1,721,040 research outputs found
Do capital buffers matter? Evidence from the stocks and flows of nonperforming loans
Full text linkThis paper investigates the determinants of the stocks and flows (both in- and outflows) of nonperforming loans (NPLs) by considering a bank-specific factor that is not adequately analysed in the literature, namely, bank capital buffers. Using unbalanced panel data with 6,087 bank-year observations for the 2006–2018 period and a two-step system generalised method of moments (GMM) estimation, we find that banks with higher levels of capital buffers (both in terms of Tier 1 and total capital) have fewer NPL stocks and generate fewer NPL inflows. When we control for the characteristics of the loan portfolio, real guarantees collected by the bank increase the stocks and flows of new, impaired loans, while personal guarantees favour the outflow of bad loans
Natural disasters and economic growth: The role of banking market structure
Full text linkFollowing a natural disaster, the rate of economic growth recovers faster in less competitive banking markets. A 10% reduction in competition increases the rate of economic growth by 0.3%. In less competitive markets, banks respond to a disaster by increasing the supply of real estate credit by refinancing mortgage loans, but do not lend more to businesses or consumers. Instead, government agencies provide disaster loans to affected businesses and households. Smaller, profitable and well-capitalized institutions that rely more on traditional retail banking originate most mortgage credit
Knowledge mapping of model risk in banking
Full text linkFor years, bank management has relied on mathematical, statistical and financial models, which increasingly expose banks to model risk. The latter is also extended by the phenomenon of innovation: machine learning, artificial intelligence and big data make the models more and more sophisticated and difficult to manage. This study aims to clarify how the literature on model risk is evolving through a bibliometric survey to understand state of the art and identify the discussion topics, open questions and challenges for the future. The study results show that the literature on model risk is still quite young and sparse. The problems to be solved are conceptual, computational, and organizational. The considerations made lead to the question of whether adding further complexity to model risk management is a solution or whether, on the contrary, it creates new model risks
Is the ECB’s conventional monetary policy state‐dependent? An event study approach
Full text linkWe investigate the impact of ECB conventional (CMP) on national banking indices of 10 Eurozone countries and a Eurozone-wide banking index using the event study technique. We find that announcements of unexpected increases in interest rates benefit French, German, Greek and Italian banks when interest rates are low, while in other periods, the effect is muted. A plausible explanation is that bank profits are squeezed when interest rates are low because banks are reluctant to push deposit rates to zero. Our results are robust to potentially confounding events related to unconventional monetary policy announcements, volatility clustering and volatility expectations
COVID‐19, ESG investing, and the resilience of more sustainable stocks: Evidence from European firms
Full text linkFollowing the COVID-19 outbreak, orientation toward sustainability is a critical factor in ensuring firm survival and growth. Using a large sample of 1,204 firms in Europe during the year 2020, this study investigates how more sustainable firms fare during the pandemic compared with other firms in terms of risk–return trade-off and stock market liquidity. We also highlight the drivers of the resilience of more sustainable firms to the pandemic. Particularly, we document that higher levels of cash holdings and liquid assets in the pre-COVID period help these firms to perform and absorb the COVID-19 externalities better than other firms. Our results are robust to a host of econometric models, including GMM estimations and several measures of stock market performance. These findings contribute to the theoretical and empirical debate on the role of the sustainability as a source of corporate resilience to unexpected shocks
Market Reaction to the Expected Loss Model in Banks
Full text linkThis is the author accepted manuscript. The final version is available from Elsevier via the DOI in this recordWe investigate how investors perceive the adoption of the expected-loss model (ELM) for impairment incorporated in IFRS 9. Using a sample of European listed banks covering the period of the standard-setting process of IFRS 9, we examine whether the market perceives the new regulation to increase shareholder wealth. First, we document a positive market reaction to the ELM adoption events. Second, we find that investors perceive that the potential benefits of ELM are more pronounced for larger banks, banks with lower profitability and higher systemic risk, and for those that received a public bailout and with more positively skewed returns. Overall, these results support a “monitoring” channel suggesting that ELM may lead to greater bank transparency and more effective market discipline, fundamental for improving financial stability
Bank market power and supervisory enforcement actions
Full text linkThis paper investigates the relationship between supervisory enforcement actions and bank market
power. Employing a unique dataset on enforcement actions in Italy from 2006 to 2018, we first
document that banks with higher market power are more likely to escape public scrutiny. Further,
this effect is more substantial for local banks than commercial ones, coherent with the view that
national supervisors are softer when dealing with local banks. Second, when uncovering the main
characteristics of the banks with higher market power, we find that banks with higher market power
do not outperform other banks in profitability but show a worse loan quality, suggesting that banks
with higher market power have riskier loan portfolios than other banks and attract fewer
enforcement actions. Our results are robust across several econometric techniques and alternative
specifications by contributing to the long-lasting debate on the implications of the bank market
power on financial stability, considering the role of enforcement actions
Diversification, multimarket contacts and profits in the leasing industry
No full textThis paper examines the competitive dynamics and multimarket characteristics of the Italian leasing industry. We employ a GMM-system estimator for dynamic panel analysis using a unique dataset over 2002–2008. Our main findings suggest that there is no evidence of tacit collusion in the Italian leasing sector thus rejecting the hypothesis that mutual forbearance affects market conditions through greater multimarket contact. The study offers no support to the assumption that similarity among firms facilitates collusive behaviour. Finally, the analysis reveals that on average the most profitable leasing firms are less diversified and have a better risk profile
Investments in Nascent Project-Based Enterprises: The interplay between role-congruent reputations and institutional endorsement
Full text linkWe study nascent project-based enterprises (PBEs) through the lens of upper echelons and institutional theory. We analyse the interplay between the different role-congruent reputations of their project entrepreneurs and the institutional endorsement of their project idea, theorizing how these affect PBEs' ability to attract private investments. In the context of the Italian film industry, we find that the commercial reputation of the project entrepreneur in the producer role is crucial for attracting investors, while the artistic reputation of the project entrepreneur in the creative director role is crucial for attaining institutional endorsement of the project idea. Finally, we find that the effect of the commercial reputation of the project entrepreneur in the producer role on attracting investments is mediated by the institutional endorsement. We contribute to the literature on PBEs by demonstrating how specific combinations of project entrepreneurs' roles and (role-congruent) reputations can directly and indirectly attract investments
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