ACCA is aware that different businesses in different countries are experiencing these challenging times in different ways. Yet for all the attention devoted to the matter, there is still relatively little concrete information and anecdotal reports can be misleading. ACCA’s Global Economic Conditions survey aims to fill in important gaps in the understanding of global economic developments using the unique insights of finance professionals as a temperature check of the global economy.
This report is the first of a series of publications on the findings of the Global Economic Conditions Survey. Fieldwork for the first 2009 survey took place between 20 February – 14 March 2009 and online responses were received from 805 ACCA members in more than 80 countries around the world. ACCA sincerely thanks all members who have taken part in this survey.
Contagion effects resulting from bankruptcy announcements have long been the focus of empirical analyses. The majority of the literature has examined bankruptcy of non-financial firms. In the banking industry, however, failure of a firm is different than for non-banks. Specifically, unlike any other industry, a failing bank can not be closed until regulators evaluate the situation for its impact on the safety and soundness of the financial system, arrange a purchaser of the bank’s assets and liabilities (or another liquidation method), and declare the bank closed. Additionally, before 1997 and the enactment of the Reigle-Neal Interstate Banking and Branching Efficiency Act, banks were not completely free to expand outside their local area. While many banks and their home states had regional reciprocity laws (banks could expand across state lines with neighboring states), complete nationwide expansion was virtually nonexistent. Thus, unlike failures in non-banking industries, a bank failure is more likely to have a direct impact on the performance of rival banks in the failing bank’s local area.
In an attempt to clarify the nature of bank failure related contagion on U.S. banks, Aharony and Swary (1996) examine information-based elements of bank failures using large bank failures occurring in the southwest U.S. in the 1980s. They find that the closer the rival bank is to the failing bank the stronger the contagion effect; the larger the rival bank the stronger the contagion effect; and the higher the rival banks’ leverage the more negative the impact. They conclude that regional bank failures should send a “red flag” to regulators indicating additional banks in the region may be problematic.
A renewed interest in the dynamics of the current account spurred by productivity and fiscal shocks has recently emerged as a consequence of the record deterioration of the current account balance in the US, which has been accompanied first by the faster productivity growth of the 90's, and then by the new large fiscal deficits run in the aftermath of September 11.
