Financial advisors: A case of babysitters?

We use two data sets, one from a large brokerage and another from a major bank, to ask: (i) whether financial advisors are more likely to be matched with poorer, uninformed investors or with richer and experienced investors; (ii) how advised accounts actually perform relative to self-managed accounts; (iii) whether the contribution of independent and bank advisors is similar. We find that advised accounts offer on average lower net returns and inferior risk-return tradeoffs (Sharpe ratios). Trading costs contribute to outcomes, as advised accounts feature higher turnover, consistent with commissions being the main source of advisor income. Results are robust to controlling for investor and local area characteristics. The results apply with stronger force to bank advisors than to independent financial advisors, consistent with greater limitations on bank advisory services.     

Evidence of Bank Market Discipline in Subordinated Debenture Yields: 1983–1991

We examine debenture yields over the period 1983–1991 to evaluate the market's sensitivity to bank-specific risks, and conclude that investors have rationally reflected changes in the government's policy toward absorbing private losses in the event of a bank failure. Although this evidence does not establish that market discipline can effectively control banking firms, it soundly rejects the hypothesis that investors cannot rationally differentiate among the risks undertaken by the major U.S. banking firms.     

Learning by Observing: Information Spillovers in the Execution and Valuation of Commercial Bank M&As

We offer a new explanation for why academic studies typically fail to find value creation in bank mergers. Our conjectures are predicated on the idea that, until recently, large bank acquisitions were a new phenomenon, with no best practices history to inform bank managers or market investors. We hypothesize that merging banks, and investors pricing bank mergers, learn by observing information that spills over from previous bank mergers. We find evidence consistent with these conjectures for 216 M&As of large, publicly traded U.S. commercial banks between 1987 and 1999. Our findings are consistent with semistrong stock market efficiency.     

Institutional investors and bank governance: An international analysis of bank earnings management

Despite the growing importance of institutional investors in global capital markets and the link between bank earnings management and financial crash risk, little is known about the role of institutional investors in mitigating bank earnings management. We conduct the first international analysis of this issue using a broad sample of banks and institutional investors. We find a negative relation between institutional ownership and bank earnings management, after controlling for the stringency of a country's bank regulations and other relevant bank and country characteristics. Additionally, institutional ownership is more negatively related to earnings management in countries with more-stringent bank disclosure requirements or when ownership is held by domestic rather than foreign institutional investors. Institutional ownership is also more negatively related to earnings management in countries in which insiders extract more private benefits or when ownership is held by institutional blockholders. Our findings have important policy implications regarding institutional investors' engagement with banks.     

Bank failures and the cost of systemic risk: Evidence from 1900 to 1930

We measure the effect of bank failures on economic growth using data from 1900 to 1930, a period without active government stabilization policies and several severe banking crises. VAR model estimates suggest bank failures have long-lasting negative effects on economic growth. A bank failure shock involving one percent of system liabilities leads to a 6.5% reduction in GNP growth within three quarters and a measurable reduction for 10 quarters. Panel VAR model estimates for the 48 states show bank failures aggravate commercial non-bank failures. Institutional and regulatory features affect the intensity of the bank failure effect. We find that bank failures have a larger impact in states with deposit insurance, in states more heavily concentrated in agriculture, and in states with fewer large firms. However, because a number of states exhibit all three characteristics, we are not able to clearly identify the true marginal effects of these factors independently.     

金融创新、投资者逃离与央行危机救助

从1970年的商业票据危机到2008年的全球金融危机,历史上发生过多次因金融创新的复杂性诱发投资者逃离进而演化为金融危机的事件,而危机的最终化解多借助于央行的危机救助。本文基于投资者逃离模型,从金融创新及其产生的投资者不确定性出发讨论金融危机中投资者逃离行为,并通过对投资者逃离行为的分析探讨央行危机救助的时点与方式。本文认为,就金融危机的事前预防而言,央行应在创新工具运用的过程中引导金融机构开展充分的投资者教育及对创新工具的总规模进行适当限制从而降低危机发生的概率和破坏性;就金融危机的事后救助而言,央行危机救助的时点应放在投资者对未来的不确定性突然增加并开始调整原有策略的时刻,救助的主要措施是承诺在一定条件下购买资产或注入流动性,从而降低投资者不确定性,促使投资者改变逃离市场的策略或者至少避免投资者逃离成为群体行为。     

Pre-positioning for effective resolution of bank failures

Large bank failures are often handled differently to other firm failures because suddenly closing a large bank and consequently freezing otherwise liquid claims raises financial stability concerns. As a result, substantial public funds are often used as part of the resolution process, which can undermine market discipline and longer-term financial stability. We propose a resolution scheme that enables the good portion of creditors’ claims to be quickly made available to them in way that maintains market discipline while managing the liquidity effects of large bank failures. We report on a New Zealand study into making the scheme work in practice.     

Why do contagion effects vary among bank failures?

Many of the previous studies on contagion effects in the banking industry focused on the failure of a large bank to determine whether the adverse effects spread to other banks. Yet, little is known whether other publicized bank failures cause contagion effects, and why the effects may vary among bank failures. Given the changes in the banking environment over time, contagion effects could be conditioned on the characteristics of the failing bank and of the banking environment at that time. We assess 99 publicized bank failures over the 1980–1996 period, and find that contagion effects exist in general for the surviving rivals of the failed bank. The degree of contagion effects varies over time (among bank failures), and is stronger when the failed bank is a multibank holding company, when the failed bank is publicly held, when the failed bank is relatively large, when the rivals are relatively small, and when the rivals have relatively low capital levels. The contagion effects are less pronounced in the period following the passage of FIRREA. Furthermore, the total risk-shifts of surviving rival banks in response to the announcement of a failed bank are inversely related to their capital level, and total risk-shifts of rival banks are less pronounced for failures occurring just after the passage of FIRREA. The results suggest that a bank’s exposure to possible contagion effects due to a bank failure can be partially controlled by a bank’s managerial policies and by regulatory policies.     

Bookbuilding and Strategic Allocation

In the bookbuilding procedure, an investment banker solicits bids for shares from institutional investors prior to pricing an equity issue. The banker then prices the issue and allocates shares at his discretion to the investors. We examine the books for 39 international equity issues. We find that the investment banker awards more shares to bidders who provide information in their bids. Regular investors receive favorable allocations, especially when the issue is heavily oversubscribed. The investment banker also favors revised bids and domestic investors.     

The networking function of investment banks: Evidence from private investments in public equity

We examine investment banks' networking function in capital markets, using a sample of Private Investments in Public Equity (PIPEs). We argue that investment banks develop relationships with investors through repeat dealings, and that investment banks' networks of relationship investors form the basis of their networking function. We find that investment banks, especially those with larger investor networks, help issuers attract investors. Correspondingly, an issuer that desires more investors is more likely to hire an investment bank than place the shares directly. We also find that issuers pay higher fees to hire investment banks with larger investor networks. Our empirical findings suggest that the networking function of investment banks is important in securities offerings.     

The Roles of Corporate Governance in Bank Failures during the Recent Financial Crisis

We analyze the roles of bank ownership, management, and compensation structures in bank failures during the recent financial crisis. Our results suggest that failures are strongly influenced by ownership structure: high shareholdings of lower‐level management and non‐chief executive officer (non‐CEO) higher‐level management increase failure risk significantly. In contrast, shareholdings of banks’ CEOs do not have a direct impact on bank failure. These findings suggest that high stakes in the bank induce non‐CEO managers to take high risks due to moral hazard incentives, which may result in bank failure. We identify tail risk in noninterest income as a primary risk‐taking channel of lower‐level managers.     

Did the financial crisis affect the market valuation of large systemic U.S. banks?

We examine the impact of the financial crisis on the stock market valuation of large and systemic U.S. bank holding companies (BHCs). Using the Bertsatos and Sakellaris (2016) model of fundamental valuation of bank equity, we provide evidence that the financial crisis has not altered investors’ attitudes towards bank characteristics. In particular, before, during, and after the crisis, investors in large and systemic U.S. BHCs seemed to penalize leverage, albeit temporarily. Both before and after the crisis, they reward size in the short run. This pattern is appearing only briefly during the crisis. We also show that bank opacity plays no role in market valuation either in the short run or in the long run. Last but not least, we find evidence that stress testing has been informative to the market and that those BHCs that failed at the post-crisis stress tests were not subsequently valued differently by the market.     

Assessing the credit worthiness of Italian SMEs and mini-bond issuers

A number of innovations have been introduced in the last five years to counter the devastating impact of credit rationing in Europe, particularly from traditional bank lending. This is a major problem for the small and medium size firms' sector in Europe, which has also suffered from bank regulatory concerns of capital adequacy, heightened emphasis on default risk of bank counterparties and the general malfunctioning of credit extension and private sector growth. In Italy, some of these less traditional sources of funding for SMEs have started to become more popular and the development of the mini-bond market is a clear example. We believe “mini-bonds” can be a success in Italy as long as the market supplies an attractive risk/return tradeoff to investors as well as affordable and flexible financing for borrowers. Assessments of credit risk must be convincing and objective, providing complements to the traditional rating agency process. In this study, we develop a new innovative model to assess SMEs' creditworthiness and we test it on the companies that have issued mini-bonds so far. Our findings confirm that the amount of information asymmetry is still high in the market and is affecting the level of risk/return trade off potentially reducing the number of investors and small businesses that would be interested in using this new channel to fund their business growth.     

Liquidity Shortages and Banking Crises

We show in this article that bank failures can be contagious. Unlike earlier work where contagion stems from depositor panics or contractual links between banks, we argue that bank failures can shrink the common pool of liquidity, creating, or exacerbating aggregate liquidity shortages. This could lead to a contagion of failures and a total meltdown of the system. Given the costs of a meltdown, there is a possible role for government intervention. Unfortunately, liquidity and solvency problems interact and can cause each other, making it hard to determine the cause of a crisis. We propose a robust sequence of intervention.     

金融产品持股与银行系统性风险——兼论《商业银行股权管理暂行办法》的影响

基于金融机构通过金融产品增持上市银行股份现象日益普遍的背景,本文运用2011-2019年上市银行数据,采用系统GMM和合成控制法(SCM),分析金融产品持股¹对银行系统性风险的影响及其异质性,并探讨《商业银行股权管理暂行办法》(以下简称《股权办法》)限制金融产品超比例持有上市银行股份规定的效果。结果表明:(1)当单家金融产品股东的持股比例均低于5%²时,其会利用专业优势更好地监督银行行为,金融产品总持股比例有助于降低银行系统性风险。(2)当第一大金融产品股东的持股比例超过5%时,其会利用话语权为自身牟利,导致银行系统性风险增加,削弱金融产品总持股比例对银行系统性风险的降低作用。(3)由于保险产品持股在金融产品总持股中占主导地位,其对银行系统性风险的影响与金融产品持股的作用一致;保险产品以外的其他金融产品总持股比例会降低银行系统性风险。(4)《股权办法》的实施有助于约束持股比例超过5%的机构投资者的冒险行为,进而降低相应银行的系统性风险。     

存款保险、银行挤兑与流动性创造——Diamond-Dybvig模型一定有效吗？

在放宽基本假设后,我们通过经典的Diamond-Dybvig模型对存款保险、银行挤兑及流动性创造等问题作了进一步研究.我们得出结论：当假定所有投资者在任何时期都相互独立时,银行是否要创造流动性或者要创造多少流动性,以及银行挤兑最终是否发生,这在很大程度上都受制于投资者的风险偏好类型、相应风险类型的人数、非银行投资项目收益与银行初期利率的关系、某一投资者对其余投资者行为的甑别结果及银行对投资者行为甑别的结果,此时,银行未必能够创造最优量的流动性,原模型失效.     

Investor information and bank instability during the European debt crisis

Outside of financial crises, investors have little incentive to produce private information on banks’ short-term liabilities held as information-insensitive safe assets. The same does not hold during crises. We compare the information effects of different policy interventions. We measure information production using credit default swap spreads during the Global Financial Crisis and the European debt crisis. We study abnormal information production around major events and find that capital injections reduced abnormal information production while early European stress tests increased it. High levels of information production predict bank balance sheet contraction and higher government expenditures to support financial institutions.     

The wolves of Wall Street? Managerial attributes and bank risk

We find that chief executive officers and chief financial officers exert significant individual effects on bank risk. Manager transitions, including transitions generated by plausibly exogenous manager departures, lead to abnormally large changes in bank risk. We demonstrate that the effects of managers on bank risk are sizable and manager-specific. The effects are also partly anticipated by the board because they are reflected in managers’ pay. However, wide-ranging personal attributes, including biographical, experience, and compensation data, only explain a small share of managers’ impact on bank risk. This implies that attempts to rein in bank risk-taking by targeting manager characteristics will be challenging for investors and regulators.     

投资银行-机构投资者关系、“捧场”与IPO中的利益问题

投资银行是直接融资过程中最重要的中介机构,作为融资产品的“卖方”代表,其核心竞争力源于它所构建的投资者关系网络,但现有文献对于投行-投资者关系在证券发行中的作用还缺乏系统的实证研究。本文利用机构投资者在中国IPO新股发行中的完整询价记录,基于报价参与和报价水平两个维度提出了一种新的动态关系强度测算方法,并由此细致刻画了投行-机构关系对股票发行、定价的作用机制。结果发现:(1)投行可以驱动关系机构主动认购其承销的IPO新股,并引导关系机构给出与投行估值水平保持一致的高位报价,进而有效缓解了IPO拍卖制下的“投资者参与不确定性问题”。(2)关系机构的捧场报价显著提高了股票发行价格、增加了投行的承销收入;但是当新股交易价格在长期内逐渐向其内在价值水平收敛时,受到关系机构捧场支持越多的IPO新股,其长期回报率相对越低。(3)投行与机构的关系在本质上是互惠的,一旦投行被赋予新股分配权力,它明显倾向于将新股抑价发行带来的巨大利益分配给在前期捧场的关系机构,二者的关系越强,机构报价被认定为“有效报价”的概率越高,而一旦被认定为有效报价,关系机构的新股需求更是将被优先满足。     

Institutional failure or market failure?

We investigate the effect of the power of creditors, property rights protection, and institutional quality, on bank profits using a panel of 498 banks from 46 countries. Results show that better institutions and stronger property rights protection reduce bank profits, while stronger power of creditors drives up bank profits significantly. Results imply that better institutions and enhanced property rights protection lead to greater flow of credit allowing firms and investors to undertake more profitable ventures. By extension, stronger creditor rights erect steeper barriers to external finance for firms and investors. National indicators of economic freedoms may be more important to lowering the spread than strict creditor rights. Seemingly, credit markets fail when economic institutions fail or when governments intervene into these markets in ways that impede the safety and soundness of financial transactions and private contracting.