Stock Returns,Productivity, and Corruption in Eight European Fast-Emerging Markets

This article addresses the impact of productivity, corruption, and trade openness on the stock returns of 265 industrial companies listed in eight Eastern European fast-emerging markets, over the 2004-2013 period. Through a three-factor model that includes both measures at firm level and macro-level control variables, our findings suggest that country corruption index is negatively correlated with the total annual return of the stocks of the listed industrial companies of our sample. Moreover, the most productive firms are featured by higher stock returns, while leverage seems not to be a key predictor of stock returns. In addition, the article uncovers innovative evidence about trade openness that is negatively correlated with stock returns due to its connection with the recent financial crisis. That is, firms operating in markets that are more open to trade show a higher degree of interconnection with other economies and are more likely to undergo the effects of negative fluctuations from foreign markets during the economic crisis. © 2015 Wiley Periodicals, Inc.     

Ownership structure,risk and performance in the European banking industry

We compare the performance and risk of a sample of 181 large banks from 15 European countries over the 1999–2004 period and evaluate the impact of alternative ownership models, together with the degree of ownership concentration, on their profitability, cost efficiency and risk. Three main results emerge. First, after controlling for bank characteristics, country and time effects, mutual banks and government-owned banks exhibit a lower profitability than privately owned banks, in spite of their lower costs. Second, public sector banks have poorer loan quality and higher insolvency risk than other types of banks while mutual banks have better loan quality and lower asset risk than both private and public sector banks. Finally, while ownership concentration does not significantly affect a bank’s profitability, a higher ownership concentration is associated with better loan quality, lower asset risk and lower insolvency risk. These differences, along with differences in asset composition and funding mix, indicate a different financial intermediation model for the different ownership forms.     

Insider employee stock option trading and stock prices

The question of which factors determine corporate bonds pricing is investigated by analysing the spreads of eurobonds issued by major G-10 companies during the 1991–2001 period. Three main results emerge from the analysis. First, bond ratings appear as the most important determinant of yield spreads, with investors’ reliance on rating agencies judgments increasing over time. Second, the primary market efficiency and the expected secondary market liquidity are not relevant explanatory factors of spreads cross-sectional variability. Finally, rating agencies adopt a different, ‘through the cycle’, evaluation criteria of default risk with respect to the forward looking one adopted by bond investors.     

Exchange rate and interest rate polarization

Exchange Rate and Interest Rate Polarization. - The relationship between the polarization phenomenon in foreign exhange markets and a similar regu-larity in interest rate differentials is considered. In the case of perfect substitutability and of perfect foresight, both polarizations would be perfectly complementary. Risk premia and forecast errors, however, might induce some degree of substitutability between the two concepts. Throughout almost the entire EMS experience, in France and Italy both phenomena appear to be equivalent. At the end of the 80s, however, interest rate polarization has surged at the expense of exchange rate polarization. In fact, a bias in estimates was found to explain this recent behaviour.     

Estimating the impact of social isolation on subjective health in Europe

Quality & Quantity - We investigate the relationship between social isolation and subjective health, considering that this relationship is potentially affected by endogeneity due to the...     

An Analysis of European Banks' SND Issues and its Implications for the Design of a Mandatory Subordinated Debt Policy

During the last twenty years an increasing number of proposals to improve bank market discipline through the introduction of a mandatory subordinated debt policy (MSDP) have been presented and critically discussed by academic economists and bank regulators. While theoretical issues are key in this debate, a proper understanding of the market for banks' subordinated notes and debentures (SND) and the main features of securities is also considered relevant for the potential introduction, design and goals setting of such a policy. This paper builds on information concerning issuers, investors, markets, pricing and the technical features of securities to critically discuss these aspects. Data on over 1800 European banks SND issues completed during the 1988–2000:Q1 period together with information on primary and secondary market functioning are presented.