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on Regulation |
| By: | Alessandro Beber (University of Amsterdam and CEPR); Marco Pagano (Università di Napoli Federico II, CSEF, EIEF and CEPR) |
| Abstract: | Most stock exchange regulators around the world reacted to the financial crisis of 2007-2009 by imposing bans or regulatory constraints on short-selling by market participants. We use the large amount of evidence generated by these regime changes to investigate their effects on liquidity, price discovery and stock returns. Since bans were enacted and lifted at different dates in different countries, and in some countries applied to financial stocks only, we identify their effects with panel data techniques, and find that bans (i) were detrimental for liquidity, especially for stocks with small market capitalization and high volatility; (ii) slowed down price discovery, especially in bear market phases, and (iii) failed to support stock prices. |
| Keywords: | liquidity, short selling, ban, crisis, volatility |
| JEL: | G12 G14 G18 |
| Date: | 2009–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:241&r=reg |
| By: | Fabio Iraldo (Sant’Anna School of Advanced Studies and IEFE – Institute for Environmental and Energy Policy and Economics, Bocconi University); Francesco Testa (IEFE – Institute for Environmental and Energy Policy and Economics, Bocconi University); Vlasis Oikonomou (Joint Implementation Network Laan Corpus den Hoorn); Michela Melis (IEFE – Institute for Environmental and Energy Policy and Economics, Bocconi University); Marco Frey (Sant’Anna School of Advanced Studies and IEFE – Institute for Environmental and Energy Policy and Economics, Bocconi University); Eise Spijker (Joint Implementation Network Laan Corpus den Hoorn) |
| Abstract: | The effects of environmental regulation on competitiveness is always a topic under debate for policymakers and practitioners. The article describes the different ways of defining and measuring the effects of environmental regulation on competition and market forces and synthesizes the most updated findings on the relationship between these dimensions. It also proposes an in depth analysis of the most recent empirical studies, with a particular focus on the buildings and construction (B&C) sector, which often is a substantial contributor to the most important countries’ economic indicators. We find that two variables have proved to be both (i) key in defining to what extent and under what conditions environmental regulation exerts adverse or positive effects on competitiveness and (ii) difficult to nail down: forms of regulation and responses by business. |
| Date: | 2009–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:sse:wpaper:200904&r=reg |
| By: | Delis, Manthos D; Tran , Kien; Tsionas, Efthymios |
| Abstract: | By examining the impact of capital regulation on bank risk-taking using a local estimation technique, we are able to quantify the heterogeneous response of banks towards this type of regulation in banking sectors of western-type economies. Subsequently, using this information on the bank-level responses to capital regulation, we examine the sources of heterogeneity. The findings suggest that the impact of capital regulation on bank risk is very heterogeneous across banks and the sources of this heterogeneity can be traced into both bank and industry characteristics, as well as into the macroeconomic conditions. Therefore, the present analysis has important implications on the way bank regulation is conducted, as it suggests that common capital regulatory umbrellas may not be sufficient to promote financial stability. On the basis of our findings, we contend that Basel guidelines may have to be reoriented towards more flexible, country-specific policy proposals that focus on the restraint of excess risk-taking by banks. |
| Keywords: | Capital regulation; risk-taking of banks; local generalized method of moments |
| JEL: | C14 G38 G32 C33 G21 |
| Date: | 2009–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18526&r=reg |
| By: | Robert A. Ritz |
| Abstract: | Carbon leakage is a major concern for policymakers involved with environmental initiatives such as the European Union’s emissions trading scheme and similar cap-and-trade proposals in the United States, Australia, and elsewhere. This paper provides a framework for understanding the drives underlying carbon leakage at the level of an individual sector in which only a subset of firms is covered by such regulation. It provides simple formulae to estimate leakage rates using information on industry characteristics that is typically available to the analyst. Illustrative estimates for the steel industry in the EU ETS suggest carbon leakage of 25-30% or (much) higher - unless environmental-efficiency improvements by regulated firms are substantial. |
| Keywords: | Abatement, Cap-and-trade, carbon tax, Cost pass-through, Emissions trading, Free allocation, Market structure |
| JEL: | D43 H23 Q58 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:461&r=reg |
| By: | Beltratti, Andrea (Bocconi University); Stulz, Rene M. (Ohio State University and ECGI) |
| Abstract: | Though overall bank performance from July 2007 to December 2008 was the worst since at least the Great Depression, there is significant variation in the cross-section of stock returns of large banks across the world during that period. We use this variation to evaluate the importance of factors that have been discussed as having contributed to the poor performance of banks during the credit crisis. More specifically, we investigate whether bank performance is related to bank-level governance, country-level governance, country-level regulation, and bank balance sheet and profitability characteristics before the crisis. Banks that the market favored in 2006 had especially poor returns during the crisis. Using conventional indicators of good governance, banks with more shareholder-friendly boards performed worse during the crisis. Banks in countries with stricter capital requirement regulations and with more independent supervisors performed better. Though banks in countries with more powerful supervisors had worse stock returns, we provide some evidence that this may be because these supervisors required banks to raise more capital during the crisis and that doing so was costly for shareholders. Large banks with more Tier 1 capital and more deposit financing at the end of 2006 had significantly higher returns during the crisis. After accounting for country fixed effects, banks with more loans and more liquid assets performed better during the month following the Lehman bankruptcy, and so did banks from countries with stronger capital supervision and more restrictions on bank activities. |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2009-12&r=reg |
| By: | Nobuo Akai (Osaka University); Motohiro Sato (Hitotsubashi University) |
| Abstract: | This paper considers a simple dynamic decentralized leadership model with local borrowing and regional productivity enhancing investment. The central government is benevolent but cannot commit. The local governments strategically act while accounting for the ex post motive of the central government. We then investigate inefficiency in the subgame perfect equilibrium. We analyze the effect of central control on local borrowings. It is revealed that the central control is of no use. The model is extended to the case with residential mobility which gives different policy implications. |
| Keywords: | soft budget, local borrowing, local investment |
| JEL: | H71 H72 H73 H77 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2009/10/doc2009-20&r=reg |
| By: | Malwina Mejer (Université Libre de Bruxelles); Bruno van Pottelsberghe de la Potterie (Université Libre de Bruxelles) |
| Abstract: | This article argues that the consequences of the ‘fragmentation’ of the European patent system are more dramatic than the mere prohibitive costs of maintaining a patent in force in many jurisdictions. The prevalence of national jurisdictions, which are highly heterogeneous in their costs and practices, over the validity and enforcement of European patents induces both a high level of uncertainty and an intense managerial complexity which undoubtedly reduces both the effectiveness and the attractiveness of the European patent system in its mission to stimulate innovation. |
| Keywords: | European patent system, litigation process, enforcement, uncertainty |
| JEL: | K41 P14 O34 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2009/10/doc2009-31&r=reg |
| By: | Ignazio Angeloni; Ester Faia |
| Abstract: | We introduce banks, modeled as in Diamond and Rajan (JoF 2000 or JPE 2001), into a standard DSGE model and use this framework to study the role of banks in the transmission of shocks, the effects of monetary policy when banks are exposed to runs, and the interplay between monetary policy and Basel-like capital ratios. In equilibrium, bank leverage depends positively on the uncertainty of projects and on the bank’s "relationship lender" skills, and negatively on short term interest rates. A monetary restriction reduces leverage, while a productivity or asset price boom increases it. Procyclical capital ratios are destabilising; monetary policy can only partly offset this effect. The best policy combination includes mildly anticyclical capital ratios and a response of monetary policy to asset prices or leverage |
| Keywords: | capital requirements, leverage, bank runs, combination policy, market liquidity |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1569&r=reg |