Pub Date : 2026-01-16DOI: 10.1016/j.jfs.2026.101501
Jianfu Shen , Gaiyan Zhang , Zunxin Zheng
Using data from Egan-Jones Ratings (EJR), an investor-paid agency, we find an asymmetric rating bias: optimistic for high-quality firms and conservative for low-quality firms compared to issuer-paid agencies (S&P and Moody’s). This bias varies with information uncertainty and investor clientele, with higher ratings for firms with greater institutional ownership and more conservative ratings for firms with higher uncertainty. Conservative ratings lead to false warnings and rating instability, while optimism causes missed defaults. Our results challenge the view that investor-paid models are less biased, showing how business models interact with information environment and client incentives to influence rating behavior.
{"title":"Biases in investor-paid credit ratings","authors":"Jianfu Shen , Gaiyan Zhang , Zunxin Zheng","doi":"10.1016/j.jfs.2026.101501","DOIUrl":"10.1016/j.jfs.2026.101501","url":null,"abstract":"<div><div>Using data from Egan-Jones Ratings (EJR), an investor-paid agency, we find an asymmetric rating bias: optimistic for high-quality firms and conservative for low-quality firms compared to issuer-paid agencies (S&P and Moody’s). This bias varies with information uncertainty and investor clientele, with higher ratings for firms with greater institutional ownership and more conservative ratings for firms with higher uncertainty. Conservative ratings lead to false warnings and rating instability, while optimism causes missed defaults. Our results challenge the view that investor-paid models are less biased, showing how business models interact with information environment and client incentives to influence rating behavior.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"83 ","pages":"Article 101501"},"PeriodicalIF":4.2,"publicationDate":"2026-01-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146025938","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-16DOI: 10.1016/j.jfs.2026.101500
Shaker Ahmed , Jens Hagendorff , Timothy King , Abhishek Srivastav
We use the staggered deregulation of interstate banking in the U.S. to show that CEOs who have gained career experience at multiple banks are more likely to pursue acquisitions when competition intensifies. Acquisitions completed by these CEOs perform better than those led by CEOs whose career experience is confined to a single institution. Analyzing the sources of performance gains, we find that CEOs with greater across-bank experience are more effective at identifying and integrating dissimilar targets. Our findings cannot be explained by other formative CEO experiences or a CEO general ability. The results highlight the importance of externally versus internally acquired experience in explaining how managers respond to a competitive shock.
{"title":"A safe pair of hands? Bank CEO career experience and acquisition performance","authors":"Shaker Ahmed , Jens Hagendorff , Timothy King , Abhishek Srivastav","doi":"10.1016/j.jfs.2026.101500","DOIUrl":"10.1016/j.jfs.2026.101500","url":null,"abstract":"<div><div>We use the staggered deregulation of interstate banking in the U.S. to show that CEOs who have gained career experience at multiple banks are more likely to pursue acquisitions when competition intensifies. Acquisitions completed by these CEOs perform better than those led by CEOs whose career experience is confined to a single institution. Analyzing the sources of performance gains, we find that CEOs with greater across-bank experience are more effective at identifying and integrating dissimilar targets. Our findings cannot be explained by other formative CEO experiences or a CEO general ability. The results highlight the importance of externally versus internally acquired experience in explaining how managers respond to a competitive shock.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"83 ","pages":"Article 101500"},"PeriodicalIF":4.2,"publicationDate":"2026-01-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146025939","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-12DOI: 10.1016/j.jfs.2026.101499
Chrysovalantis Gaganis , George N. Leledakis , Fotios Pasiouras , Emmanouil G. Pyrgiotakis
We use a comprehensive cross-country sample to investigate whether and how the country-level social capital influences the firm-level stock price crash risk. We document a negative and statistically significant effect, which is robust to various tests including IV estimations that account for endogeneity concerns. When we disaggregate social capital into its various components, we find that the results are driven by civic and social participation, institutional trust, and family relationships, whereas social networks and interpersonal trust do not appear to matter. Furthermore, we find that the impact of social capital is channeled through firm-level reporting opacity and price informativeness. Finally, the impact of social capital, including most of its components, is moderated by formal institutions, like property rights and law and order.
{"title":"Social capital and stock price crash risk: cross-country evidence","authors":"Chrysovalantis Gaganis , George N. Leledakis , Fotios Pasiouras , Emmanouil G. Pyrgiotakis","doi":"10.1016/j.jfs.2026.101499","DOIUrl":"10.1016/j.jfs.2026.101499","url":null,"abstract":"<div><div>We use a comprehensive cross-country sample to investigate whether and how the country-level social capital influences the firm-level stock price crash risk. We document a negative and statistically significant effect, which is robust to various tests including IV estimations that account for endogeneity concerns. When we disaggregate social capital into its various components, we find that the results are driven by civic and social participation, institutional trust, and family relationships, whereas social networks and interpersonal trust do not appear to matter. Furthermore, we find that the impact of social capital is channeled through firm-level reporting opacity and price informativeness. Finally, the impact of social capital, including most of its components, is moderated by formal institutions, like property rights and law and order.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"83 ","pages":"Article 101499"},"PeriodicalIF":4.2,"publicationDate":"2026-01-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145996552","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using an extensive matched hedge fund-prime broker panel dataset for the period 2001–2021, we document a strong positive relationship between hedge fund leverage and prime broker’s stock price crash risk after controlling for other crash risk drivers. Our results are not only statistically, but also economically significant, showing that a one-standard-deviation increase in hedge fund leverage is associated on average with an increase of around 5% of a standard deviation in the negative skewness or the down-to-up-volatility of bank stock returns. Moreover, they remain robust when accounting for endogeneity and conducting many robustness checks. We also document that some investment strategies, such as one focusing on fixed income, appear to decrease the slope of the risk metrics of prime brokers, and ultimately leading to lower stock price crash risk.
{"title":"The leverage of hedge funds and the risk of their prime brokers","authors":"Ariston Karagiorgis , Dimitrios Anastasiou , Konstantinos Drakos , Steven Ongena","doi":"10.1016/j.jfs.2025.101498","DOIUrl":"10.1016/j.jfs.2025.101498","url":null,"abstract":"<div><div>Using an extensive matched hedge fund-prime broker panel dataset for the period 2001–2021, we document a strong positive relationship between hedge fund leverage and prime broker’s stock price crash risk after controlling for other crash risk drivers. Our results are not only statistically, but also economically significant, showing that a one-standard-deviation increase in hedge fund leverage is associated on average with an increase of around 5% of a standard deviation in the negative skewness or the down-to-up-volatility of bank stock returns. Moreover, they remain robust when accounting for endogeneity and conducting many robustness checks. We also document that some investment strategies, such as one focusing on fixed income, appear to decrease the slope of the risk metrics of prime brokers, and ultimately leading to lower stock price crash risk.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"82 ","pages":"Article 101498"},"PeriodicalIF":4.2,"publicationDate":"2025-12-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145883772","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-26DOI: 10.1016/j.jfs.2025.101496
Kawser Ahmed Shiblu, Francesca Toscano
This study investigates the relationship between corporate culture and strategic alliances. We find that firms with strong cultural frameworks are more likely to form strategic alliances, particularly in contract-intensive sectors. Additionally, corporate culture acts as a substitute for factors like industry competition or potential credit rating changes. Culture impacts nearly every domain aside from funding-related alliances, with Teamwork, Innovation, and Quality representing the most significant dimensions. Finally, equity markets respond positively to alliance announcements from firms with stronger cultural values, suggesting that investors view corporate culture as a key driver of strategic success.
{"title":"Culture as a catalyst: The impact of corporate culture on strategic alliances and equity market response","authors":"Kawser Ahmed Shiblu, Francesca Toscano","doi":"10.1016/j.jfs.2025.101496","DOIUrl":"10.1016/j.jfs.2025.101496","url":null,"abstract":"<div><div>This study investigates the relationship between corporate culture and strategic alliances. We find that firms with strong cultural frameworks are more likely to form strategic alliances, particularly in contract-intensive sectors. Additionally, corporate culture acts as a substitute for factors like industry competition or potential credit rating changes. Culture impacts nearly every domain aside from funding-related alliances, with <em>Teamwork</em>, <em>Innovation</em>, and <em>Quality</em> representing the most significant dimensions. Finally, equity markets respond positively to alliance announcements from firms with stronger cultural values, suggesting that investors view corporate culture as a key driver of strategic success.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"82 ","pages":"Article 101496"},"PeriodicalIF":4.2,"publicationDate":"2025-12-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840292","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-24DOI: 10.1016/j.jfs.2025.101497
Noam Michelson
This paper examines the effectiveness of a novel monetary policy instrument—central bank purchases of commercial banks’ unsecured bonds—on bank credit supply. As part of its COVID-19 response in July 2020, the Bank of Israel uniquely included purchases of banks’ unsecured debt issued through publicly tradable bonds in its corporate bond purchase program. This differed from most similar programs globally that focused solely on corporate securities. Using confidential datasets of individual central bank purchases and bank-level borrower credit, I employ Khwaja and Mian’s (2008) analytical framework with borrower fixed effects to isolate supply effects from demand factors. The results demonstrate that the share of bank bonds purchased by the Bank of Israel led to a significant increase in credit supply. An analysis of the transmission channels reveals that changes in bondholder composition—specifically the shift from “unstable hands” investors to the stable, buy-and-hold, Bank of Israel— drove these effects by restoring market confidence and inducing deposit inflows. Consequently, banks with higher pre-program shares of price-sensitive bondholders experienced larger deposit inflows and exhibited substantially stronger credit responses. This study contributes to the literature by documenting a novel policy instrument for expanding the supply of bank credit and providing the first evidence that changes in banks’ debtholder composition affect their provision of credit.
{"title":"Stimulating credit through banks’ unsecured debt purchases: Insights from a non-traditional measure","authors":"Noam Michelson","doi":"10.1016/j.jfs.2025.101497","DOIUrl":"10.1016/j.jfs.2025.101497","url":null,"abstract":"<div><div>This paper examines the effectiveness of a novel monetary policy instrument—central bank purchases of commercial banks’ unsecured bonds—on bank credit supply. As part of its COVID-19 response in July 2020, the Bank of Israel uniquely included purchases of banks’ unsecured debt issued through publicly tradable bonds in its corporate bond purchase program. This differed from most similar programs globally that focused solely on corporate securities. Using confidential datasets of individual central bank purchases and bank-level borrower credit, I employ Khwaja and Mian’s (2008) analytical framework with borrower fixed effects to isolate supply effects from demand factors. The results demonstrate that the share of bank bonds purchased by the Bank of Israel led to a significant increase in credit supply. An analysis of the transmission channels reveals that changes in bondholder composition—specifically the shift from “unstable hands” investors to the stable, buy-and-hold, Bank of Israel— drove these effects by restoring market confidence and inducing deposit inflows. Consequently, banks with higher pre-program shares of price-sensitive bondholders experienced larger deposit inflows and exhibited substantially stronger credit responses. This study contributes to the literature by documenting a novel policy instrument for expanding the supply of bank credit and providing the first evidence that changes in banks’ debtholder composition affect their provision of credit.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"82 ","pages":"Article 101497"},"PeriodicalIF":4.2,"publicationDate":"2025-12-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840189","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-24DOI: 10.1016/j.jfs.2025.101495
Marius Fourné , Xiang Li
This study employs bilateral data on external assets to examine the impact of climate policies on the reallocation of international capital. We find that the stringency of climate policy in the destination country is significantly and positively associated with an increase in the allocation of portfolio equity and banking investment to that country. However, it does not show significant effects on the allocation of foreign direct investment and portfolio debt. Our findings are not driven by valuation effects, and we present evidence that suggests diversification, suasion, and uncertainty mitigation as possible underlying mechanisms.
{"title":"Climate policy and international capital reallocation","authors":"Marius Fourné , Xiang Li","doi":"10.1016/j.jfs.2025.101495","DOIUrl":"10.1016/j.jfs.2025.101495","url":null,"abstract":"<div><div>This study employs bilateral data on external assets to examine the impact of climate policies on the reallocation of international capital. We find that the stringency of climate policy in the destination country is significantly and positively associated with an increase in the allocation of portfolio equity and banking investment to that country. However, it does not show significant effects on the allocation of foreign direct investment and portfolio debt. Our findings are not driven by valuation effects, and we present evidence that suggests diversification, suasion, and uncertainty mitigation as possible underlying mechanisms.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"82 ","pages":"Article 101495"},"PeriodicalIF":4.2,"publicationDate":"2025-12-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840190","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-24DOI: 10.1016/j.jfs.2025.101494
Oz Shy
Whistleblowers who report financial crimes are treated differently than whistleblowers in other sectors. This is because of the potential for partial recovery of the loss caused by financial fraud. The paper shows that the optimal whistleblower reward is a fraction of the amount that is recovered from fraud loss, which is capped at the level that can no longer attract additional whistleblowers. The paper also analyzes how rewards to whistleblowers affect heterogeneous potential fraudsters’ decision to commit fraud and why additional penalties in the form of monetary fines and/or jail time are needed.
{"title":"Whistleblowers and financial fraud","authors":"Oz Shy","doi":"10.1016/j.jfs.2025.101494","DOIUrl":"10.1016/j.jfs.2025.101494","url":null,"abstract":"<div><div>Whistleblowers who report financial crimes are treated differently than whistleblowers in other sectors. This is because of the potential for partial recovery of the loss caused by financial fraud. The paper shows that the optimal whistleblower reward is a fraction of the amount that is recovered from fraud loss, which is capped at the level that can no longer attract additional whistleblowers. The paper also analyzes how rewards to whistleblowers affect heterogeneous potential fraudsters’ decision to commit fraud and why additional penalties in the form of monetary fines and/or jail time are needed.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"82 ","pages":"Article 101494"},"PeriodicalIF":4.2,"publicationDate":"2025-12-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145840291","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-23DOI: 10.1016/j.jfs.2025.101493
Marianna Blix Grimaldi , Supriya Kapoor
Using detailed data on U.S. bank holding companies and the Federal Reserve’s Quantitative Easing (QE) programmes implemented after the 2007–09 financial crisis, we reveal a more nuanced transmission mechanism than previously documented in the literature. The effect of QE on bank lending varies systematically according to banks’ liquidity and solvency profiles. Specifically, we find that the most vulnerable banks (e.g., those with high asset-risk exposure and low liquidity or low capital positions) tend to increase lending more aggressively than their safer counterparties in response to QE. Moreover, QE appears to increase risk-taking behaviour, especially among weaker banks. These findings highlight the non-linear nature of QE transmission and emphasize the importance of accounting for bank heterogeneity in the assessment of unconventional monetary policy.
{"title":"Different strokes for different banks: A heterogeneity analysis of Fed QE on bank lending","authors":"Marianna Blix Grimaldi , Supriya Kapoor","doi":"10.1016/j.jfs.2025.101493","DOIUrl":"10.1016/j.jfs.2025.101493","url":null,"abstract":"<div><div>Using detailed data on U.S. bank holding companies and the Federal Reserve’s Quantitative Easing (QE) programmes implemented after the 2007–09 financial crisis, we reveal a more nuanced transmission mechanism than previously documented in the literature. The effect of QE on bank lending varies systematically according to banks’ liquidity and solvency profiles. Specifically, we find that the most vulnerable banks (e.g., those with high asset-risk exposure and low liquidity or low capital positions) tend to increase lending more aggressively than their safer counterparties in response to QE. Moreover, QE appears to increase risk-taking behaviour, especially among weaker banks. These findings highlight the non-linear nature of QE transmission and emphasize the importance of accounting for bank heterogeneity in the assessment of unconventional monetary policy.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"82 ","pages":"Article 101493"},"PeriodicalIF":4.2,"publicationDate":"2025-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145883769","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-11-28DOI: 10.1016/j.jfs.2025.101492
Adonis Antoniades
In the run-up to the Great Recession, commercial banks used their balance sheets to fund an expansion in real estate to commercial borrowers. The subsequent bank failures owed more to pre-crisis exposure to commercial real estate credit than to household mortgages or to liquidity risk.
{"title":"Commercial bank failures during the Great Recession: The real (estate) story","authors":"Adonis Antoniades","doi":"10.1016/j.jfs.2025.101492","DOIUrl":"10.1016/j.jfs.2025.101492","url":null,"abstract":"<div><div>In the run-up to the Great Recession, commercial banks used their balance sheets to fund an expansion in real estate to commercial borrowers. The subsequent bank failures owed more to pre-crisis exposure to commercial real estate credit than to household mortgages or to liquidity risk.</div></div>","PeriodicalId":48027,"journal":{"name":"Journal of Financial Stability","volume":"82 ","pages":"Article 101492"},"PeriodicalIF":4.2,"publicationDate":"2025-11-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145685026","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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