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on Corporate Finance |
| By: | Stefania Albanesi; Giacomo De Giorgi; Jaromir Nosal |
| Abstract: | A broadly accepted view contends that the 2007-09 financial crisis in the U.S. was caused by an expansion in the supply of credit to subprime borrowers during the 2001- 2006 credit boom, leading to the spike in defaults and foreclosures that sparked the crisis. We use a large administrative panel of credit file data to examine the evolution of household debt and defaults between 1999 and 2013. Our findings suggest an alternative narrative that challenges the large role of subprime credit in the crisis. We show that credit growth between 2001 and 2007 was concentrated in the prime segment, and debt to high risk borrowers was virtually constant for all debt categories during this period. The rise in mortgage defaults during the crisis was concentrated in the middle of the credit score distribution, and mostly attributable to real estate investors. We argue that previous analyses confounded life cycle debt demand of borrowers who were young at the start of the boom with an expansion in credit supply over that period. |
| JEL: | D14 E01 E21 E40 G01 G1 G18 G20 G21 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23740&r=cfn |
| By: | Marco Migueis |
| Abstract: | The Advanced Measurement Approach (AMA) to operational risk capital is vulnerable to gaming, complex, and lacks comparability. The Standardized Measurement Approach (SMA) to operational risk capital lacks risk sensitivity and is unlikely to be appropriately conservative for US banks. An alternative framework is proposed that addresses the weaknesses of these approaches by relying on an incentive-compatible mechanism to elicit forward-looking projections of loss exposure. |
| Keywords: | Banking Regulation ; Incentive Compatibility ; Operational Risk ; Regulatory Capital |
| JEL: | G21 G28 G32 |
| Date: | 2017–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2017-87&r=cfn |
| By: | Panicker, Vidya; Mitra, Sumit; Sensarma, Rudra |
| Abstract: | The objective of this study is to investigate the impact of corporate governance characteristics on foreign investments in the Indian IT industry. Foreign capital is important for industries in an emerging economy as it bridges the gap between investment requirements and the domestically available capital. Prior research has shown that corporate governance characteristics of a firm can influence the FII inflow into it. The sample for this study consists of 113 firms from the Indian IT industry spanning 9 years from 2005 to 2013. The Indian IT industry was chosen as the setting for this study due to the increasing levels of FII inflow to these companies and because IT companies are among the pioneers in the formulation and implementation of corporate governance regulation in India. The ownership pattern of a firm, measured through parameters like its promoter shareholdings, and the corporate governance characteristics as indicated by the total number of directors in the board are analyzed to understand their impact on inflow of FII to the firms. A fixed effect regression was run on the sample and the results were analyzed. The results show that firms with more concentrated promoter holdings have lower levels of foreign investments. Larger board size seems to attract higher levels of foreign investments. However the number of independent members on board and the board chairman being independent have been found to be insignificant in determining FII inflow to a firm. Higher market capitalization and profitability help in attracting foreign investments. These results suggest the need for a strong current level of performance before inviting international investments for fund raising and also hints at a convergence in corporate governance of Indian IT firms towards the Anglo-Saxon system of corporate governance. |
| Keywords: | FII, Corporate governance, ownership patterns, board characteristics, Indian IT industry |
| JEL: | C33 G32 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81068&r=cfn |
| By: | Xavier Hollandts (CRCGM et IFGE - Kedge Business School - Kedge Business School); Nicolas Aubert (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université, INSEEC Business School - Institut des hautes études économiques et commerciales Business School (INSEEC)); Abdelmehdi Abdelhamid (CRCGM - Centre de Recherche Clermontois en Gestion et Management - Clermont Auvergne - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA - Université Clermont Auvergne); Victor Prieur (DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Employee stock ownership gives employees a voice and therefore may have a major impact on corporate governance. Thus, employee stock ownership may be a powerful mean to protect CEOs from both market for corporate control and dismissal threat. In this paper, we examine the relationship between employee stock ownership and CEO entrenchment. Following the recent French legislative changes, we use a comprehensive panel dataset of the major French listed companies over the 2009-2012 period. We document inverted U shaped relationships between employee stock ownership and CEO entrenchment. Board employee ownership representation also plays a role and increases the inflexion points of these curvilinear relationship. |
| Keywords: | employee stock ownership,corporate governance,CEO entrenchment |
| Date: | 2017–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01495427&r=cfn |
| By: | Sarkar, Sanjukta; Sensarma, Rudra |
| Abstract: | Under the traditional franchise value paradigm, competition in banking markets is considered to be risk enhancing because of its tendency to raise interest rates on deposits. Taking a contrarian view, Boyd and De Nicolo (2005) have argued that competition in the loan market can lead to lower interest rates and hence, reduce bank risk taking. Following these theoretical results, the empirical evidence on the relationship between risk and competition in banking has also been mixed. This paper analyzes the competition-stability relationship for the Indian banking sector for the period 1999-2000 to 2012-2013. Banking competition is measured using structural measures of concentration viz. 5-bank concentration ratios and the Herfindahl-Hirschman Index as well as a non-structural measure of competition- the Panzar-Rosse H-Statistic. Our results show that while concentration leads to lower levels of default, market and asset risks, it exacerbates the levels of capital and liquidity risks. These results have interesting implications for banking sector policy in emerging economies. |
| Keywords: | Banks, Competition, Risk |
| JEL: | G21 G28 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81065&r=cfn |
| By: | Stefania Albanesi |
| Abstract: | A broadly accepted view contends that the 2007-09 fi nancial crisis in the U.S. wascaused by an expansion in the supply of credit to subprime borrowers during the 2001-2006 credit boom, leading to the spike in defaults and foreclosures that sparked thecrisis. We use a large administrative panel of credit fi le data to examine the evolutionof household debt and defaults between 1999 and 2013. Our fi ndings suggest an alternative narrative that challenges the large role of subprime credit in the crisis. We showthat credit growth between 2001 and 2007 was concentrated in the prime segment,and debt to high risk borrowers was virtually constant for all debt categories duringthis period. The rise in mortgage defaults during the crisis was concentrated in themiddle of the credit score distribution, and mostly attributable to real estate investors.We argue that previous analyses confounded life cycle debt demand of borrowers whowere young at the start of the boom with an expansion in credit supply over that period. Moreover, a positive correlation between the concentration of subprime borrowersand the severity of the 2007-09 recession found in previous research may be driven byhigh prevalence of young, low education, minority individuals in zip codes with largesubprime population. |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:6174&r=cfn |
| By: | Adrian, Tobias; Fleming, Michael J; Shachar, Or; Vogt, Erik |
| Abstract: | This paper examines market liquidity in the post-crisis era in light of concerns that regulatory changes might have reduced dealers' ability and willingness to make markets. We begin with a discussion of the broader trading environment, including an overview of regulations and their potential effects on dealer balance sheets and market making, but also considering additional drivers of market liquidity. We document a stagnation of dealer balance sheets after the financial crisis of 2007-09, which occurred concurrently with dealer balance sheet deleveraging. However, using high-frequency trade and quote data for U.S. Treasuries and corporate bonds, we find only limited evidence of a deterioration in market liquidity. |
| Keywords: | corporate bonds; liquidity; market making; regulation; Treasury securities |
| JEL: | G12 G21 G28 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12248&r=cfn |
| By: | John S. Howe; Thibaut G. Morillon |
| Abstract: | We investigate the consequences of mergers and acquisitions (M&As) for information asymmetry in the banking sector. We test competing hypotheses about the effect of M&As on the information environment. M&As either increase information asymmetry (the opacity hypothesis) or diminishes it (the transparency hypothesis). We find evidence that information asymmetry increases following M&A announcements and decreases following deal completions. These findings are more pronounced for acquisitions involving a private target, and all-cash deals, as well as for mergers as opposed to acquisition of assets. Additionally, we find that the enactment of Dodd-Frank reduced the levels of information asymmetry. The results are important to regulators, policy makers, and investors. |
| Keywords: | mergers and acquisitions, opacity hypothesis, transparency hypothesis, information asymmetry |
| JEL: | G34 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:nfi:nfiwps:2017-wp-01&r=cfn |