Secrecy, Information Shocks, and Corporate Investment: Evidence from European Union Countries
Mohamad Mazboudi, Iftekhar Hasan
Journal of International Financial Markets, Institutions and Money,
2018
Abstract
This study examines how national culture affects corporate investment. We argue that national culture affects corporate investment efficiency through the level of secrecy that national culture exhibits. Using a sample of firms from eight culturally-diverse European Union countries, we find that the level of secrecy that national culture exhibits is negatively related to corporate investment efficiency after controlling for a number of firm- and country-level factors. We also find that the negative relation between national culture and corporate investment efficiency is mitigated by an exogenous shock to the information asymmetry problem between managers and investors. Our study highlights the importance of the cultural value of secrecy/transparency as a determinant of investment efficiency at the firm-level.
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Comments on “Consultation BCBS discussion paper on the regulatory treatment of sovereign exposures”
Michael Koetter, Lena Tonzer
Einzelveröffentlichungen,
2018
Abstract
The BCBS discussion paper on the regulatory treatment of sovereign exposures addresses a so far hardly touched topic as concerns capital regulation. While the regulatory framework has been changed substantially over recent years including the establishment of the European Banking Union, risk weights on sovereign exposures have remained mostly unchanged and sovereign exposures of banks benefit from a favourable capital treatment. This applies despite the fact that the recent European sovereign debt crisis has revealed the potential of a doom loop between bank and sovereign risk and demonstrated that sovereign exposures are by no means “risk-free”. The paper is thus an important proposal how to change the risk evaluation of banks’ sovereign exposures.
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Sovereign Stress, Banking Stress, and the Monetary Transmission Mechanism in the Euro Area
Oliver Holtemöller, Jan-Christopher Scherer
IWH Discussion Papers,
Nr. 3,
2018
Abstract
In this paper, we investigate to what extent sovereign stress and banking stress have contributed to the increase in the level and in the heterogeneity of nonfinancial firms’ refinancing costs in the Euro area during the European debt crisis and how they did affect the monetary transmission mechanism. We identify the increasing effect of government bond yield spreads (sovereign stress) and the share of non-performing loans (banking stress) on firms’ financing costs using an instrumental-variable approach. Moreover, we estimate both sources of stress to have significantly impaired the monetary transmission mechanism during the European debt crisis.
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Does It Pay to Get Connected? An Examination of Bank Alliance Network and Bond Spread
Iftekhar Hasan, Céline Meslier, Amine Tarazi, Mingming Zhou
Journal of Economics and Business,
im Erscheinen
Abstract
This paper examines the effects of bank alliance network on bonds issued by European banks during the period 1990–2009. We construct six measures capturing different dimensions of banks’ network characteristics. In opposition to the results obtained for non-financial firms, our findings indicate that being part of a network does not create value for bank’s bondholders, indicating a dark side effect of strategic alliances in the banking sector. While being part of a network is perceived as a risk-increasing event by market participants, this negative perception is significantly lower for the larger banks, and, to a lesser extent, for the more profitable banks. Moreover, during crisis times, the positive impact on bond spread of a bank’s higher centrality or of a bank’s higher connectedness in the network is stronger, indicating that market participants may fear spillover effects within the network during periods of banks’ heightened financial fragility.
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The European Refugee Crisis and the Natural Rate of Output
Katja Heinisch, Klaus Wohlrabe
Applied Economics Letters,
Nr. 16,
2017
Abstract
The European Commission follows a harmonized approach for calculating structural (potential) output for EU member states that takes into account labour as an important ingredient. This article shows how the recent huge migrants’ inflow to Europe affects trend output. Due to the fact that the immigrants immediately increase the working population but effectively do not enter the labour market, we illustrate that the potential output is potentially upward biased without any corrections. Taking Germany as an example, we find that the average medium-term potential growth rate is lower if the migration flow is modelled adequately compared to results based on the unadjusted European Commission procedure.
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Delay Determinants of European Banking Union Implementation
Michael Koetter, Thomas Krause, Lena Tonzer
Abstract
To safeguard financial stability and harmonise regulation, the European Commission substantially reformed banking supervision, resolution, and deposit insurance via EU directives. But most countries delay the transposition of these directives. We ask if transposition delays result from strategic considerations of governments conditional on the state of their financial, regulatory, and political systems? Supervisors might try to protect national banking systems and local politicians maybe reluctant to surrender national sovereignty to deal with failed banks. Alternatively, intricate financial regulation might require more implementation time in large and complex financial and political systems. We therefore collect data on the transposition delays of the three Banking Union directives and investigate observed delay variation across member states. Our correlation analyses suggest that existing regulatory and institutional frameworks, rather than banking market structure or political factors, matter for transposition delays.
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Competition and Contestability in Bank Retail Markets
Reint E. Gropp, Christoffer Kok
Handbook of Competition in Banking and Finance,
2017
Abstract
We examine the role of internet banking in retail-banking competition. The empirical analysis focuses on European banks for the period 2012-15. Building on the idea of contestable markets, we show that internet banking has increased competition through the contestability of markets. The effect is stronger for retail deposits, but recently consumer loans also show an effect. We attribute this finding to the advent of fintechs. These outcomes support the use of non-concentration-based competition measures in banking research.
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Transposition Frictions, Banking Union, and Integrated Financial Markets in Europe
Michael Koetter, Thomas Krause, Lena Tonzer
G20 Insights Policy Brief, Policy Area "Financial Resilience",
2017
Abstract
In response to the financial crisis of 2007/2008, policymakers implemented comprehensive changes concerning the regulation and supervision of banks. Many of those changes, including Basel III or the directives pertaining to the Single Rulebook in the European Union (EU), are agreed upon at the supranational level, which constitutes a key step towards harmonized regulation and supervision in an integrated European financial market. However, the success of these reforms depends on the uniform and timely implementation at the national level. Avoiding strategic delays to implement EU regulation into national laws should thus constitute a main target of the G20.
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Drivers of Systemic Risk: Do National and European Perspectives Differ?
Claudia M. Buch, Thomas Krause, Lena Tonzer
Abstract
In Europe, the financial stability mandate generally rests at the national level. But there is an important exception. Since the establishment of the Banking Union in 2014, the European Central Bank (ECB) can impose stricter regulations than the national regulator. The precondition is that the ECB identifies systemic risks which are not adequately addressed by the macroprudential regulator at the national level. In this paper, we ask whether the drivers of systemic risk differ when applying a national versus a European perspective. We use market data for 80 listed euro-area banks to measure each bank’s contribution to systemic risk (SRISK) at the national and the euro-area level. Our research delivers three main findings. First, on average, systemic risk increased during the financial crisis. The difference between systemic risk at the national and the euro-area level is not very large, but there is considerable heterogeneity across countries and banks. Second, an exploration of the drivers of systemic risk shows that a bank’s contribution to systemic risk is positively related to its size and profitability. It decreases in a bank’s share of loans to total assets. Third, the qualitative determinants of systemic risk are similar at the national and euro-area level, whereas the quantitative importance of some determinants differs.
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