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on Banking |
| By: | Pierre Pessarossi (Autorité de Contrôle Prudentiel et de Résolution - Banque de France); Frédéric Vinas (Paris School of Economics and Autorité de Contrôle Prudentiel et de Résolution - Banque de France) |
| Abstract: | We study banks supply of long-term credit after a negative funding shock. Thanks to a unique database at bank-firm level, we take advantage of the exogenous interbank market freeze in 2007-2008 to assess the causal relation between French banks' liquidity risk and their lending. We find that banks with higher funding risk and more maturity transformation provided a lower supply of long-term loans after the shock, even controlling for credit demand. Short-term lending supply is however unaffected. These findings help explain the severity of the recession that followed the liquidity crisis. And they support Basel III liquidity regulation. This regulation should have a stabilising effect on long-term lending in times of funding stress |
| Keywords: | financial institution; liquidity risk; loan maturity |
| JEL: | G01 G21 G28 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:15073&r=all |
| By: | Morgan, Peter (Asian Development Bank Institute); Zhang, Yan (Asian Development Bank Institute) |
| Abstract: | This paper presents estimates of the effect of the share of mortgage lending by individual banks on two measures of financial stability—the bank Z-score and the nonperforming loan ratio. The sample covers 212 banks in 19 emerging Asian economies for 2007–2013 from the Bankscope database. The findings suggest that mortgage lending is positive for financial stability, specifically by lowering the probability of default by financial institutions and reducing the nonperforming loan ratio, at least in noncrisis periods, for levels of mortgage shares up to 30%–40%. For higher levels of mortgage lending shares, the impact on financial stability turns negative. Mortgage lending can also be a useful measure of both financial development and financial inclusion. |
| Keywords: | financial stability; mortgage loan ratio; mortgage lending |
| JEL: | G21 O16 R30 |
| Date: | 2015–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0543&r=all |
| By: | Franklin, Jeremy (Bank of England); Rostom, May (Bank of England); Thwaites, Gregory (Bank of England) |
| Abstract: | This paper uses a large firm-level data set of UK companies and information on their pre-crisis lending relationships to identify the causal links from changes in credit supply to the real economy following the 2008 financial crisis. Controlling for demand in the product market, we find that the contraction in credit supply reduced labour productivity, wages and the capital intensity of production at the firm level. Firms experiencing adverse credit shocks were also more likely to fail, other things equal. We find that these effects are robust, statistically significant and economically large, but only when instruments based on pre-crisis banking relationships are used. We show that banking relationships were conditionally randomly assigned and were strong predictors of credit supply, such that any bias in our estimates is likely to be small. |
| Keywords: | Credit shock; financial frictions; productivity puzzle; firm-level data |
| JEL: | D21 D22 D24 G21 |
| Date: | 2015–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0557&r=all |
| By: | Bing Xu; Honglin Wang; Adrian Van Rixtel |
| Abstract: | This paper investigates if informational monopolies resulting from relationship lending and bank market concentration allow for rent extraction through collateral. Our identification strategy hinges on the notion that informational equalization shocks (such as equity IPOs) erode rent seeking opportunities, while competing theories do not rely on information asymmetries among lenders. Using a unique hand-collected database of 9,288 bank loans obtained by 649 listed Chinese firms, we find that collateral incidence is positively associated with relationship intensity and bank market concentration, while this effect is moderated for post-IPO loans. These results are obtained controlling for a large number of loan and firm characteristics, monetary policy variables and regional macroeconomic characteristics. We also demonstrate important cross-sectional variation among borrowing firms: rent extraction through collateral is significantly less pronounced for less risky firms. Our results hold for a battery of robustness tests, both included in the paper and in an Internet appendix (available upon request). Furthermore, we provide new evidence on the determinants of collateral in Chinese bank lending markets. |
| Keywords: | Informational rents, collateral, relationship lending, market structure, IPOs, China |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:522&r=all |
| By: | Julio Galvez (CEMFI, Centro de Estudios Monetarios y Financieros); Javier Mencía (Banco de España) |
| Abstract: | We analyse the dependence between sovereign bonds’ and banks’ asset return distributions with a large panel of European data from 2001 to 2013. Using quantile regressions, we identify nonlinear contemporaneous and lagged dependence. As a result, shocks to crisis-hit sovereign bonds have contemporaneous effects on the whole distribution of banks’ returns, as well as a persistent impact in the tails. Our results offer relevant insights about the relationship between banking and sovereign crises. In particular, during the recent financial crisis, banks’ asset return distributions have lower means and fatter tails than in the absence of a simultaneous sovereign crisis. |
| Keywords: | Quantile regressions, nonlinear dependence, counterfactual analyses, systemic risk. |
| JEL: | G15 G21 F34 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2014_1407&r=all |
| By: | Iñaki Aldasoro; Domenico Delli Gatti (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore); Ester Faia |
| Abstract: | We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a matching algorithm. We compare three alternative matching algorithms: maximum entropy, closest matching and random matching. Contagion occurs through liquidity hoarding, interbank interlinkages and fire sale externalities. The resulting network configurations exhibits a core-periphery structure, dis-assortative behavior and low clustering coefficient. We measure systemic importance by means of network centrality and input-output metrics and the contribution of systemic risk by means of Shapley values. Within this framework we analyze the effects of prudential policies on the stability/efficiency trade-off. Liquidity requirements unequivocally decrease systemic risk but at the cost of lower efficiency (measured by aggregate investment in non-liquid assets); equity requirements tend to reduce risk (hence increase stability) without reducing significantly overall investment. |
| Keywords: | banking networks, centrality metrics, systemic risk |
| JEL: | D85 G21 G28 C63 L14 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie1:def028&r=all |
| By: | Lana Embree; Varya Taylor |
| Abstract: | The Large Value Transfer System (LVTS) is Canada’s main electronic interbank funds transfer system that financial institutions use daily to transmit thousands of payments worth several billions of dollars. The LVTS is different than real-time gross settlement (RTGS) systems because, while each payment is final and irrevocable, settlement occurs on a multilateral net basis at the end of the day. Furthermore, LVTS payments are secured by a collateral pool that mutualizes losses across participants in the event of a default. In this paper, we use the Bank of Finland Simulator to examine the implications of fully collateralizing LVTS payments, similar to an RTGS. An important caveat to consider, however, is that the simulations do not take into account the anticipated change in payment behaviour in response to a change in collateral requirements. In this regard, we include a queuing mechanism to at least reflect more efficient use of liquidity. The results indicate that collateral requirements vary by participant and some participants actually require less collateral in the simulation than what is required under the current LVTS design. |
| Keywords: | Financial Institutions, Payment clearing and settlement systems |
| JEL: | E E4 E47 G G2 G21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:15-29&r=all |
| By: | Kartik Anand; Céline Gauthier; Moez Souissi |
| Abstract: | We propose a tractable, model-based stress-testing framework where the solvency risks, funding liquidity risks and market risks of banks are intertwined. We highlight how coordination failure between a bank’s creditors and adverse selection in the secondary market for the bank’s assets interact, leading to a vicious cycle that can drive otherwise solvent banks to illiquidity. Investors’ pessimism over the quality of a bank’s assets reduces the bank’s recourse to liquidity, which exacerbates the incidence of runs by creditors. This, in turn, makes investors more pessimistic, driving down other banks’ recourse to liquidity. We illustrate these dynamics in a calibrated stress-testing exercise. |
| Keywords: | Financial stability, Financial system regulation and policies |
| JEL: | G01 G21 G28 C72 E58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:15-32&r=all |
| By: | Liebmann, Eva (Austrian Federal Ministry of Finance); Peek, Joe (Federal Reserve Bank of Boston) |
| Abstract: | Liquidity risk has received increased attention recently, especially in light of the 2007 - 2009 financial crisis, when banks' extensive reliance on short-term funding, maturity mismatches between assets and liabilities, and insufficient liquidity buffers made them quite susceptible to liquidity risk. To mitigate such risk, the Basel Committee on Banking Supervision (BCBS) introduced an improved global capital framework and new global liquidity standards for banks in December 2010 in the form of the new Basel Accord (Basel III). This brief offers insights from the crisis experience, identifies the problems that the new liquidity regulation aims to address, and summarizes underlying differences between the United States and Europe that may affect the ability to design and implement consistent global standards. |
| JEL: | F33 G01 G28 |
| Date: | 2015–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbcq:2015_003&r=all |
| By: | Mu-Jeung Yang (University of Washington, Seattle); Johannes Wieland (University of California, San Diego) |
| Abstract: | We propose a novel mechanism, 'financial dampening,' whereby financial sector deleveraging attenuates the effectiveness of monetary policy. In our model of financial intermediation, where banks have leverage targets and asymmetric portfolio adjustment costs, deleveraging banks will have a lower pass-through from reductions in policy rates to credit supply. We find consistent evidence for financial dampening in micro- data on U.S. regulated financial intermediaries. We instrument deleveraging at local banks using average deleveraging at spatially-separate banks of the same bank holding company to isolate local deleveraging independent of local demand conditions. We find that in response to a 1% monetary policy shock, a bank at the 25th percentile of the deleveraging distribution increases its loan growth by 3.70% more than a bank at the 75th percentile according to our baseline specification. Thus, our mechanism provides a rationale for why recoveries from financial crisis may be slow. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:1022&r=all |
| By: | Nwachukwu, Jacinta; Asongu, Simplice |
| Abstract: | This study investigates the legitimacy of the relatively high interest rates charged by those microfinance institutions (MFIs) which have been transformed into regulated commercial banks using information garnered from a panel of 1232 MFIs from 107 developing countries. Results show that formally regulated micro banks have significantly higher average portfolio yields than their unregulated counterparts. By contrast, large-scale MFIs with more than eight years of experience have succeeded in lowering interest rates, but only up to a certain cut-off point. The implication is that policies which help nascent small-scale MFIs to overcome their cost disadvantages form a more effective pricing strategy than do initiatives to transform them into regulated institutions. |
| Keywords: | Microfinance, microbanks, non-bank financial institutions, interest rates, age, economies of scale, developing countries |
| JEL: | E43 G21 G23 G28 N20 |
| Date: | 2015–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:67298&r=all |
| By: | Papanikolaou, Nikolaos I.; Wolff, Christian C |
| Abstract: | In this paper we study the relationship between leverage and risk in commercial banking market. We employ a panel data set that consists of the biggest US commercial banks and which extends from 2002 to 2010 thus covering both the years before the outbreak of the current financial crisis as well as those followed. We make clear distinctions among different leverage types like on- and off-balance sheet leverage as well as short- and long-term leverage, which have never been made in the relevant literature. Our findings provide evidence that excessive leverage, both explicit and hidden off-the-balance sheet, rendered large banks vulnerable to financial shocks thus contributing to the fragility of the whole banking industry. In a similar vein, a direct link between short- and long-term leverage with risk is reported before the crisis, showing that leverage has been one of the key factors responsible for the serious liquidity shortages that were revealed after 2007 when the crisis erupted. We also demonstrate that banks which concentrate on traditional banking activities typically carry less risk exposure than those that are involved with modern financial instruments. Overall, our results provide a better understanding of the role of leverage in destabilizing the whole system whereas at the same time contribute to the current discussion on the resilience of the banking sector through the strengthening of the existing regulatory framework. |
| Keywords: | commercial banking; financial crisis; leverage; risk |
| JEL: | C23 D02 G21 G28 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10890&r=all |
| By: | Thiago Christiano Silva; Marcos Soares da Silva; Benjamin Miranda Tabak |
| Abstract: | In this paper, we employ a comprehensive set of network measurements to assess the determinant factors of banking liquidity performance in the Brazilian interbank network. In our empirical model, we proxy the banking liquidity performance with the liquidity coverage ratio as defined in Basel III. We first show that the Brazilian interbank network has a core-periphery structure and then find that this peculiar network topology can improve liquidity performance of banks. Considering several evidences in the literature pointing to the fact that interbank markets seem to self-organize in core-periphery structures, this finding suggest that interbank systems drive themselves to a network organization that enhances the financial system liquidity. In contrast, we also argue that core-periphery structures can lead to large liquidity shortfalls in the financial network in case a core bank defaults, implying a greater systemic risk. Nonetheless, we show that the default probabilities of core banks are very low in the Brazilian interbank market |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:401&r=all |
| By: | James Chapman; H. Evren Damar |
| Abstract: | In this paper, we investigate how liquidity conditions in Canada may affect domestic and/or foreign lending of globally active banks and whether this transmission is influenced by individual bank characteristics. We find that Canadian banks expanded their foreign lending during the recent financial crisis, often through acquisitions of foreign banks. We also find evidence that internal capital markets play a role in the lending activities of globally active Canadian banks during times of heightened liquidity risk. |
| Keywords: | Financial institutions; Financial stability |
| JEL: | E44 F36 G21 G32 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocatr:105&r=all |
| By: | Spiros Bougheas; Alan Kirman |
| Abstract: | We review an extensive literature debating the merits of alternative priority structures for banking liabilities put forward by financial economists, legal scholars and policymakers. This work has focused exclusively on the relative advantages of each group of creditors to monitor the activities of bankers. We argue that systemic risk is another dimension that this discussion must include. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcfc:15/08&r=all |
| By: | Or Shachar (Federal Reserve Bank of New York); Jennifer La'O (Columbia University); Anna Costello (Massachusetts Institute of Technology); Nina Boyarchenko (Federal Reserve Bank of New York) |
| Abstract: | We study how bank holding companies interact in the corporate bond, syndicated loan, and credit default swap (CDS) markets. These three markets represent different ways to trade credit risk. The corporate bond market allows market participants to trade corporate credit risk directly. Similarly, the syndicated loan market allows direct exposure to corporate credit risk but is limited to only the largest borrowers and has lower secondary market liquidity. Finally, participants in the CDS market take an indirect exposure to the ultimate borrower. CDS markets are the most liquid of the three markets, allowing dealers to more easily assume long and short positions. Moreover, by entering into a CDS contract with another dealer, the firm also exposes itself to counterparty risk. This paper links data from these three different markets to create a more complete picture of how dealers assume and distribute credit risk. We identify key determinants of dealers' net and gross exposures to credit risk. We furthermore map out the interdealer network structures in these markets, allowing us to study how these network structures distribute risk among the dealers and how they shape the total risk borne by the system. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:1048&r=all |
| By: | Simplice Asongu (Yaoundé/Cameroun) |
| Abstract: | Using twenty-five policy variables, we investigate determinants of mobile phone/banking in 49 Sub-Saharan African countries with data for the year 2011. The determinants are classified into six policy categories, notably: macroeconomic, business/bank, market-related, knowledge economy, external flows and human development. The empirical evidence is based on contemporary and non-contemporary Quantile regressions. The following implications are relevant to the findings. First, mobile phone penetration is positively correlated with: (i) education, domestic savings, regulation quality and patent applications, especially at low initial levels of mobile penetration; (ii) bank density; (iii) urban population density and (iv) internet penetration. Second, the use of the mobile to pay bills is positively linked with: (i) trade and internet penetration, especially in contemporary specifications and (ii) remittances and patent applications, especially at low initial levels of the dependent variable. Third, using the mobile to send/receive money is positively correlated with: internet penetration and human development, especially in the contemporary specifications. Fourth, mobile banking is positively linked with: (i) trade in contemporary specifications; (ii) remittances and patent applications at low initial levels of the dependent variable and (iii) internet penetration and human development, with contemporary threshold evidence. The policy implications are articulated with incremental policy syndromes. |
| Keywords: | Mobile phones; Mobile banking; Development; Africa |
| JEL: | G20 L96 O11 O33 O55 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:15/043&r=all |
| By: | Thanassoulis, John (Bank of England); Tanaka, Misa (Bank of England) |
| Abstract: | This paper studies the agency problem between bank management, shareholders, and the taxpayer. Executive bonuses increase in the probability the bank is too big to fail. Bank management recognise it is very likely optimal to select risky projects which exploit the taxpayer, implying project selection effort (eg due diligence) is more expensive to incentivise. This agency problem leads to too much risk for society, not for shareholders. Compensation rules aimed at solving management-shareholder agency problems — equity pay, deferred, including debt — do not correct the excessive risk taking. By contrast, malus and clawbacks can incentivise the bank management to make better risk choices. |
| Keywords: | Executive compensation; bankers bonuses; risk-taking; financial regulation; return on equity; clawback; deferral |
| JEL: | G21 G28 G32 G38 |
| Date: | 2015–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0558&r=all |
| By: | Paul de Grauwe; Corrado Macchiarelli |
| Abstract: | In this paper we extend the behavioral macroeconomic model as proposed by De Grauwe (2012) to include a banking sector. The behavioral model takes the view that agents have limited cognitive abilities. As a result, it is “rational” to use simple forecasting rules and to subject the use of these rules to a fitness test. Agents are then driven to select the rule that performs best. The behavioral model produces endogenous and self-fulfilling movements of optimism and pessimism (animal spirits). Our main result is that the existence of banks intensifies these movements, creating a greater scope for booms and busts. Thus, banks do not create but amplify animal spirits. We find that increases in the equity ratios of banks tend to reduce the importance of animal spirits over the business cycle. The other policy conclusion we derive from our results is that the central bank has an important responsibility for stabilising output: output stabilization is an instrument to “tame the animal spirits”. This has the effect of improving the trade-off between inflation and output volatility. |
| Keywords: | Animal spirits; Credit cycle; Interest rate spread; Stabilization |
| JEL: | E44 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:63984&r=all |
| By: | Daron Acemoglu; Asuman E. Ozdaglar; Alireza Tahbaz Salehi |
| Date: | 2015–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:786969000000001187&r=all |
| By: | Nick Butt; Rohan Churm; Michael McMahon; Arpad Morotz; Jochen Schanz |
| Abstract: | We test whether quantitative easing (QE), in addition to boosting aggregate demand and inflation via portfolio rebalancing channels, operated through a bank lending channel (BLC) in the UK. Using Bank of England data together with an instrumental variables approach, we find no evidence of a traditional BLC associated with QE. We show, in a simple framework, that the traditional BLC is diminished if the bank receives `flighty’ deposits (deposits that are likely to quickly leave the bank). We show that QE gave rise to such flighty deposits which may explain why we find no evidence of a BLC. |
| Keywords: | Monetary policy, Bank lending channel, Quantitative Easing |
| JEL: | E51 E52 G20 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2015-38&r=all |
| By: | David Martinez-Miera (Universidad Carlos III de Madrid); Rafael Repullo (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | We present a model of the connection between real interest rates, credit spreads, and the structure and the risk of the banking system. Banks intermediate between entrepreneurs and investors, and choose the monitoring intensity on entrepreneurs. projects. We characterize the equilibrium for a fixed aggregate supply of savings, showing that safer entrepreneurs will be funded by nonmonitoring (shadow) Banks and riskier entrepreneurs by monitoring (traditional) banks. We also show that a savings glut reduces interest rates and spreads, increases the relative size of the shadow banking system and the probability of failure of the traditional banks. The model provides a framework for understanding the emergence of endogenous boom and bust cycles, as well as the procyclical nature of the shadow banking system, the existence of countercyclical risk premia, and the low levels of interest rates and spreads leading to the buildup of risks during booms. |
| Keywords: | Savings glut, real interest rates, credit spreads, bank monitoring, shadow banks, financial stability, banking crises, boom and bust cycles. |
| JEL: | G21 G23 E44 |
| Date: | 2015–09 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2015_1507&r=all |
| By: | M. Albert; C. Jude; C. Rebillard |
| Abstract: | After three decades of rapid growth, the Chinese economy has been slowing; at the same time, concerns about the sustainability of its growth model are mounting, calling for urgent rebalancing. This paper provides an assessment of how, and to what extent, the rebalancing process may impact China’s potential growth in the next fifteen years. After reviewing the main reasons behind China’s high growth and imbalances (and the role of factor price distortions), as well as its rising vulnerabilities (overinvestment, excessive credit growth, and a real estate bubble), we adopt a production function approach to derive potential growth. However we depart from the standard methodology in two important ways: first, we correct China’s capital stock for overinvestment by taking into account the credit cycle; second, we disentangle the effects of sectoral reallocations from within-sector productivity, allowing for a better assessment of the expected shift from manufacturing to services. Our results indicate that growth would be currently slightly higher than its potential, with a positive output gap, thus questioning the rationale for additional stimulus measures. Moreover, in our scenario potential growth would fall more quickly than currently expected by the Consensus, to around 5 percent by 2020. |
| Keywords: | China, potential growth, overinvestment, credit cycle, sectoral reallocations, rebalancing. |
| JEL: | E22 E24 E32 E51 O11 O47 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:572&r=all |
| By: | Shaofeng Xu |
| Abstract: | This paper examines the welfare cost of rare housing disasters characterized by large drops in house prices. I construct an overlapping generations general equilibrium model with recursive preferences and housing disaster shocks. The likelihood and magnitude of housing disasters are inferred from historic housing market experiences in the OECD. The model shows that despite the rarity of housing disasters, Canadian households would willingly give up 5 percent of their non-housing consumption each year to eliminate the housing disaster risk. The evaluation of this risk, however, varies considerably across age groups, with a welfare cost as high as 10 percent of annual non-housing consumption for the old, but near zero for the young. This asymmetry stems from the fact that, compared to the old, younger households suffer less from house price declines in disaster periods, due to smaller holdings of housing assets, and benefit from lower house prices in normal periods, due to the negative price effect of disaster risk. |
| Keywords: | Asset Pricing, Economic models, Housing |
| JEL: | E21 E44 G11 R21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:15-26&r=all |
| By: | Emanuele BACCHIOCCHI (Department of Economics, Management and Quantitative methods,University of Milan, Italy); Matteo FERRARI (Department of Economics, Management and Quantitative methods,University of Milan, Italy); Massimo FLORIO (Department of Economics, Management and Quantitative methods,University of Milan, Italy); Daniela VANDONE (Department of Economics, Management and Quantitative methods,University of Milan, Italy) |
| Abstract: | Between 2003 and 2013, according to Zephyr (BvD) data, 22% of M&A deals between banks have involved state-owned banks, either as targets (12%) or as acquirers (10%). The behavior of state-owned banks in the market control is, however, underresearched.The standard Inefficient Management Hypothesis suggests that more efficient managerial teams target less performing firms. The IMH, however, has never been tested for deals involving state-owned banks, nor the pre-deal operating characteristics of state-owned banks involved as acquirers in M&A deals. We build up a unique dataset of 3,682 deals between banks that allows us to classify M&As into four categories, depending on the ownership of the acquirer and the target: 1) public re-organization (deals between two state-owned banks), 2) publicization (a stateowned bank acquiring a private bank), 3) privatization and 4) private re-organization (deals between two private banks). Our findings confirms for the first time the IMH also for state-owned banks. We also find that state-owned banks active as acquirers in the market for corporate control have a better pre-deal performance compared to the private benchmark; this evidence is stronger for development banks. |
| Keywords: | Inefficient Management Hypothesis, Mergers & Acquisitions,State-owned banks, Ownership |
| JEL: | G32 G34 L32 |
| Date: | 2015–08 |
| URL: | http://d.repec.org/n?u=RePEc:crc:wpaper:1508&r=all |
| By: | Bojinov, Bojidar |
| Abstract: | The study aims to outline the specifics related with the emergence and development of banking in Bulgaria. The analyzed time period is divided into four parts, wich reflect development of the Bulgarian state. The first period covers the years before the establishment of the Third Bulgarian State (until 1878) and covers development of banking relations in the Ottoman Empire on the territory of the Bulgarian lands. The second period focuses on the development of banking in the newly created Third Bulgarian State (1878-1944) and reflects different aspects of the institutionalization of the state and banks. Third period (1944-1989) focuses on devolution changes in the banking sector came after the nationalization of the banking sector and the imposition of centrally planned economy in Bulgaria. Analysis of the fourth period (after 1989) focuses on the problems of the banking system transition to market relations, and on the causes of the banking crisis (1996-1997). |
| Keywords: | banks, central bank, Bulgarian national bank, history |
| JEL: | B00 G21 |
| Date: | 2015–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:67234&r=all |