Xuelian Li

Sunflower management is a type of management style in which a chief executive officer (CEO) ignores information and attempts to confirm the board’s prior beliefs. The CEO’s accommodating behavior may reduce incentive conflicts but also stimulate diligent board monitoring. The present article aims to develop a contingent claim utility model to investigate the effect of green lending on bank spread behavior and board monitoring under sunflower management. The principal advantage of the contingent claim utility approach is the explicit treatment of uncertainty and diligent board monitoring, which play a prominent role in discussions of intermediary behavior. Additionally, banks may earn goodwill from a green lending policy, thus yielding environmental improvements. In this study, we explore the goodwill effect on the bank’s interest margin determination and board monitoring. We use the comparative statistics method to analyze the result of changes in the theoretical model’s exogenous parameters. Moreover, we use empirical data as a baseline for numerical simulations to explain the comparative statistics. Our main findings are that increasing green lending reduces interest margins and enforces diligent board monitoring. The increase in goodwill garnered from improvements to the bank’s green lending reputation was found to enhance the interest margins but ease active board monitoring. From these results, we outline implications such as implementing intangible goodwill asset accumulation from bank customers’ green awareness via green lending publicity that increases the bank interest margin under sunflower management, thereby affecting banking stability.

This study explores the determinants of an insurer’s guaranteed rate based on a contingent claim model. According to the model development, we structure and estimate the guaranteed rate setting and policyholder protection equations. A time-series approach explains the guaranteed rate-setting behavior and insurance stability captured by policyholder protection from 1990 to 2018. The evidence suggests that derivatives, life insurance premiums, administrative costs, and federal income tax affect the insurer’s guaranteed rate-setting behavior. Increasing life insurance premiums and administrative costs in asset-liability matching management significantly enhance policyholder protection, contributing to insurance stability.

The increasingly closer economic relations among Mainland China, Hong Kong, Macao and Taiwan have emerged and expanded the need for monetary cooperation. The pursuit of monetary cooperation could not only have a long-term strategic significance for the internationalising progress of RMB, but also a practical significance in boosting the mutually beneficial development of regional economy, as well as reducing financial risks and the political divergences between the two sides of Taiwan Strait. In this paper, the feasibility of monetary cooperation among Mainland China, Hong Kong, Macao and Taiwan is analysed from the perspectives of static state and dynamic trend by using the three-variable SVAR model (output, price and interest rate), state-space model and impulse–response analysis. The research finds that an overall symmetry of economic shocks from these four regions is relatively symmetrical. Besides, the restructuring speed of economic shock and the dynamic trend of the symmetry of economic shock are relatively optimistic. From the perspective of economy, it is believed that, as their trade and financial cooperation deepens, the conditions for monetary cooperation among Mainland China, Hong Kong, Macao and Taiwan, would gradually mature.