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CEO International Background and Cross-Border M&As J. Bank. Financ. (IF 3.539) Pub Date : 2024-03-03 Busra Agcayazi, Ann Marie Hibbert, Thibaut G. Morillon
We investigate whether having a CEO with an international background affects U.S. firms’ cross-border merger and acquisition (M&A) activities. By defining international background as having either non-U.S. nationality, overseas education, or foreign work experience, we provide robust evidence that when a CEO possesses these characteristics, a firm is more likely to acquire international targets, and
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The Performance of Marketplace Lenders J. Bank. Financ. (IF 3.539) Pub Date : 2024-03-01 Roman Kräussl, Zsofia Kräussl, Joshua Pollet, Kalle Rinne
We analyze the performance of marketplace lending using loan cash flow data from the largest platform, Lending Club. We find substantial risk-adjusted performance of about 35 basis points per month for the entire loan portfolio. Other loan portfolios grouped by risk category have similar risk-adjusted performance. We show that characteristics of the local bank sector for each loan, such as concentration
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Private Mortgage Securitization and Adverse Selection - New Evidence from Expected Loan Losses J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-28 Abdullah Yavas, Shuang Zhu
This paper studies expected loan loss and adverse selection in private mortgage securitization. The research extends the previous literature on securitization that has focused on default probability. Expected loan loss incorporates both the probability of default and loss given default and represents a comprehensive measure of loan quality that has the ultimate impact on lenders and investors. This
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THE MYTH OF TIGHTENING CREDIT RATING STANDARDS IN THE MARKET FOR CORPORATE DEBT J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-25 Karolina Krystyniak, Viktoriya Staneva
This study revisits the existing evidence of a downward trend in credit rating standards indicating that CRAs have become more conservative over time. We find that the time-series variation in the proxy for rating standards is mostly driven by the market-based variables in the model, specifically market capitalization and idiosyncratic volatility. We examine an alternative specification of the model
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Reconciling interest rates evidence with theory: Rejecting unit roots when the HD(1) is a competing alternative J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-23 Alessandro Palandri
The paper introduces the HD(1), a Markovian process of order one with reversion rates that are faster the farther the process is from equilibrium. The aHD(1) approximation is introduced to allow for an estimation-calibration procedure based on available ARMA routines. Critical values of unit root tests with aHD(1) alternative are tabulated for the signed likelihood-ratio statistic. Revisiting the stylized
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Corporate culture and M&A deals: Using text from crowdsourced employer reviews to measure cultural differences J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-22 Tobias Hertel, Devrimi Kaya, Doron Reichmann
Corporate culture constitutes a key success factor in mergers and acquisitions (M&A). We examine the role of acquirer-target cultural differences in US domestic M&A deals. We train a topic model on how employees describe corporate culture in free-response texts of crowdsourced employer reviews to estimate cultural differences between the acquirer-target pairs. We find a negative linear relationship
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Access to capital and investment composition: Evidence from fracking in North Dakota J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-21 Zack Liu, Avishai Schiff, Nathan Swem
We investigate how access to capital relates to the firms' investment decisions and project characteristics. We use project-level hydraulic fracturing (fracking) data from the energy industry to show that privately held firms more intensely invest in newer, non-proven areas while publicly-traded firms tilt investment toward well-established, proven areas. Furthermore, we find that exogenous improvements
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Optimal investor life cycle decisions with time-inconsistent preferences J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-19 Shumin Chen, Dan Luo, Haixiang Yao
We examine the lifetime decisions of an investor with time-inconsistent preferences, obtaining optimal time-consistent strategies for investment, consumption, and life insurance premiums explicitly under a stationary Markov perfect equilibrium framework. We find that the investor increases consumption to seek immediate gratification, and simultaneously increases life insurance purchasing to fulfill
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Are All Female Directors Equal? Incentives and Effectiveness of Female Independent Directors J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-18 Zhiyan Cao, Arun Upadhyay, Hongchao Zeng
We examine how differences in the career incentives of female directors impact their monitoring effectiveness in the context of financial reporting. We find that female independent directors who are sitting senior executives in other firms (executive FIDs) improve financial reporting quality while other female independent directors (non-executive FIDs) do not. Exogenous departure of executive FIDs
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Can information provision and preference elicitation promote ESG investments? Evidence from a large, incentivized online experiment J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-17 Marcel Seifert, Florian Spitzer, Simone Haeckl, Alexia Gaudeul, Erich Kirchler, Stefan Palan, Katharina Gangl
Sustainable investing is characterized by considerations of both financial returns and ESG (Environmental, Social and Governance) impacts. We investigate how information about these two aspects, individually and in combination, affects investors’ decision to invest sustainably and their satisfaction with the information they received. We also test whether different ESG preference elicitation modes
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Information Environment and Participation of Foreign Banks in U.S. Syndicated Loan Market J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-16 Ann L-C Chan, Yi-Ting Hsieh, Edward Lee, Meng-Lan Yueh
This study examines how financial information quality affects the participation and lending behavior of foreign banks in the loan syndicate of U.S borrowers. We utilize the implementation of the Sarbanes-Oxley Act (SOX) in the U.S. as our research setting. We demonstrate a significant increase in foreign banks loan shares to public firms in the post-SOX period. In parallel, we find that this increase
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US political corruption and quarterly conference calls J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-16 Lamia Chourou, Ashrafee T. Hossain, Anand Jha
We find that managers obfuscate during conference calls when their firm's headquarters is in a politically corrupt state, and they do so to shield assets from corrupt officials. The positive association between corruption and obfuscation by managers is much stronger when the expropriation risks are higher, such as when the firm (a) does not pay dividends, (b) is making a profit, (c) has more cash,
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FinTech Penetration, Charter Value, and Bank Risk-taking J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-16 Xiaoran Jia
Using a sample of U.S. community banks and FinTech loans data from LendingClub and Prosper, I find that banks’ future change in risk-taking is positively associated with their current exposure to FinTech penetration. Path analysis shows that FinTech penetration influences bank risk-taking through the erosion of bank charter value. Additionally, cross-sectional analysis shows that the risk-increasing
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The Good, the Bad, and the not-so Ugly of Credit Booms?: Capital Allocation and Financial Constraints J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-13 Matías Braun, Francisco Marcet, Claudio Raddatz
We provide international empirical evidence that periods of rapid expansion in credit—credit booms—lead to both a relaxation of financial constraints and a worsening of capital allocation. These two effects are related, suggesting a more prominent role for the investor sentiment views of the credit cycle. Firms more likely to be financially constrained because of their size, industry, or country experience
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Cash holdings in pension funds J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-12 Sidita Hasa, Carolina Salva
Using unexplored data on Swiss pension funds, we document substantial heterogeneity in cash holdings across funds. While we identify key operational and investments needs to hold cash, they only explain a small share of the variation in cash holdings. A large share of this variation is attributable to an unobservable, time-invariant, fund-specific factor. The average fund holds excess cash and slowly
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Market timing in open market bond repurchases J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-09 Nadav Steinberg, Avi Wohl
Bond repurchases are widespread in the US and other markets but data limitations have thus far prevented market-timing analysis. Using unique Israeli daily data we show that firms time the market in their actual open market bond repurchases. Bond repurchases typically follow price decline and result in significantly positive abnormal returns in the following days: about 1 % in five trading days. The
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Geopolitical risk and currency returns J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-07 Xi Liu, Xueyong Zhang
This study investigates the relationship between geopolitical risk (GPR) and currency excess returns. A zero-cost strategy that buys higher GPR currencies and sells lower GPR currencies generates a significant excess return of 5.72% per year. These returns contain information that goes beyond traditional currency investment strategies and cannot be explained by existing risk factors in asset pricing
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CEO overconfidence and the choice of debt issuance J. Bank. Financ. (IF 3.539) Pub Date : 2024-02-04 Li Ge, Taher Jamil, Jin Yu
This paper examines how chief executive officer (CEO) overconfidence affects firms’ choice of corporate debt issuance. We find that firms with overconfident CEOs tend to issue more private debt, especially bank loans, than public bonds compared with firms with nonoverconfident CEOs. The effect of CEO overconfidence is more pronounced when default spreads are wide, when gross domestic product growth
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The tax shield increases the interest rate J. Bank. Financ. (IF 3.539) Pub Date : 2024-01-29 Marcel Fischer, Bjarne Astrup Jensen
We study the general equilibrium implications of the corporate tax shield in a growth economy that taxes household income and firm profits and redistributes tax revenues. Our stylized model predicts that in general equilibrium the tax shield's reduction of the corporate after-tax borrowing rate is counteracted (but not fully eliminated) by an increase in the pre-tax rate.
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Task-Oriented Speech and Information Processing J. Bank. Financ. (IF 3.539) Pub Date : 2024-01-26 Vineet Bhagwat, Sara E. Shirley, Jeffrey R. Stark
We examine the impact of task-oriented speech (TOS) on market participants’ ability to process new information, where TOS quantifies a more direct method of communication. Focusing on a widely publicized information event, conference calls, we show that greater TOS is associated with lower ex-post total and idiosyncratic volatility and abnormal trading volume, even after controlling for linguistic
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When Emergency Medicine Becomes A Staple Diet: Evidence From Indian Banking Crisis J. Bank. Financ. (IF 3.539) Pub Date : 2024-01-26 Nithin Mannil, Naman Nishesh, Prasanna Tantri
We investigate the role of regulatory forbearance in causing a banking crisis. To mitigate the expected spillover effects of the global financial crisis, the Indian banking regulator allowed banks to restructure loans without creating provisions. The forbearance continued beyond the crisis due to political economy-related considerations. Using heterogeneity in the application of the policy, we find
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Conservatism and representativeness heuristic in peer reviews: Evidence from the finance literature 1946–2020 J. Bank. Financ. (IF 3.539) Pub Date : 2024-01-19 Kee H. Chung, Choonsik Lee
This paper explores whether journal referees take into account the author's scholarly credentials in their decisions using the stochastic process underlying the Yule-Simon distribution as a descriptive model of the peer-review process. We provide evidence that referees consider the author's publication record valuable information in their decision-making, and such referee behavior helps improve the
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The information content of stress test announcements J. Bank. Financ. (IF 3.539) Pub Date : 2024-01-17 Luca Guerrieri, Michele Modugno
We exploit institutional features of the U.S. bank stress tests to disentangle different types of information garnered by market participants when the stress test results are released. By examining the reaction of different asset prices, we find evidence that market participants value the stress test announcements not only for the information on possible future capital distributions but also for the
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Competition, peer firm effects, and cash composition J. Bank. Financ. (IF 3.539) Pub Date : 2024-01-14 Nam Le, Megan Ramsey
We examine the relationship between competition and the composition of corporate cash. A precautionary motive might suggest firms increase the less risky pure cash component when the threat of competition increases. Using fluidity as a measure of competition and exploiting a change in import tariffs as an exogenous shock, we find firms increase the short-term investments component, which is less liquid
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Risk-taking incentives and risk-talking outcomes J. Bank. Financ. (IF 3.539) Pub Date : 2024-01-01 Dev R Mishra
CEOs’ option-based compensation and discussions about political risk (risk-talking) in successive earnings conference calls are significantly positively associated. This effect is more significant in the subsample of firms with less equity price volatility and poor investment risk-taking (lower capital expenditure). Furthermore, seven out of eight components of risk-talking are positively related to
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Credit default swaps and corporate ESG performance J. Bank. Financ. (IF 3.539) Pub Date : 2023-12-25 Ran Zhao, Lu Zhu
This study finds that credit default swap (CDS) trading positively affects a firm's environmental, social, and governance (ESG) performance. This effect is more prominent in ESG strengths than ESG concerns. The proposed empirical connection remains valid across endogeneity-controlling methodologies, model specifications, and ESG performance measures. The effect is stronger for firms with stronger bank
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Loan Officer Specialization and Credit Defaults J. Bank. Financ. (IF 3.539) Pub Date : 2023-12-23 Michael Goedde-Menke, Peter-Hendrik Ingermann
This paper shows that industry specialization of loan officers facilitates monitoring synergies and lowers credit default rates of small- and medium-sized enterprises. We exploit a wave of early loan officer retirements as a quasi-natural experiment, in which the resulting borrower reallocations changed the industry specialization levels of the remaining loan officers. In a difference-in-differences
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Market discipline and policy loans J. Bank. Financ. (IF 3.539) Pub Date : 2023-12-14 Chia-Chun Chiang, Greg Niehaus
We examine the conditions under which life insurer customers can use a policy loan to protect the unguaranteed cash value in their life insurance policies and annuity contracts from insurer insolvency, and thereby provide market discipline for life insurers. Consistent with policyholders using policy loans to protect their cash value, our empirical evidence indicates that insurers’ policy loan growth
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Award-winning CEOs and corporate innovation J. Bank. Financ. (IF 3.539) Pub Date : 2023-12-13 Mia Hang Pham, Yulia Merkoulova, Chris Veld
We examine the role of award-winning CEOs in corporate innovative activities. We find no significant difference in innovation outputs between firms of media award-winning CEOs and a matched sample of predicted winners. However, firms headed by winners of non-media awards generate significantly more patents and citations in the second and third year after the award. Firms led by CEO-winners of media
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Fifty shades of QE: Robust evidence J. Bank. Financ. (IF 3.539) Pub Date : 2023-12-07 Brian Fabo, Martina Jančoková, Elisabeth Kempf, Ľuboš Pástor
Fabo et al. (2021) show that papers written by central bank researchers find quantitative easing (QE) to be more effective than papers written by academics. Weale and Wieladek (2022) show that a subset of these results lose statistical significance when OLS regressions are replaced by regressions that downweight outliers. We examine those outliers and find no reason to downweight them. Most of them
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Equity in capital raising? Empirical evidence from structured private placements J. Bank. Financ. (IF 3.539) Pub Date : 2023-12-10 Hue Hwa Au Yong, Christine Brown, Choy Yeing (Chloe) Ho, Chander Shekhar
Packaged private placements (PPP) in Australia allow all eligible shareholders to purchase shares at the same price as offered to institutions in the private placement component of the offering. Announcement returns for PPPs are negative on average but are positive for offers with large placements to institutions. Returns also exhibit higher sensitivity to private placement size in PPPs than in traditional
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Back to the funding ratio! Addressing the duration puzzle and retirement income risk of defined contribution pension plans J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-30 Daniel Mantilla-Garcia, Lionel Martellini, Manuel E. Garcia-Huitrón, Miguel A. Martinez-Carrasco
Effective risk management in pension funds requires the use of appropriate long-term risk and performance indicators. However, Defined Contribution (DC) pension plans currently rely on short-term metrics that don't align with the retirement income goals of beneficiaries. Against this backdrop, we introduce a funding ratio measure for DC plans defined as the plan assets divided by accrued benefits derived
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Corrigendum to “Decreasing returns to scale and skill in hedge funds” [Journal of Banking & Finance Volume 156 (2023) 107009] J. Bank. Financ. (IF 3.539) Pub Date : 2023-12-01 Yun Ling, Stephen Satchell, Juan Yao
Abstract not available
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Salience theory and cryptocurrency returns J. Bank. Financ. (IF 3.539) Pub Date : 2023-12-01 Charlie X. Cai, Ran Zhao
The salience theory of choice under risk shows that investor behavior drives cross-sectional cryptocurrency returns. Investors place too much weight on salient payouts, causing overvaluation of cryptocurrencies with upward salience returns and undervaluation of those with downward salience returns, leading to negative expected returns for the former and positive expected returns for the latter. The
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Trading ahead of treasury auctions J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-22 Jean-David Sigaux
I develop and test a model that explains the gradual price decline observed ahead of anticipated sales such as Treasury auctions. Risk-averse agents expect a noisy increase in the net supply of a risky asset. They face a trade-off between hedging the noise with long positions and speculating with short positions. As a result of hedging, the price is above the expected price. As the noise decreases
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Central bank policies and financial markets: Lessons from the euro crisis J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-14 Ashoka Mody, Milan Nedeljkovic
In a novel econometric framework, we identify differences and significant asymmetries in financial markets' responses to the European Central Bank (ECB)'s various policy interventions during the eurozone crisis. Dollar liquidity interventions reduced stress in bond markets and improved economic sentiment, as reflected in higher equity prices. In contrast, the ECB's euro liquidity provisions and monetary
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Relationship banking and firms’ earnings quality – Does it matter whether banks are creditors or owners? J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-15 Jochen Bigus, Marina Weicker
There is mixed empirical evidence on whether close banking relationships are associated with lower or higher earnings quality of borrowing firms. This paper analyzes how this evidence can be explained by the role of the bank, whether the bank is a creditor or equity-holder of the firm. We use a sample of Japanese public firms. In Japan, (1) banks historically have both close financial and personal
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How effectively do green bonds help the environment? J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-14 Mona A. ElBannan, Gunter Löffler
We document a significantly negative relationship between the volume of issued green bonds and the future carbon intensity of non-financial corporates; this relationship is limited to firms with higher financial constraints and higher credit risk. The findings suggest that green bonds can help firms finance carbon reductions, but they also indicate that a considerable fraction of green bond financing
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The effect of bank recapitalization policy on credit allocation, investment, and productivity: Evidence from a banking crisis in Japan J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-14 Hiroyuki Kasahara, Yasuyuki Sawada, Michio Suzuki
This paper examines the ramifications of government capital injections into financially distressed banks during the 1997 Japanese banking crisis. Using a dataset merging firm-level financial statements and bank balance sheets, we explore whether the capital injections primarily benefited high-productivity firms or were misallocated to struggling “zombie” firms. The results suggest that post-injection
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Government guarantees and bank liquidity creation around the world J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-14 Allen N. Berger, Xinming Li, Herman Saheruddin, Daxuan Zhao
Governments provide bank guarantees, such as deposit insurance. While risk effects are well researched, impacts on bank output remain largely unexplored. We investigate bank output effects using data from 75 countries/regions on bank liquidity creation, a comprehensive bank output measure. We address reverse causality, examining home-country guarantee effects on liquidity creation by subsidiary banks
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Modeling your stress away J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-14 Friederike Niepmann, Viktors Stebunovs
This paper investigates the validity of banks' credit loss projections in the bi-annual EU-wide bank stress tests, which inform regulatory capital requirements. It finds that banks “re-optimized” their models in 2016 to bring down credit losses, exploiting flexibility in the stress test framework. Specifically, banks whose losses would have increased the most from 2014 to 2016 because of changes in
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Impact of risk oversight functions on bank risk: Evidence from the Dodd-Frank Act J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-14 Lakshmi Balasubramanyan, Naveen D. Daniel, Joseph G Haubrich, Lalitha Naveen
We document the impact of having a risk committee (RC) and a chief risk officer (CRO) on bank risk using the passage of the Dodd Frank Act as a natural experiment. The Act requires bank holding companies with over $10B of assets to have an RC to oversee risk management, while those with over $50B of assets are additionally required to have a CRO. We use difference-in-difference and regression discontinuity
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The demise of branch banking – Technology, consolidation, bank fragility J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-13 Jan Keil, Steven Ongena
We study bank branching dynamics across 3,143 US counties and 26 years. During the last decade, banks closed their branches at an unprecedented rate. At its peak in 2009, there were 90,783 branches. By 2020, this number has fallen by 12 percent. While technological factors correlate with these branching dynamics, bank fragility and consolidation are also strongly associated with changes in the number
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Market-based private equity returns J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-07 Theodosis L. Kallenos, George P. Nishiotis
Using the universe of business development companies (BDCs), a unique publicly traded segment of U.S. Private Equity (PE), for the period 1998–2017, we provide the first in-depth examination of their performance and risk-adjusted characteristics and compare our results to contrasting evidence derived from recently developed time series proxies for unlisted PE returns. BDCs exhibit zero alpha, beta
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The dark side of bank taxes J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-06 Marcin Borsuk, Oskar Kowalewski, Jianping Qi
We investigate the impact of a new bank tax in Poland on bank lending behavior. We find that banks respond to the tax by tightening credit supply and increasing the costs of credit to the real sector. However, the responses vary across loan segments. In line with search-for-yield behavior, the tax motivates banks to shift their allocations of household credit from low-margin and relatively safe mortgage
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Capital regulation induced reaching for systematic yield: Financial instability through fire sales J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-10 Martijn A. Boermans, Bram van der Kroft
Credit rating-based capital regulation induces financial institutions to take on additional systematic risk. In this paper, we uncover interconnected channels through which this systematic risk hoarding affects financial stability using a proprietary ECB bond holdings dataset. First, banks and insurance corporations effectively reduce their capital buffers by hoarding bonds with high systematic credit
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Do stock-level experienced returns influence security selection? J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-07 Constantinos Antoniou, Shema F. Mitali
We examine whether the managers of equity mutual funds exhibit reinforcement learning, investing more heavily in firms in which they previously experienced higher returns. The results reliably support this hypothesis. Experienced returns are related to managers' re-balancing decisions in response to flows. Experienced returns do not play a role for index-tracking funds. When new managers come in a
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Marginals versus copulas: Which account for more model risk in multivariate risk forecasting? J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-09 Simon Fritzsch, Maike Timphus, Gregor Weiß
We study the model risk of multivariate risk models in a comprehensive empirical study on Copula-GARCH models used for forecasting Value-at-Risk and Expected Shortfall. To determine whether model risk inherent in the forecasting of portfolio risk is caused by the candidate marginal or copula models, we analyze different groups of models in which we fix either the marginals, the copula, or neither.
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The case for CASE: Estimating heterogeneous systemic effects J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-07 Zaichao Du, Juan Carlos Escanciano, Guangwei Zhu
The Basel Committee and the Financial Stability Board require a consensus on the identification of characteristics that make a financial institution more prone than others to be severely hit by systemic shocks. This paper introduces a new tool to achieve this goal: a model for the Conditional Average Systemic Effects (CASE). The CASE quantifies the average effect of a system wide shock or market downturn
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The value of growth: Changes in profitability and future stock returns J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-08 Bryan Lim, Juan Sotes-Paladino, George Jiaguo Wang, Yaqiong Yao
We use a simple two-stage dividend growth model to connect profitability growth and firm scale to stock returns. In this framework, both the magnitude and the length of the first-stage growth play a key role in determining returns. Using current profitability growth to estimate magnitude and firm scale as inverse proxy for length, we predict that future returns should increase with current profitability
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Frictions in scaling up central bank balance sheet policies: how Eurosystem asset purchases impact the repo market J. Bank. Financ. (IF 3.539) Pub Date : 2023-11-04 Tomás Carrera de Souza, Tom Hudepohl
This paper examines the impact of the Eurosystem's increased footprint in financial markets, resulting from the response to the Covid-19 crisis, on repo rates. We exploit transaction-level data on the repo market and the Eurosystem's purchase programmes and find that both marginal purchases (flow effect) and aggregate holdings (stock effect) have a significant downward impact on repo rates. The stock
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Venture capital directors and corporate debt structure: An empirical analysis of newly listed companies J. Bank. Financ. (IF 3.539) Pub Date : 2023-10-24 Viet Anh Dang, Ahmet Karpuz, Abdul Mohamed
We investigate how venture capitalists (VCs) serving as directors on corporate boards affect portfolio companies’ debt structure after initial public offerings (IPOs). Using hand-collected data, we find that companies with a higher fraction of VC directors on their boards use significantly fewer types of debt. The impact of VC directorships on debt concentration is more pronounced in companies facing
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Do foreign institutions avoid investing in poorly CSR-performing firms? J. Bank. Financ. (IF 3.539) Pub Date : 2023-10-24 Nadia Ben Yahia, Amna Chalwati, Dorra Hmaied, Abdul Mohi Khizer, Samir Trabelsi
We examine the impact of corporate social responsibility (CSR) on the investment decisions of foreign institutional investors. Using institutional investor holdings data domiciled in emerging markets, we find a positive and economically significant impact of firm CSR performance on foreign institutional ownership. We further document that independent foreign investors are affected by firm CSR performance
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When school ties meet geography: Education-province bias in mutual fund portfolios J. Bank. Financ. (IF 3.539) Pub Date : 2023-10-13 Quanxi Liang, Qi Jin, Meiting Lu, Yaowen Shan
Fund managers tilt towards stocks from the location of their tertiary education (education province). We find that, compared with their peers, fund managers overweight stocks headquartered in their education provinces. This overweighting differs from other biases, such as local bias, hometown bias, and educational ties, and is detrimental to fund performance. Funds with more education-province bias
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Politically influenced bank lending J. Bank. Financ. (IF 3.539) Pub Date : 2023-10-13 Yifan Zhou
Borrowers from the same state as the chairman of the US Senate Banking Committee (“connected borrowers”) are able to borrow at spreads 19 bps lower than other borrowers. Banks that provide connected loans enjoy regulatory relief in the form of fewer future investigations. Connected borrowers' contributions toward the chairman are influenced by their cost of loans, but the same is not true for nonconnected
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Why does option-implied volatility forecast realized volatility? Evidence from news events J. Bank. Financ. (IF 3.539) Pub Date : 2023-10-06 Sipeng Chen, Gang Li
This study examines the information content of stock option-implied volatility. We measure the arrival intensities and magnitudes of scheduled and unscheduled news as well as fundamental and non-fundamental news. Most of these news measures exhibit strong and positive associations with contemporaneous stock return volatility, and many of them can be predicted by implied volatility. Approximately one
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Liquidity regulations, bank lending and fire-sale risk J. Bank. Financ. (IF 3.539) Pub Date : 2023-09-19 Daniel Roberts, Asani Sarkar, Or Shachar
We examine whether U.S. banks subject to the Liquidity Coverage Ratio (LCR) reduce lending (an unintended consequence) and/or become more resilient to liquidity shocks, as intended by regulators. We find that LCR banks tighten lending standards, and reduce liquidity creation that occurs mainly through lower lending relative to non-LCR banks. However, covered banks also contribute less to fire-sale