2010-08-06 papers

on Financial Markets

Issue of 2010‒08‒06
two papers chosen by

Do Firm-Bank `Odd Couples' Exacerbate Credit Rationing? By Giovanni Ferri; Pierluigi Murro; Zeno Rotondi
Price support in the stock market By Benjamin Golez; José M. Marín

Do Firm-Bank `Odd Couples' Exacerbate Credit Rationing?

By:	Giovanni Ferri (University of Bari); Pierluigi Murro (University of Bari); Zeno Rotondi (UniCredit Group's Retail Research Division)
Abstract:	We start considering an optimal matching of opaque (transparent) borrowing firrms with relational (transactional) lending main banks. Next we contemplate the possibility that firm-bank "odd couples" materialize where opaque (transparent) firrms end up matched with transactional (re- lational) main banks. We conjecture the "odd couples" emerge either since the bank's lending technology is not perfectly observable to the rm or because riskier firrms - even though opaque - strategically select transac- tional banks in the hope of being classified as lower risks. Our econometric results show the probability of rationing is larger when firrms and banks match in "odd couples".
Keywords:	Relationship Banking, Credit Rationing and Asymmetric Information
JEL:	G21 D84
Date:	2010–07
URL:	http://d.repec.org/n?u=RePEc:bai:series:wp0031&r=fmk

Price support in the stock market

By:	Benjamin Golez (Universitat Pompeu Fabra); José M. Marín (IMDEA Social Sciences Institute)
Abstract:	The interplay of delegated portfolio management and asset management ownership generates a double agency problem that may result on trading to support security prices. We test this hypothesis analyzing the trading patterns of mutual funds a¢ liated with banks with the stocks of their controlling banks. We show that affiliated mutual funds tend to increase the holdings of the parent bank stock following a large drop in the stock price of the bank. Further, we provide evidence that these patterns of trading are not consistent with portfolio rebalancing into the banking sector, contrarian trading or timing skills. We also provide evidence that the patterns of trading are not information-driven. This leads us to conclude that affiliated mutual funds follow this strategy to support the price of the parent bank.
Keywords:	price support; con‡ict of interests; agency problem; mutual funds; asset management; fund families; banks; prosecution
JEL:	G30 G23 G32 G28 G21 K22
Date:	2010–08–02
URL:	http://d.repec.org/n?u=RePEc:imd:wpaper:wp2010-16&r=fmk

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