Journal of Banking & Finance最新文献

Fabo et al. (2021) use OLS regression to show that central bankers report quantitatively larger effects of QE on output and inflation than do academic researchers. We reject the null hypothesis of a Gaussian distribution of the residuals in many of these specifications, except for the language regressions. We then repeat the analysis with regression estimators that are robust to a non-Gaussian residual distribution where this is feasible. We use the median regression and the MS regression estimator. With these robust regression approaches, the null hypothesis that central bank and academic researchers report the same quantitative effect of QE on output and inflation cannot be rejected, with point estimates which are less than half as large. This statistical challenge suggests that more research is required to understand better whether central bank researchers report different QE multipliers or not.

We examine the resilience of green bonds to the COVID-19 shock through the lens of institutional investors’ holdings. We show that the green label has a positive impact on bond holdings both in normal times and during the COVID crisis. Moreover, during the pandemic outbreak, green bonds experienced lower net sales, on average, than equivalent conventional bonds, while no significant differences emerge in normal times. The results hold across different investor classes, including mutual funds exposed to large outflows, and are not driven by issuers’ fundamentals. We also document that the ownership of green fixed income securities is more concentrated than that of comparable conventional bonds, and that concentration has increased in the first quarter of 2020.

Using supervisory data from large U.S. bank holding companies (BHCs), we document that operational loss recovery rates decrease in macroeconomic downturns. This procyclical relationship varies by business lines and loss event types and is robust to alternative data aggregations, macroeconomic measurement horizons, subperiod partitions and estimation methodologies. Further analysis shows that resource constraints faced by BHC risk management functions is a plausible explanation for these patterns. Our findings offer new evidence on how economic shocks transmit to banking industry losses with implications for risk management and supervision.

This paper examines how cultural distance affects fund transfers in the internal capital market of multinational firms. The results show that a larger cultural distance significantly reduces internal fund transfers to foreign subsidiaries. These results are robust to alternative measures of cultural distance and different econometric specifications. External shocks do not affect the results. Further analysis shows that the negative cultural impact is driven mainly by the dimensions of power distance, individualism, and uncertainty avoidance. Furthermore, the effect of cultural distance on internal fund transfers is independent of subsidiary productivity, and a larger cultural distance exacerbates the negative impact of corporate diversification on firm value. Overall, our findings highlight the important role that culture plays in multinationals’ global operations.

This study examines whether sell-side analysts can disseminate information consistent with anomaly prescriptions in China. I adopt 192 trading- and accounting-based anomaly signals to identify undervalued and overvalued stocks. Results show that analysts tend to make more (less) favorable recommendations and earnings forecasts for undervalued (overvalued) stocks. Regarding the information content, analyst recommendations and earnings forecasts are consistent with accounting- rather than trading-based information. Additionally, analyst recommendations and earnings forecasts are consistent with anomalies, especially for firms with a relatively poor information environment. These results indicate that Chinese analysts can mitigate anomaly mispricing and improve market efficiency.

We examine the economics that underlie retail trading costs around discount brokers’ widespread adoption of zero commission trading in October 2019. Our analysis of participating brokers’ Rule 606 filings and financial statements reveals little change in payment for order flow, which suggests brokers absorbed the cost of eliminating commissions in a competitive environment. We then perform a difference-in-differences analysis of effective spreads and report economically trivial changes in retail execution costs around the commission change. Finally, we assess the total trading costs of an aggregate retail portfolio compared to a host of counterfactuals. We find that following the zero-commission change, total retail transaction costs dropped substantially even under the extreme counterfactual that these traders pay exchange quoted spreads and receive zero price improvement. Our findings support the brokerage industry's claim that dropping commissions helped retail investors and should ease regulators’ concerns to the contrary.

We examine the effect of corporate violations on bank loan contracting and document that borrowers with higher corporate violation penalties have higher loan costs. Higher corporate violations are also associated with more restrictive covenants and a higher likelihood of a collateral requirement. The increasing effect of corporate violations on loan costs is concentrated in opaque firms or those subject to more competitive markets or ineffective monitoring. Firms with higher violation penalties have lower future performance and a higher number of future violations. Overall, our results demonstrate that banks factor corporate violations into their lending decisions, thus shedding new light on the economic consequences of corporate violations through the creditors’ lens.

We investigate the impact of deregulation-induced banking competition on corporate credit risk. Although banking competition does not, on average, affect corporate bankruptcy rates, we find that it causes corporate bankruptcies to increase significantly for high-leverage firms. We show that higher borrowing costs for high-leverage firms post-deregulation and the resulting credit rationing may be key factors behind our findings. The effect of deregulation lasts for up to seven years after the introduction of deregulation and originates mainly from firms that have high short-term debt and are financially constrained. Our results suggest that banking competition, which is expected to expand lending and reduce its cost, may, in fact, create more challenging credit conditions, particularly for firms that are more heavily dependent on external funding.

This study examines the impact of zero fees on market quality. This issue is examined using a natural experiment in Bitcoin provided by the Binance exchange, which eliminated maker–taker trading fees for market participants in July 2022. I find that although zero fees increase investors’ willingness to trade, thereby prima facie increasing liquidity, their elimination encourages market makers to widen the bid–ask spread and provide a shallower market depth, which in turn reduces liquidity. Liquidity providers realize gains at the expense of liquidity takers, suggesting the emergence of new potential forms of unethical financial market conduct. Notably, despite the removal of trading fees, total transaction costs increased for customers. These outcomes, coupled with the boost in exchange market share, raise concerns about price integrity and investors’ protection in the highly unregulated crypto environment, in turn implying that the elimination of maker–taker fees is harmful to the market.

Partial conversion of contingent capital (CC) provides its owners with a portfolio of equity and debt. Since the cash-flow rights on equity (debt) typically induce a preference for risk taking (safety), the net preference of CC-holders upon conversion will depend on their relative holdings of each asset, which in turn, depends on the amount of CC converted. Conversions also provide CC-holders with equity-control rights, which afford them greater influence over management. Taking into account these cash-flow/control rights, initial shareholders may find it optimal to: (1) select high-risk assets that create influential and risk-loving CC-holders, or (2) select low-risk assets that forestall the influence of safety-loving CC-holders.