Delegation and the regulation of U.S. financial markets

We analyze the institutional determinants of U.S. financial market regulation with a general model of the policy-making process in which legislators delegate authority to regulate financial risk at both the firm and systemic levels. The model explains changes in U.S. financial regulation leading up to the financial crisis. We test the predictions of the general model with a novel, comprehensive data set of financial regulatory laws enacted specifically between 1950 and 2009. The theoretical and empirical analysis finds that economic and political factors impact Congress’ decision to delegate regulatory authority to executive agencies, which in turn impacts the stringency of financial market regulation, and our estimation results indicate that political factors may have been stronger and resulted in inefficiencies.     

社保基金持股与企业盈余质量:A股上市公司的证据

本文利用中国A股上市公司2006-2015年的数据,研究社保基金持股对上市公司盈余质量的影响。我们用上市公司财务重述作为测度盈余质量的指标,发现社保基金持股能够显著降低企业发布财务重述的概率,这表明社保基金对上市公司盈余质量的提高具有促进作用。并且,社保基金的这一治理作用在国有企业、内部治理水平较差以及市场化程度较低地区的上市公司中更加显著。通过双重差分模型和安慰剂检验等方法弱化了内生性问题之后,以上结论依然成立,说明社保基金持股和盈余质量提升之间存在因果关系,我们称之为社保基金的公司治理作用。进一步研究发现,社保基金可以通过抑制控股股东资金占用、增加机构调研次数等途径提升被持股公司的盈余质量。本文有助于认识和评估社保基金持股对于上市公司的监督与治理作用。     

Switching costs and financial stability

We establish that the effect of intensified deposit market competition, measured by reduced switching costs, on the probability of bank failures depends critically on whether we focus on competition with established customer relationships or competition for the formation of such relationships. With inherited customer relationships, intensified competition due to lower switching costs destabilizes the banking market, whereas it stabilizes the market if we focus on competition for the formation of customer relationships. We characterize the factors important for evaluating the effects of intensified competition on stability in a market with unattached as well as locked-in depositors.     

Forecasts in times of crises

Financial crises pose unique challenges for forecast accuracy. Using the IMF’s Monitoring of Fund Arrangements (MONA) database, we conduct the most comprehensive evaluation of IMF forecasts to date for countries in times of crises. We examine 29 macroeconomic variables in terms of bias, efficiency, and information content to find that IMF forecasts add substantial informational value, as they consistently outperform naive forecast approaches. However, we also document that there is room for improvement: two-thirds of the key macroeconomic variables that we examine are forecast inefficiently, and six variables (growth of nominal GDP, public investment, private investment, the current account, net transfers, and government expenditures) exhibit significant forecast biases. The forecasts for low-income countries are the main drivers of forecast biases and inefficiency, perhaps reflecting larger shocks and lower data quality. When we decompose the forecast errors into their sources, we find that forecast errors for private consumption growth are the key contributor to GDP growth forecast errors. Similarly, forecast errors for non-interest expenditure growth and tax revenue growth are crucial determinants of the forecast errors in the growth of fiscal budgets. Forecast errors for balance of payments growth are influenced significantly by forecast errors in goods import growth. The results highlight which macroeconomic aggregates require further attention in future forecast models for countries in crises.     

Bank systemic risk and macroeconomic shocks: Canadian and U.S. evidence

This paper investigates how banks, as a group, react to macroeconomic risk and uncertainty; more specifically, it examines the relationship between bank systemic risk and changes and disruptions in economic conditions. Adopting the methodology of Beaudry et al. (2001), we introduce a new estimation procedure based on EGARCH to refine the framework developed by Baum et al., 2002, Baum et al., 2004, Baum et al., 2009 and Quagliariello, 2007, Quagliariello, 2009, and we analyze the relationship in the current industry context—i.e., in the context of market-based banking. Our results confirm that banks tend to behave more homogeneously vis-à-vis macroeconomic uncertainty. In particular, we find that both the cross-sectional dispersion of loans-to-assets and the cross-sectional dispersion of non-interest income share shrink during slow growth episodes, and particularly during financial crises, when the resilience of the banking system is at its lowest. More importantly, our main findings indicate that the cross-sectional dispersion of loans-to-assets has increased in the last decade, whereas the cross-sectional dispersion of non-interest income share appears to be more volatile and sensitive to macroeconomic shocks.     

Fair value accounting from a distributed cognition perspective

This study offers a unique interdisciplinary perspective on fair value accounting. The growing influence of esoteric financial instruments whose valuation is becoming increasingly complex makes it necessary to focus on actual valuation practices. Based on an extensive review, this paper regards fair value accounting for complex financial instruments as involving processes distributed among actors located inside and/or outside a reporting entity. It also draws attention to collaboration by organizations that apply their external and internal resources to perform complex financial valuations. Furthermore, it demonstrates that cases involving unusual market conditions underline the importance of human interactions to the valuation process.     

Corporate social responsibility reporting in financial institutions: Evidence from Euronext

The legitimacy, the identity and the social impact of financial institutions go beyond the generation of revenues for providers of capital, through financial intermediation. Financial institutions bear significant corporate social responsibility (CSR). We produce measures of CSR disclosure and explore the determinants of CSR disclosure practices in a cross section of financial institutions. Working with financial companies whose stocks are listed in the Euronext stock exchange, we find that the extent of disclosure of CSR practices is greater in large companies and also in companies of greater financial leverage. Therefore, increased corporate visibility and financial risk increase stakeholder demand for transparency on the social impact of financial institutions and their CSR practices.     

Financial development and barriers to the cross-border diffusion of financial innovation

This paper explores the determinants of financial development by focusing on the role played by barriers to the diffusion of financial technology. These barriers are measured using human genetic distance from the technology frontier. The results based on cross-sectional data for 123 countries suggest that genetic distance to the global frontier has an economically and statistically significant effect on financial development, in that countries that are genetically far from the technology leader tend to have lower levels of financial development. Genetic distance is found to have the largest effect, even after controlling for other determinants of financial development established in the literature. These findings indicate that cultural barriers to the diffusion of financial technology across borders impact financial development by influencing the follower countries’ ability to adopt and adapt innovations from the frontier.     

Determinants of seeking advice within defined contribution retirement savings schemes

We report results from a study of superannuation member advice‐seeking within their plan, explaining observed patterns by member age, gender, issue salience and size‐of‐bet effect. Inquiry mode, frequency and volume of contact with the advice‐provider, and sensitivity of members to legislative change and macroeconomic events are considered. Results show that gender (female more likely than male), age (older rather than younger), balance (larger rather than smaller) and experience (longer rather than shorter) are the strongest advice‐seeking predictors, consistent over time. Findings suggest member engagement around retirement planning may be more effective when considering the factors affecting advice‐seeking behaviour in general.