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on Corporate Finance |
| By: | Anginer, Deniz; Demirguc-Kunt, Asli; Huizinga, Harry; Ma, Kebin |
| Abstract: | This paper finds that shareholder-friendly corporate governance is positively associated with bank insolvency risk, as proxied by the Z-score and the Merton's distance to default measure, for an international sample of banks over the 2004-08 period. Banks are special in that"good"corporate governance increases bank insolvency risk relatively more for banks that are large and located in countries with sound public finances, as banks aim to exploit the financial safety net. Good corporate governance is specifically associated with higher asset volatility, more nonperforming loans, and a lower tangible capital ratio. Furthermore, good corporate governance is associated with more bank risk-taking at times of rapid economic expansion. Consistent with increased risk-taking, good corporate governance is associated with a higher valuation of the implicit insurance provided by the financial safety net, especially in the case of large banks. These results underline the importance of the financial safety net and too-big-to-fail policies in encouraging excessive risk-taking by banks. |
| Keywords: | Banks&Banking Reform,Emerging Markets,Bankruptcy and Resolution of Financial Distress,Debt Markets,Governance Indicators |
| Date: | 2014–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7017&r=cfn |
| By: | Zorobabel Bicabay (African Development Bank); Daniel Kapp (European Central Bank); Francesco Molteni (Université Paris 1 and LabEx ReFi) |
| Abstract: | We analyze the political environment in the wake of financial crises and try to infer its implications on decision making and economic policies. Concretely, we investigate if a shift in the ideology of the government or changes of political constraints drive the implementation of economic policies around periods of financial stress. To this end, we apply a simultaneous equations approach to evaluate governments' responses to financial crises, given the impact of crises on the political and social environment. This method allows us to disentangle the direct effects from financial crises on public policy from the indirect effects induced by political and social changes. The proposed policy response model is able to take into account the possibility of a selection bias. The direct and indirect effects from financial crises on the political process are shown, where the indirect effect is defined as the impact of financial crises on the political orientation and political constraints. Furthermore, results suggest that changes in the political environment during financial crises do affect policy responses, although the effect is highly heterogeneous across different types of crises. |
| JEL: | C15 G01 G17 G22 G32 |
| Date: | 2014–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:thk:rnotes:44&r=cfn |
| By: | Stavros Thomadakis, Dimitrios Gounopoulos, Christos Nounis and Michalis Riginos |
| Abstract: | The study explores the growth of the Athens Stock Exchange through new listings and IPOs over the period 1880-1940. We examine institutional changes in exchange governance and listing requirements. On a theme that has not been addressed before, we find that simple listings were far more numerous than actual IPOs, while even during ‘hot’ listing periods IPO activity was relatively limited. IPOs in Greece remained unregulated throughout the period and there is only sparse evidence on the involvement of professional investment banking services. IPOs over-pricing in the early decades gives way to under-pricing in the 1920s. The growth of the Greek stock market was coincident with development episodes in the economy, as well as phases of protectionism. It has been driven by a demand for listings basically serving the liquidity needs of company owners. Finally, the study presents data on "quasi-IPOs" (i.e. capital increases shortly after listing) and shows that they offer a more accurate assessment of the demand for the financing of listing firms. |
| Keywords: | Listings, Initial public offerings; financial history; financial innovation |
| JEL: | N23 N43 G18 |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:hel:greese:86&r=cfn |
| By: | Adam, Tim R.; Streitz, Daniel |
| Abstract: | We examine whether performance-sensitive debt (PSD) is used to reduce hold-up problems in long-term lending relationships. We find that the use of PSD is more common in the presence of a long-term lending relationship and if the borrower has fewer financing alternatives available. In syndicated deals, however, the presence of a relationship lead arranger reduces the use of PSD, which is consistent with hold-up being of lesser concern in such cases. Further, supporting our hypothesis that hold-up concerns motivate the use of PSD, we find a substitution effect between the use of PSD and the tightness of financial covenants. |
| Keywords: | Performance-sensitive debt; relationship lending; hold-up; holdout; syndicated debt; covenants |
| JEL: | G21 G31 G32 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:476&r=cfn |