Alex Fayman

Bio: Alex Fayman is an academic researcher from University of Central Arkansas. The author has contributed to research in topics: Dividend & Economic freedom. The author has an hindex of 7, co-authored 14 publications receiving 95 citations.

Bank Profitability: The Impact of Foreign Currency Fluctuations

Abstract: Given the global nature of business, and in particular banking, we should find that financial institutions are impacted by foreign currency movements. In this paper, we investigate whether the performance of 22 large U.S. commercial banks is affected by foreign exchange fluctuations over a 40-year period. We find that these large U.S. banks are exposed to foreign exchange risk and that specific bank performance is related to the value of the dollar relative to market baskets of other currencies. These results can potentially be used to mitigate some of this risk and/or alter investment portfolios given various foreign currency movements.

Prepayment risk and bank performance

Abstract: Purpose – The purpose of this paper is to identify effects of prepayment risk on performance of commercial banks in the USA. Understanding how various risks impact banks' performance can help to improve performance of financial institutions and better estimate risk premia charged by banks on the loans they extend to their customers.Design/methodology/approach – The paper measures the prepayment risk premium and aims to gauge its effect on various ratios that measure bank performance. Since, risk management is an important goal of financial management, it is important to learn how prepayment risk pertains to bank performance.Findings – The results of this paper suggest that prepayment risk may significantly impact return on loans, return on equity and real estate loans to total loans ratios of various commercial banks. The impacts, in terms of strength and direction, vary between the periods of pre‐ and post‐passage of the Financial Institutions Reform and Recovery Act. The results indicate that the additi...

Growth in the Number of Firms and the Economic Freedom Index in a Dynamic Model of the U.S. States

Abstract: INTRODUCTION Freedom indices of the world have established themselves as fixtures in the social sciences literature, especially in the economic growth literature. (e.g., Atukeren, 2005; Berggren and Jordahl, 2005; Gwartney, Lawson and Clark, 2005; Powell, 2005; Gwartney, Holcombe and Lawson, 2004; Nieswiadomy and Strazichich, 2004; Cole, 2003; Gwartney and Lawson, 2003; Gwartney, Block and Lawson, 1996) Across the literature, the consistent finding is that economic freedom, as measured by the various indices, is significantly and positively related to economic well-being. Citizens of nations with more economic freedom enjoy higher incomes, and as an economy becomes freer, incomes rise. Of course, some may object that the term "economic freedom" is not value neutral. Though true, the advocacy component of the indices creators does not alter the indices' proven research usefulness in summarizing a broad variety of government activities. One could choose to think of the indices in terms of "market liberalism," or "government economic non-interventionism." Karabegovic, Samida, Schlegel and McMahon (2003) introduced a conceptually similar index, the Economic Freedom of North America index (EFNA) featuring economic freedom differences among U.S. states and Canadian provinces. Karabegovic, et al, used their index to explain income differences among the states, offering evidence that the EFNA is significantly, positively related to state levels and growth of economic activity. Various researchers have used the EFNA (e.g., Ashby, 2005; Kreft and Sobel, 2005; Wang, 2005) to address questions of income differentials between states, income growth, entrepreneurship, and other research questions. Similar to Kreft and Sobel (2005), Gohmann, Hobbs & McCrickard (2008), Sobel (2008), and others, we apply the EFNA to questions of entrepreneurship. Specifically, we ask whether the political outcomes summarized by the EFNA are significantly related to growth in the number of businesses. Karabegovic, et al, argue that the EFNA measures economic freedom in states; furthermore, they argued that greater economic freedom results in higher income levels for state residents because greater economic freedom consists of greater opportunity to seek and exploit economic opportunities; that is, to pursue entrepreneurial activity. Freedom to exploit economic opportunities is also the freedom to create new businesses, so economic freedom should lead to more business births. However, such freedom is a double-edged sword. The freedom to start a business is also the freedom for that business to fail. Indeed, it is business births that create the "raw material" for business failures. Therefore, the impact of economic freedom on growth in the number of businesses is ambiguous, although the impact on society--higher incomes--is not. This paper contains two innovations not found elsewhere in this stream of the literature. The first is the dependent variable, the measure of businesses. We use the annual growth rate in the number of firms, approximated by the annual difference in the natural log of the number of firms. Therefore, this measure implicitly includes firm births and firm deaths, and captures the full range of firm launches, whether partnership, corporation, etc. The second innovation is the use of a particular dynamic panel data estimator (Arellano and Bond, 1991) not found in this literature outside of a working paper. (1) ENTREPRENEURSHIP, ECONOMIC FREEDOM, AND ECONOMIC PERFORMANCE Promoting entrepreneurship has emerged as a significant policy tool for regional economic growth and job creation. The relevant policy question becomes which policies best promote entrepreneurship. A literature has developed around the concept that the appropriate policies are those will increase economic freedom. "Economic freedom" may be conceptualized as: "Policies are consistent with economic freedom when they provide an infrastructure for voluntary exchange, and protect individuals and their property from aggressors seeking to use violence, coercion, and fraud to seize things that do not belong to them. …

Financial development and economic growth

Abstract: relationship. All subsequent studies confirmed it (see for example King and Levine, 1993, and the review in: Pagano, 1993). Goldsmith used a sample of 35 countries for the period between 1860 and 1963 to show the relationship between income and financial depth measured by the ratio between bank's assets and GDP. He also showed that in periods of rapid growth, financial depth grows faster than income. More details about measuring financial depth can be found in this paper. FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH Velimir Šonje

Economic freedom and income inequality revisited: evidence from a panel error correction model

Abstract: I. INTRODUCTION Over the last three decades, inequality in the United States grew significantly. The Gini index of income inequality was below 0.40 in 1980. Today, it is close to 0.45. Between 1980 and 2009, while the real income of the population in the bottom fifth grew slightly more than 10% and the middle fifth by 15%, the income of the top 5% grew more than 45%. Today, the income share of the bottom fifth is less than 5% while the highest fifth is more than 50%. As Page and Jacobs (2009) argue, growing income inequality in the United States is recognized as a problem from across the political spectrum--from liberal democrats like Barack Obama to conservative republicans like George W. Bush. Although not everyone agrees that inequality is actually a problem, almost three-fourths of Americans agree that differences in income are too large (Page and Jacobs 2009, 40). Nevertheless, government policies to reduce inequality are still quite controversial. Page and Jacobs define Americans as conservative egalitarians. Is conservative egalitarianism an oxymoron? Is it possible to achieve equality while promoting policies toward economic freedom? In this paper, we analyze these questions using data from U.S. states covering almost a quarter of a century. The effects of economic freedom on income inequality are threefold. First, it creates opportunities for the poor by creating equal access to property rights necessary for the generation of capital for everyone. Second, economic freedom promotes economic growth which in turn affects income distribution. Kuznets (1955, 1963) hypothesizes that income distribution in an economy worsens in the early stages of the economic development, but then it improves as it reaches later stages of development. According to Kuznets, this is because of a shift of labor from low- to high-productivity sectors in the initial stages of development, which results in a widening gap in incomes. As the economy develops, however, the high-productivity sector dominates the economy, and income inequality decreases. In other words, there is an inverse-U-shaped relationship between income inequality and economic growth. Several studies investigating the relationship between income inequality and economic growth in the United States do not find empirical evidence supporting Kuznets' hypothesis. They do, however, find a U-shape relationship between the two variables revealing an indirect relationship between economic freedom and income inequality. (1) Finally, economic freedom limits redistribution from the rich to the poor. A regressive tax system is generally assumed to raise income inequality, whereas a progressive tax system is assumed to reduce it. Dincer and Gunalp (2012) find a negative relationship between the marginal tax rates and income inequality in the United States. There are several empirical studies analyzing the relationship between economic freedom and income inequality. (2) Not surprisingly, their findings have yielded mixed results. The lack of consensus is partly due to the differences in the samples and the empirical methodology. Our study advances the literature on several fronts. First, unlike previous studies which rely on cross-sectional data, we exploit both time series and cross-sectional variation in the data. Second, and perhaps most importantly, we analyze the Granger-causal relationship between economic freedom and inequality within a panel error correction model framework. Previous studies assume a unidirectional causal relationship from economic freedom to inequality. In democratic countries, such as the United States, high income inequality forces governments to follow policies that redistribute income from the rich to the poor. Given that redistributive policies cause economic freedom to decline, unidirectional causality is rather a strong assumption. Our results reveal bidirectional Granger-causality in both the short and long run between economic freedom and inequality. …

Economic Freedom of North America: 2013

Abstract: MOST FREE 3RD QUARTILE 2ND QUARTILE LEAST FREE The map uses the Subnational index. The quartiles for the map are based on scores to two decimal points. The rankings in the report are based on scores to only one decimal point. Researchers can find unrounded scores on freetheworld.com. Data available to researchers The full data set, including all of the data published in this report as well as data omitted due to limited space, can be downloaded for free. TOP AND BOTTOM Economic Freedom of North America 2017 is our 13th edition. For researchers, this report has become the most widely used of the North American indexes to explore empirically the effects of economic freedom; more than 230 research articles have used the index.

Bank Dividends and Signaling to Information-Sensitive Depositors

Abstract: This study investigates whether the composition of debt affects the payout policy of banks. We identify that information-sensitive depositors (institutional investors) are targets of dividend signaling by banks. We use a unique database of Brazilian banks, for which we are able to identify several types of debtholders, namely institutional investors, nonfinancial firms and individuals, which are potential targets of dividend signaling. We also exploit the features of the Brazilian banking system, such as the existence of several closely held banks, owned and managed by a small group of shareholders, for which shareholder-targeted signaling is implausible, and find that banks that rely more on information-sensitive (institutional) depositors for funding pay larger dividends, controlling for other features. During the financial crisis, this behavior was even more pronounced. This relationship reinforces the role of dividends as a costly and credible signal of the quality of bank assets. We also find that payout is negatively related to the banks’ cost of funding (interest rates paid on certificates of deposits), that dividends have a positive relationship with size and past profitability and that closely held banks pay more dividends than publicly traded banks, a finding that is also in line with the idea that depositors are targets of dividend-signaling. Finally, we find a negative relationship between dividends and the capital adequacy ratio, which indicates that regulatory pressure may induce banks to pay less dividends and that payouts are negatively related to the growth of the loan portfolio, consistent with the idea of banks retaining earnings to increase equity and thus their lending capacity.