Mart Sõrg’s research while affiliated with University of Tartu and other places

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Publications (23)


Figure 1. Sources of finance for non-financial corporations in the period 2004–2008 (Monthly Bulletin, ECB, October 2010, p. 62). When it was too late to avoid big problems it was started to work out the European banking regulation and supervision system. In October 2008 the European Commission mandated a High Level Group chaired by former managing director of the IMF Jacques de Larosière to give advice on the future of European financial regulation and supervision. The Group presented its final report on 25 February 2009 and their recommendation provided the basis for legislative proposals by Commission later that year (de Larosière, 2009). In this report de Larosière argues that a key lesson to be drawn from the crisis is the urgent need to upgrade macro-prudential supervision in the EU for all financial activities. However the European Commission made its proposal first, followed a little later by a Report by Herman van Rompuy, the President of the European Council. There are small – but significant – differences between the two proposals. It is anticipated that the latter will form the basis for further work.  
Figure 2. Credit institutions' balance sheets in different countries: proportion of the five largest institutions ex ante and ex post financial crisis (European Central Bank).  
Roots of the weaknesses of the euro. Euro nõrkuste juured
  • Article
  • Full-text available

January 2012

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19 Reads

Mart Sõrg

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Nadežda Ivanova

The aim of the euro was to speed up the integration process and economic development in Europe. History of euro showed us that these optimistic goals have been only partly fulfilled. This modest result has several essential roots. Our research showed that Europe have not been and is even not today the optimal currency area. The architecture of the EMU was incomplete: in building up it was not given enough power to ECB, also were underestimated vitality national interests in member states. Therefore common interests in euro area were not enough protected. Last global financial and economic crisis showed clearly main weaknesses of euro and enforced to start to liquidate them. We conclude that resent reforms and enlargement of the EMU (Estonia) probably will strengthen this union

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Roots of the Weaknesses of the Euro

June 2011

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24 Reads

The aim of the euro was to speed up the integration process and economic development in Europe. History of euro showed us that these optimistic goals have been only partly fulfilled. This modest result has several essential roots. Our research showed that Europe have not been and is even not today the optimal currency area. The architecture of the EMU was incomplete: in building up it was not given enough power to ECB, also were underestimated vitality national interests in member states. Therefore common interests in euro area were not enough protected. Last global financial and economic crisis showed clearly main weaknesses of euro and enforced to start to liquidate them. We conclude that resent reforms and enlargement of the EMU (Estonia) probably will strengthen this union.


Table 2 . Some Indicators of the Estonian Banking and Financial Sector Development, 1997-2002
Table 4 . Summary Information on the Output and Input Variables
Estonian Banking Sector Performance Analysis Using Malmquist Indexes And DuPont Financial Ratio Analysis

February 2011

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465 Reads

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18 Citations

International Business & Economics Research Journal (IBER)

Banks and other financial institutions are a unique set of business firms whose assets and liabilities, regulatory restrictions, economic functions, and operating make them an important subject of research. Banks performance monitoring, analysis and control needs special analysis in respect to their operation, productivity and performance results from the viewpoint of different audiences, like investors/owners, regulators, customers/clients, and management themselves. In this paper, productivity change in Estonian banking is estimated using the Malmquist productivity index. The data used in this study covers the period from 1999 to 2002. One purpose of this research is to introduce the Malmquist productivity index, which is first used for productivity analysis of Estonian banks. The present study shows that Estonian banks experienced average a 25.6 percent annual productivity growth rate during 1999-2002, what was the result of technological progress. Generally, all Estonian banks have increased productivity as a result of technological progress on this period. Some historical notes on the development of the Estonian banking system and the capital structure of banks are presented in this article. The usage of a modified version of DuPont financial ratio analysis is discussed also in the article. Empirical results of the Estonian commercial banking system performance analysis are presented in the article (1994-2002).


Transformation of the Estonian Banking System

January 2011

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9 Reads

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3 Citations

The transformation of the banking and financial sector in transition economies has become critical for the successful shift from centrally planned to market-driven economic systems. Such reforms led to the creation of financial markets, which are essential for market transactions. The development of the financial sector has been one of the most difficult areas of reform since at the start of transition financial institutions and markets were limited or non-existent (Fries and Taci, 2001). Financial sector reforms are not easy to accomplish in a turbulent environment. This is even more so considering the high speed of economic and social transformation as well as the length, severity and effects of the economic and financial crises experienced in the course of the transition process. Adding to the complexity of the reform process has been the lack of risk management experience in the banking sector and the numerous changes in banking regulations.



Organizational and sectoral changes in transition banking: Estonian experience

January 2007

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161 Reads

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3 Citations

Trames Journal of the Humanities and Social Sciences

Our study examines organizational and sectoral developments in the Estonian banking sector. It can be concluded that despite the unstable economic and legal environ-ment during the transition period, banking in Estonia has been much more profitable than in many developed countries. But at the same time the effectiveness of banking in a transition economy is volatile and the risk of bank failures is high. The Estonian banking sector is clearly dominated by foreign banks that have brought stability and modern banking techniques with them and increased the competitiveness of the market. We also prove that new electronic channels are more cost-effective than traditional channels and explain the difference in the cost structure.


Foreing Banks Entry and Bank Performance in the CEE Countries

January 2006

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646 Reads

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3 Citations

Banks and Bank Systems

The purpose of this paper is to estimate empirically the short-term effects of foreign banks entry on bank performance in the Central and Eastern European (CEE) Countries. A sample of 319 banks from ten CEE countries (Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovenia, Slovakia) is used in the analysis. Arellano-Bond dynamic panel estimation technique is used in regressions. The research results show that foreign banks entry affects negatively domestic banks' revenues from interest-earning assets, non-interest income, and profitability. Foreign banks entry can also raise the overhead costs of the local banks. The general conclusion is that foreign banks entry increases competition in the host country in short run.


Transition Banking May Be Highly Profitable: Estonian Case

January 2006

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170 Reads

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2 Citations

Banks and Bank Systems

Our study examines developments in the profitability, profit sources and success strategies of Estonian banks. Despite the unstable economic and legal environment, banking in transition country has been much more profitable than in developed countries. But at the same time effectiveness of banking in a transition economy is volatile and bank failures risk is high. We also prove that new electronical channels provide banks with more cost saving than traditional channels and explain what the difference in the cost structure is. In the first part we study changes in profit sources and strategies in several periods of transition in Estonian banking industry. In the second part of the article we study the profitability of e-banking services based on the example of Estonian biggest bank, Hansapank. We explore the implementation techniques of activity-based-costing (ABC) in banking sector in order to analyze the cost structure differences for traditional and electronic channel transactions. In the research we find that electronic channels provide cost saving for banks and for bank clients. In the case of Hansabank, online bank payments are 12,5 times cheaper and offline bank payments are 30 times cheaper than traditional transactions concluded in branch network.


Estonia’s Accession to the EMU

February 2005

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32 Reads

CEE countries have passed the process of transition to market economy and eight of them, including Estonia, joined the European Union in 2004. Estonia has been very successful in the transition process, mainly owing to the currency board-based monetary system, which serves as a signal of commitment to prudent monetary policy and as a guarantee of sound money during the transition period. The current paper discusses the thirteen years of experience in operating the currency board-based monetary system in Estonia. Estonia’s accession to the European Union will soon be accompanied by membership of the Economic and Monetary Union (EMU). Here it is also explained why Estonia wants to join the EMU as fast as possible and what the prospects are to do it on time, at the beginning of 2007.


Table 3 . Profitability indicators of Estonian commercial banks
Table 10 . A Summary of the Russian Banks' Activities Abroad (in order of appearance in the text)
Banks’ Internationalization: Estonian and Russian Banks’ Expansion to the Foreign Markets

February 2004

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303 Reads

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3 Citations

Direct investment outflow from transition economies abroad is still modest compared to investment inflow towards transition economies. Global economy both creates preconditions for and also motivates the internatio¬nalization of banks. The main aim of the article is to study activities of Estonian and Russian commercial banks in their efforts to transform themselves from local banks to international ones. As the internationalization of banks has not proceeded without problems and setbacks, the present research tries to point out the reasons why some of the plans were not realized. The authors of the paper argue that international economic ties provide benefits to all the parties involved and that international integration is an effective way of building international stability and economic growth.


Citations (7)


... Quite often parent banks reduce operational costs by closing its branch's foreign funding channels and becoming its only source of financial resources abroad. Such actions make the branch more dependent on the willingness of the parent bank to provide funding in stressful situations and, thus, make it weaker and more vulnerable in times of crises Source: Compiled by the authors based on (Gardenas, 2004;Liuhto, 2006) ...

Reference:

The Influence of Foreign Bank Entry on the Development of Regional Financial Markets
Foreing Banks Entry and Bank Performance in the CEE Countries

Banks and Bank Systems

... The research articles used the number of banks or their branches as sample size. The average sample size was 534, with the largest number of banks in the USA followed by European countries.The maximum sample size (6566) is used by (Dandapani et al., 2008), while (Sõrg and Luštšik, 2006) and (D. Karimzadeh et al., 2014) investigated only one bank each. ...

Transition Banking May Be Highly Profitable: Estonian Case

Banks and Bank Systems

... Where: ROA = Return on Assets EM = Equity Multiplier (02) The above formula could also be expanded into several components based on the composition of the net income of the respective industry. The modified version of DuPont financial ratio analysis is used by Kirikal, Sorg, and Vensel (2011) to investigate the Estonian banking sector performance. Almazari (2012) and Georgios and Georgios (2011) estimated banks' ROE to measure bank performance using Du Pont model. ...

Estonian Banking Sector Performance Analysis Using Malmquist Indexes And DuPont Financial Ratio Analysis

International Business & Economics Research Journal (IBER)

... Yabancı banka aynı dil ve kültüre sahip bir banka ile birleşirse, birleşmeden sonra verilen hizmetlerde aynı ya da benzer olanlar üzerinde bir değişiklik talep etmezken, mevcut sistem üzerinde etkinlik sağlamaya yöneldiğini ifade etmektedirler. Uiboupin ve Sörg (2006), finansal serbestleşmenin bankacılık sektörü üzerine etkilerine yönelik yaptıkları araştırmada; yabancı bankanın varlığının yerel bankacılık sisteminin maliyetlerinin azaltılmasına, karlılığının arttırılmasına ve bankaların kurumsallaşması süreçlerine katkı sağladığı sonucuna ulaşmışlardır. Yabancı bankaların alan ekonomisinden faydalanmak üzere yerel sistemlere dâhil olmaları bankacılık sektörünü güçlendirmekte, aynı zamanda sektörde rekabetçi bir yapının oluşmasına katkı sağlamakta, oluşan rekabetçi yapı ise birleşmeleri daha cazip bir hale getirmektedir. ...

The entry of foreign banks into emerging markets: an application of the eclectic theory
  • Citing Article

... Owing to very fast transformation from planned economy to market economy, also banking sector flourished, at least the number of banking licenses issued did. In Estonia several banks even got listed in the local Stock Exchange that amounted up to 60% of the total market capitalization (Liuhto , 2007). Banking sectors in all three Baltic states are highly concentrated (Kubiszewska and Balkan, 2017). ...

Organizational and sectoral changes in transition banking: Estonian experience

Trames Journal of the Humanities and Social Sciences

... The large number of Russian bank-like institutions and their special functions indicates that the Russian banking sector has not reached a high level of maturity in servicing its clients either domestically or abroad. Therefore, it is understandable that the foreign activities of Russian banks abroad are rather limited (Jumpponen et al., 2004). ...

Banks’ Internationalization: Estonian and Russian Banks’ Expansion to the Foreign Markets