations. On the other hand, functions regarding Risks, Internal Controls and Finances were found not to integrate the activities performed by the Controllership area in the banks investigated, which is inconsistent with the concepts systematized under the ECBC. In addition to the general functions, this paper also investigates the role Controllership plays in specific processes within financial institutions. The answers given reveal that Controllership is considered to be the area that leads and coordinates processes as Budgeting, Measurement, Costs Analysis and Control, as well as Tax Planning. However, Controllership is not considered to be the area that leads and coordinates processes regarding Strategic Planning, Environment and Viability Analyses, Performance Assessment and Risk Control, simply providing information support in many cases and thereby not adhering to the ECBC. Furthermore, there was an attempt to stratify the data obtained into different groups of institutions, which enabled a comparison of the Controllership practices across the groups. These categories showed that the Controllership practices of some groups seem to be more consistent with the ECBC elements than others, which does not indicate that any group could fully reflect these elements in practice. Finally, the results support the conclusion that Controllership practices in major banks operating in Brazil partially reflect the elements that comprise the Basic Conceptual Structure of Controllership.

This dissertation studies the demand and supply of liquidity with a particular focus on the financial intermediation sector. The first essay analyzes the role of financial intermediaries as suppliers of inside money. The demand for money arises from the needs of nonfinancial corporations to buffer liquidity shocks. The dynamic interaction between inside money supply and demand gives rise to a mechanism of financial instability that puts the procyclicality of intermediary leverage at the center. Introducing outside money, in the form of government debt, can be counterproductive, as it may amplify the procyclicality of inside money creation and intermediary leverage, making booms more fragile and crises more stagnant. The second essay addresses an issue that is left out in the first essay -- the interaction between money and credit. It offers a model of macroeconomy where intermediaries are needed for both money and credit creation. Specifically, entrepreneurs hold money to finance new projects, while intermediaries issue money backed by investments in existing projects. The complementarity between money and credit arises from financial frictions and amplifies economic fluctuations. In the third essay, my coauthors and I model the liquidity demand of banks. To buffer liquidity shocks, banks hold central bank reserves and can borrow reserves from each other. The propagation of liquidity shocks, depend on the topology of interbank credit network, but more importantly, on the type of equilibrium on the network (strategic complementarity vs. substitution). The model is estimated using data on reserves, interbank credit, bank balance sheets, and macroeconomic variables. We propose a method to identify banks that contribute the most to systemic risk, and offer policy guidance by comparing the decentralized outcome with the choice of a benevolent planner.

I study financial intermediation and optimal regulation through the lens of banking theory and applied corporate finance. In my understanding, the theory on banking is primarily the theory on bank runs. And the key questions I have been pursuing to answer are the causes of runs in both the traditional and shadow banking sectors and the roles of the market and the regulator in maintaining financial stability. I start with the shadow banking system outside the traditional regulatory framework, which accumulated tremendous risks and led to a major financial crisis. Why don’t we simply shut down the shadow banking sector? Chapter 1 examines the role of shadow banking and optimal shadow bank regulation by developing a bank run model featuring the tradeoff between financial innovation and systemic risk. In my model, the traditional banking sector is regulated such that it can credibly provide safe assets, while a shadow banking sector creates space for beneficial investment opportunities created by financial innovation but also provides regulatory arbitrage opportunities for non-innovative banks. Systemic risk arises from the negative externalities of asset liquidation in the shadow banking sector, which may lead to a self-fulfilling recession and costly government bailouts. Heavy regulatory punishment on systemically important shadow banks controls existing systemic risk and has a deterrent effect on its accumulation ex ante. My paper is the first to formalize the designation authority of a macro-prudential regulator in systemic risk regulation. I then switch from the assets side to the liabilities side on the bank’s balance sheet. Chapter 2 introduces informed agents to the banking model and proposes a novel role of deposit insurance in fostering market discipline. While the moral hazard problem brought by deposit insurance weakens market discipline, I show that the opposite can be true when the insurance stabilizes uninformed funding and increases the benefits of monitoring through information acquisition. Knowing the bank asset type, informed depositors utilize the demand deposits as a monitoring device and discipline the bank into holding good assets. However, self-fulfilling bank runs initiated by uninformed depositors erodes the future returns, inducing more depositors to forgo information acquisition and act like uninformed depositors. A novel role of deposit insurance emerges from the strategic complementarity between monitoring efforts and stability of uninformed funding. A capped deposit insurance, by stabilizing the retail funding of the bank, restores wholesale depositors’ monitoring incentives and benefits market discipline. I examine the role of information in generating bank runs in Chapter 3, where I explore the relationship between redemption price and run risks in a model of money market fund industry. Money market funds compete with commercial banks by issuing demandable shares with stable redemption price, transforming risky assets into money-like claims outside the traditional banking sector. Floating net asset value (NAV) is widely believed a solution to money market fund runs by removing the first-mover advantages. In a coordination game model a la Angeletos and Werning (2006), I show that the floating net asset value, which allows investors to redeem shares at market-based price rather than book value, may lead to more self-fulfilling runs. Compared to stable net asset value, which becomes informative only when the regime is abandoned, the floating net asset value acts as a public noisy signal, coordinating investors’ behaviors and resulting in multiplicity. The destabilizing effect increases when investors’ capacity of acquiring private information is constrained. The model implications are consistent with a surge in the conversion from prime to government institutional funds in 2016, when the floating net asset value requirement on the former is the centerpiece of the money market fund reform.

Financial Institutions have been regarded to be the core area of economic development. However, Nepal could not achieve satisfactory level of economic development and growth due to Maoists war (1996-2006) and the political instability. The increase in size and number of commercial banks are limited only in the urban areas so that banking services are not accessible to the general public. This paper examines interaction between financial development and economic growth in Nepal employing correlation analysis, regression analysis, financial ratios and other related theories. As we found that financial institutions have grown rapidly which has implication in overall economy of the nation. The economic indicators such as GDP, GDP per capita, loan assets of commercial banks, investment, deposit, number of commercial banks, and inflation rate from fiscal year 2001 to 2007 are used for the analysis of this study. The relevant ratios of commercial banks such as deposit, investment, and profitability are found to be in increasing trend. The growth rate of GDP/capita is however volatile in the study period, the regression result of Deposit/GDP is weakly significant under the study period {(0,06)*}. The investment growth rate is not significant at all possibly due to the time lag of the effect of investment on the economic development. Furthermore, correlation between Growth rate of GDP and deposit/GDP (ρ=0.49). The Growth rate of GDP and investment over GDP is positive related with a correlation coefficient of 0.82. This has confirmed our beliefs in the set out of the thesis.

<p>Financial Institutions have been regarded to be the core area of economic development. However, Nepal could not achieve satisfactory level of economic development and growth due to Maoists war (1996-2006) and the political instability. The increase in size and number of commercial banks are limited only in the urban areas so that banking services are not accessible to the general public.</p><p>This paper examines interaction between financial development and economic growth in Nepal employing correlation analysis, regression analysis, financial ratios and other related theories.</p><p>As we found that financial institutions have grown rapidly which has implication in overall economy of the nation. The economic indicators such as GDP, GDP per capita, loan assets of commercial banks, investment, deposit, number of commercial banks, and inflation rate from fiscal year 2001 to 2007 are used for the analysis of this study.</p><p>The relevant ratios of commercial banks such as deposit, investment, and profitability are found to be in increasing trend. The growth rate of GDP/capita is however volatile in the study period, the regression result of Deposit/GDP is weakly significant under the study period {(0,06)*}. The investment growth rate is not significant at all possibly due to the time lag of the effect of investment on the economic development.</p><p>Furthermore, correlation between Growth rate of GDP and deposit/GDP (ρ=0.49). The Growth rate of GDP and investment over GDP is positive related with a correlation coefficient of 0.82. This has confirmed our beliefs in the set out of the thesis.</p>

published_or_final_version / Public Administration / Master / Master of Social Sciences

published_or_final_version / Economics and Finance / Master / Master of Philosophy

The purpose of this research was to determine the success rate of business plan proposals submitted at selected financial institutions. In the context of this study, selected financial institutions refer to the four main retail banks of South Africa, namely ABSA, First National Bank, Standard Bank and Nedbank. Face-to-face in-depth interviews were conducted with eleven small business owners from each bank, bringing the total of small business owners interviewed to 44. The interviews were guided by a set of closed-ended and open-ended questions eliciting information from small business owners as to how they draft or develop their business plans. Open-ended questions allowed the respondents to express their opinions and assisted the researcher to seek clarification on the reasons or motivations behind the responses. The research found that the business plans submitted to financial institutions were ineffective as they fell short of elements that should be included in a business plan. This finding was based solely on the small businesses sampled. The results indicate that small business owners need to put in more effort to prepare sound business plans. Small business owners need to take greater care and effort to provide financial institutions with what is essentially required when applying for finance. Good record of accomplishment, good credit record, business expertise or skills, and the availability of collateral and risk capital, are all considered by small business owners to be essential in order to obtain finance. Conversely, lack of risk capital, lack of collateral and poor cash flow, are considered to be barriers to obtaining finance. Small business owners need financial institutions to assist them with their skills development. These include mentorship and training services, a tool to create business plans, an enterprise toolkit, and a model for cash flow. Government incentive schemes are unpopular with small businesses, and as a result, small business owners miss other sources of finance. Financial institutions could do more to improve the situation and to increase the accessibility of finance to the SMME sector. Financial institutions continue to place greater reliance on sound or viable business plans. This is understandable owing to the need to assess repayment ability. Small business owners need to be aware of what information financial institutions require when they assess finance applications. Overall, they should be more prepared when applying for finance. / Thesis (M.B.A.)--North-West University, Potchefstroom Campus, 2009.

The purpose of this research was to determine the success rate of business plan proposals submitted at selected financial institutions. In the context of this study, selected financial institutions refer to the four main retail banks of South Africa, namely ABSA, First National Bank, Standard Bank and Nedbank. Face-to-face in-depth interviews were conducted with eleven small business owners from each bank, bringing the total of small business owners interviewed to 44. The interviews were guided by a set of closed-ended and open-ended questions eliciting information from small business owners as to how they draft or develop their business plans. Open-ended questions allowed the respondents to express their opinions and assisted the researcher to seek clarification on the reasons or motivations behind the responses. The research found that the business plans submitted to financial institutions were ineffective as they fell short of elements that should be included in a business plan. This finding was based solely on the small businesses sampled. The results indicate that small business owners need to put in more effort to prepare sound business plans. Small business owners need to take greater care and effort to provide financial institutions with what is essentially required when applying for finance. Good record of accomplishment, good credit record, business expertise or skills, and the availability of collateral and risk capital, are all considered by small business owners to be essential in order to obtain finance. Conversely, lack of risk capital, lack of collateral and poor cash flow, are considered to be barriers to obtaining finance. Small business owners need financial institutions to assist them with their skills development. These include mentorship and training services, a tool to create business plans, an enterprise toolkit, and a model for cash flow. Government incentive schemes are unpopular with small businesses, and as a result, small business owners miss other sources of finance. Financial institutions could do more to improve the situation and to increase the accessibility of finance to the SMME sector. Financial institutions continue to place greater reliance on sound or viable business plans. This is understandable owing to the need to assess repayment ability. Small business owners need to be aware of what information financial institutions require when they assess finance applications. Overall, they should be more prepared when applying for finance. / Thesis (M.B.A.)--North-West University, Potchefstroom Campus, 2009.