nep-cfn New Economics Papers
on Corporate Finance
Issue of 2008‒04‒21
three papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Managers, Firms and (Secret) Social Networks: The Economics of Freemasonry By Braggion, F.
  2. Impact of bank competition on the interest rate pass-through in the euro area By M. van Leuvensteijn; C. Kok Sørensen; J.A. Bikker; A.A.R.J.M. van Rixtel
  3. Are French Individual Investors reluctant to realize their losses? By Boolell-Gunesh S.; Broihanne M-H.; Merli M

  1. By: Braggion, F. (Tilburg University, Center for Economic Research)
    Abstract: This paper studies the relationships between managers? a? liations with Freema- sonry and companies' performance. Using a unique data set of 410 companies quoted on the London Stock Exchange between 1895 and 1902, I find that Masonic managers were associated with greater access to credit in small and young companies whose se- curities where traded over the counter. These companies earned higher profits, but the effect is not statistically significant. On the other hand, large publicly quoted corpora- tions that were managed by Freemasons did not obtain greater access to credit; they had lower profiys and lower Tobin's Q. These findings help to understand how social networks are related to companies' performances. Although social networks help to resolve agency problems between lenders and borrowers in firms that have difficulties in obtaining debt finance, in larger publicly quoted companies they are associated with worse agency conflicts between managers and shareholders and with worse economic performance.
    Keywords: Freemasons;Social Networks;Access to Credit
    JEL: G30 G39 N23
    Date: 2008
  2. By: M. van Leuvensteijn; C. Kok Sørensen; J.A. Bikker; A.A.R.J.M. van Rixtel
    Abstract: This paper analyses the impact of loan market competition on the interest rates applied by euro area banks to loans and deposits during the 1994-2004 period, using a novel measure of competition called the Boone indicator. We find evidence that stronger competition implies significantly lower spreads between bank and market interest rates for most loan market products, in line with expectations. Using an error correction model (ECM) approach to measure the effect of competition on the pass-through of market rates to bank interest rates, we likewise find that banks tend to price their loans more in accordance with the market in countries where competitive pressures are stronger. Further, where loan market competition is stronger, we observe larger bank spreads (implying lower bank interest rates) on current account and time deposits. This would suggest that the competitive pressure is heavier in the loan market than in the deposit markets, so that banks under competition compensate for their reduction in loan market income by lowering their deposit rates. We observe also that bank interest rates in more competitive markets respond more strongly to changes in market interest rates. These findings have important monetary policy implications, as they suggest that measures to enhance competition in the European banking sector will tend to render the monetary policy transmission mechanism more effective.
    Keywords: Monetary transmission, banks, retail rates, competition, panel data
    JEL: D4 E50 G21 L10
    Date: 2008–03
  3. By: Boolell-Gunesh S.; Broihanne M-H.; Merli M (Laboratoire de Recherche en Gestion et Economie, Université Louis Pasteur)
    Abstract: We analyze the presence of the disposition effect for 90 244 French individual investors based on a large brokerage account database between 1999 and 2006. Main results show that a) French investors demonstrate a strong preference for realizing their winning stocks rather than their losing ones (disposition effect).b) the behavioral bias is not eliminated for sophisticated individual investors (higher trading activity or international diversification) c) more originally, based on French account specificities, we demonstrate that the change of “fiscal account type” does not imply a change in investors’ behavior (at an individual level of the disposition effect).
    JEL: G10
    Date: 2008

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