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on Banking |
| By: | D. Blaseg; Michael Koetter |
| Abstract: | Does bank instability push borrowers to use crowdfunding as a source of external finance? We identify stressed banks and link them to a unique, manually constructed sample of 157 new ventures seeking equity crowdfunding. The sample comprises projects from all German equity crowdfunding platforms since 2011, which we compare with 200 ventures that do not use crowdfunding. Crowdfunding is significantly more likely for new ventures that interact with stressed banks. Innovative funding is thus particularly relevant when conventional financiers are facing crises. But crowdfunded ventures are generally also more opaque and risky than new ventures that do not use crowdfunding. |
| Keywords: | equity crowdfunding, credit crunch, bank stress |
| JEL: | G01 G21 G30 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:8-15&r=ban |
| By: | Li, Xiaofei; Escalante, Cesar L.; Epperson, James E. |
| Abstract: | This study employs a semi-parametric Cox proportional hazard model to study the relationship between survival time and bank-specific determinants of failure of commercial and agricultural banks during the recent recessionary period. Results indicate that non-performing consumer and commercial loans have seriously impaired banks’ financial health and survival. |
| Keywords: | Agricultural bank, Bank failure, Cox proportional hazard model, Survival analysis, Agricultural Finance, Research Methods/ Statistical Methods, G21, C41, Q14, |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea14:162436&r=ban |
| By: | Vincenzo Quadrini (USC) |
| Abstract: | The financial intermediation sector is important not only for channeling resources from agents in excess of funds to agents in need of funds (lending channel). By issuing liabilities it also creates financial assets held by other sectors of the economy for insurance purpose. When the intermediation sector creates less liabilities or their value falls, agents are less willing to engage in activities that are individually risky but desirable in aggregate (bank liabilities channel). The paper studies how financial crises driven by self-fulfilling expectations are transmitted, through this channel, to the real sector of the economy. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:234&r=ban |
| By: | Krishnamurthy, Arvind; Vissing-Jorgensen, Annette |
| Abstract: | We present a theory in which the key driver of short-term debt issued by the financial sector is the portfolio demand for safe and liquid assets by the non-financial sector. This demand drives a premium on safe and liquid assets that the financial sector exploits by owning risky and illiquid assets and writing safe and liquid claims against those. The central prediction of the theory is that safe and liquid government debt should crowd out financial sector lending financed by short-term debt. We verify this prediction in U.S. data from 1875-2014. We take a series of approaches to rule out “standard" crowding out via real interest rates and to address potential endogeneity concerns. |
| Keywords: | banking; financial stability; monetary economics; treasury supply |
| JEL: | E4 G12 G2 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10717&r=ban |
| By: | Samuel R\"onnqvist; Peter Sarlin |
| Abstract: | News is a pertinent source of information on financial risks and stress factors, which nevertheless is challenging to harness due to the sparse and unstructured nature of natural text. We propose an approach based on distributional semantics and deep learning with neural networks to model and link text to a scarce set of bank distress events. Through unsupervised training, we learn semantic vector representations of news articles as predictors of distress events. The predictive model that we learn can signal coinciding stress with an aggregated index at bank or European level, while crucially allowing for automatic extraction of text descriptions of the events, based on passages with high stress levels. The method offers insight that models based on other types of data cannot provide, while offering a general means for interpreting this type of semantic-predictive model. We model bank distress with data on 243 events and 6.6M news articles for 101 large European banks. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1507.07870&r=ban |
| By: | Li, Xiaofei; Escalante, Cesar L.; Dodson, Charles B. |
| Abstract: | This paper compares the credit migration transition of female and racial minority farmers of the Farm Service Agency’s lending program using both time-discrete method and time-homogeneous Markov chain method. The estimated results indicates that racial and gender minority farms have higher financial vulnerability. |
| Keywords: | Farm Loan, Credit Migration, Transition matrix, Markov chain, Cohort method, Time homogeneous, Agribusiness, Agricultural Finance, Risk and Uncertainty, Q140, Q180, C02, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205038&r=ban |
| By: | Laura Veldkamp (NYU Stern); David Lucca (Federal Reserve Bank of New York); Nina Boyarchenko (Federal Reserve Bank of New York) |
| Abstract: | In most theories of financial intermediation, the intermediaries diversify risk, transform maturity or liquidity, or screen/monitor borrowers. But in U.S. Treasury auctions, none of these rationales apply: Investors can bid directly, assets are highly liquid, dealers do not discipline, screen or diversify fiscal policy risk. Yet, most bids are still intermediated. Motivated by treasury auctions, we explore a new information aggregation theory of intermediaries who observe the order-flow of each client and use that aggregated information to advise all clients. In contrast to underwriting theories where intermediaries extract rents, but reduce revenue variance, information aggregators do the opposite: They increase expected auction revenue, but also make the revenue more sensitive to changes in asset value. We use the model to examine current policy questions, such as the optimal number of intermediaries, the effect of non-intermediated bids and minimum bidding requirements. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:236&r=ban |
| By: | Nina Boyarchenko (Federal Reserve Bank of New York); Tobias Adrian (Federal Reserve Bank of New York) |
| Abstract: | We document cyclical properties of balance sheets of different types of intermediaries. While the leverage of the bank sector is highly procyclical, the leverage of the nonbank financial sector is acyclical. We propose a theory of a two-agent financial intermediary sector within a dynamic model of the macroeconomy. Banks are financed by issuing risky debt to households and face risk-based capital constraints, which leads to procyclical leverage. Households can also participate in financial markets by investing in a nonbank ``fund'' sector where fund managers face skin-in-the-game constraints, leading to acyclical leverage in equilibrium. The model also reproduces the empirical feature that banking sector leverage growth leads financial sector asset growth, while the fund sector does not. The procyclicality of the banking sector arises due to its risk based funding constraints, which give a central role to the time variation of endogenous uncertainty. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:239&r=ban |
| By: | Feixue Gong (Williams College); Gregory Phelan (Williams College) |
| Abstract: | We study how allowing agents to use debt as collateral affects asset prices, leverage, and interest rates in a general equilibrium, heterogeneous-agent model with collateralized financial contracts and multiple states of uncertainty. In the absence of debt collateralization, multiple contracts are traded in equilibrium, with some agents borrowing using risky debt and others borrowing with risk-free debt. When agents can use debt contracts as collateral to borrow from other agents, margin requirements decrease, asset prices increase, and the interest rate on risky debt decreases. We characterize equilibrium for N states and L levels of debt collateralization and prove that enough levels of debt collateralization creates an equilibrium featuring maximal leverage on all debt contracts. In the dynamic model, debt collateralization creates larger asset price volatility. |
| Keywords: | Leverage, margins, asset prices, default, securitized markets, asset-backed securities, collateralized debt obligations |
| JEL: | D52 D53 G11 G12 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2015-13&r=ban |