Journal of Financial Stability最新文献

This study examines the role of independent directors’ network centrality in bank risk-taking. Following the shareholder-incentive hypothesis and social-network theory, we predict and find that independent directors’ connectedness is positively associated with bank risk-taking. The results hold after a battery of robustness checks and endogeneity tests. Furthermore, consistent with the influence channel of networks, we show that connectedness empowers independent directors, whereas influential independent directors facilitate aggressive investment. We also find that the risk-taking effects are more pronounced for complex banks and banks with higher equity capital, higher income diversity, and lower cost-efficiency.

This paper examines the influence of media freedom restrictions on retail depositor behavior during banking crises. Non-professional, retail depositors are particularly affected due to insufficient access to vital information about the banking industry's vulnerability and broad macroeconomic conditions amidst the crisis. Using data from 85 countries from 2004 to 2019, we found that during crises, higher media restrictions lead to an increase in the rate of household deposit withdrawals. If media restrictions hinder depositors from accurately assessing the banking sector’s exposure, there is a higher likelihood of panic-based response in uncertain times brought on by the banking crisis, potentially triggering bank runs. Furthermore, our results reveal that lower banking sector risk can mitigate the negative effect of media restrictions on retail deposit growth during a banking crisis, especially in middle-income OECD and non-OECD countries, countries with stronger institutional environments, and countries with higher financial literacy. As a policy suggestion, promoting financial literacy could help reduce information asymmetry and prevent panic withdrawals, even in environments with significant media restrictions.

This paper explores the dynamic effects of counterparty risk on stock liquidity using data on unsecured creditors after a debtor has declared bankruptcy. Through matched pair fixed effect panel regressions, we find that liquidity for unsecured creditors reduces after such declarations but only in the short term. This is evidenced by increases in various spread measures and Kyle's (1985) lambda and decreases in the bid depth differentials between the stocks of the unsecured creditors and the matched firms. Additionally, we find the greater the credit exposure, the greater the decline in liquidity. In the long term, debtor bankruptcies appear to have no effect on spread measures. Rather, the market depth for unsecured creditor stocks improves.

Theories of loan contracting in the presence of asymmetric information highlight the key role of collateral in mitigating against credit rationing. However, theory also allows for the use of collateral by ‘bad’ borrowers in order to receive better loan contract offers. In this study, we explore the extent to which collateral can affect the incidence of absolute loan denial and partial rationing associated with smaller loans than requested being offered. Using data from a large survey of UK small- and-medium enterprises, we find significant evidence on the negative effect of collateral. Our results also reveal important distinction between lines of credit and term loans, where the presence of collateral is associated with 3 % less term loan approved compared to overdraft. We argue that even the request (or offer) of collateral for a term loan indicates that either the bank or the firm believes it is a risky bet.

Using unique data from a leading peer-to-peer (P2P) lending platform, we investigate the link between past investment performance and choice of auto-investing tool. Our results suggest that investors who experience fewer defaults in the manual mode are more inclined to switch to automatic investment. Several factors account for this relationship, including investor inattention, decision speed, investment delegation, and experience. Regarding the latter, our results suggest that experienced investors are more likely to continue self-directed bidding, even if they have faced defaults in manual investments in the past. These investors may attribute their previous mistakes to their own actions rather than the limitations of the self-directed bids. Our results are robust to alternative specifications.

In this paper, we examine how employee lawsuits are related to firms’ business decisions. By using union-filed lawsuit data, we document that litigation increases the likelihood of firms downsizing their businesses. Furthermore, cases filed by unions lead to an increase in both the number of store closures and the number of employees affected by these closures. We demonstrate that violations related to labor have a significant negative impact on operating performance. Our findings reveal the fact that the cost of labor, damage to reputation, legal liabilities, and diverted resources resulting from litigation damages firms’ new business opportunities. Overall, our results highlight the importance of employee treatment at the workplace, which affects corporate decisions.

We investigate whether banks’ initial responses during the first wave of the COVID-19 pandemic in supporting their customers, communities, and governments were perceived as value-enhancing by investors. Using a unique responsible banking measure for a sample of the largest US and European commercial banks, we find a negative relationship between responsible bank behavior and stock market performance, particularly in the first wave of the pandemic. We also find that riskier banks were affected more negatively if they behaved responsibly. Overall, our findings show that banks’ responsible behavior during a crisis reduces, or at best is not relevant to, shareholder value.

In August 2020, the Federal Open Market Committee adopted a far-reaching Revised Statement on Longer-Run Goals and Monetary Policy Strategy. The framework contains two major changes from the original 2012 statement. First, policy decisions will attempt to mitigate shortfalls, rather than deviations, of employment from its maximum level. Second, the FOMC will implement Flexible Average Inflation Targeting. We show how to modify the rules in the Fed’s Monetary Policy Report to be consistent with the revised statement, how the pattern of falling behind the curve, pivot, and getting back on track in Fed policy during 2021 and 2022 could have been avoided by following inertial rules consistent with either the original or the revised statements, and how current and projected Fed policy for 2023 – 2026 is in accord with the prescriptions from inertial rules.

We design a model with banks of unequal size operating subject to liquidity requirements in an imperfectly-competitive deposit market. We show that large banks have stronger incentives than small ones to lobby in order to relax the liquidity requirements unless they bear significantly higher lobbying costs. Therefore, lobbying magnifies asymmetries between banks. Furthermore, we establish that the organization of influence activities matters. An industry-wide bank association for lobbying to relax the liquidity requirements suffers from an internal conflict of interest and cannot simultaneously benefit both large and small banks if these have identical lobbying cost functions.