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Getting Tired of Your Friends: The Dynamics of Venture Capital Relationships Journal of Financial Intermediation (IF 5.979) Pub Date : 2024-03-15 Qianqian Du, Thomas Hellmann
We empirically examine how venture capitalists adjust coinvestor relationships over time. We identify a fundamental trade-off where the benefits of familiarity are weighed against the opportunity costs of coinvesting with other syndication partners. Using US data, we find that venture capitalists dynamically adjust their relationship intensities by gradually disengaging from overly deep relationships
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Window dressing of regulatory metrics: Evidence from repo markets Journal of Financial Intermediation (IF 5.979) Pub Date : 2024-03-10 Claudio Bassi, Markus Behn, Michael Grill, Martin Waibel
This paper investigates both the magnitude and the drivers of bank window dressing behavior in euro-denominated repo markets. Using a confidential transaction-level data set, our analysis illustrates that banks engineer an economically sizeable contraction in their repo transactions around regulatory reporting dates. We establish a causal link between these reductions and banks’ incentives to window
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Intergenerational Bankruptcy Risks: Learning from Parents’ Mistakes Journal of Financial Intermediation (IF 5.979) Pub Date : 2024-03-05 Sumit Agarwal, Tien Foo Sing, Xiaoyu Zhang
This study investigates inter-generational transmissions of parental bankruptcy shock on children's financial behavior in adulthood. Our results show that younger children who were 9 years or below when their parents declared bankruptcy were 2-3 percentage points less likely to declare bankruptcy than their older siblings who were 10 years and older when the parents’ bankruptcy event occurred. We rule
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Inter-firm relationships and the special role of common banks Journal of Financial Intermediation (IF 5.979) Pub Date : 2024-02-28 Emanuela Giacomini, Nitish Kumar, Andy Naranjo
Using a novel dataset that combines information on customer-supplier trade relationships with information on firm-bank lending relationships, we show that common banks that lend to firms at both ends of a trade link grow and strengthen such trade relationships. To establish causality, we use bank mergers, which generate exogenous variations in the presence of common banks, and show that common bank
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Intermediary Frictions and Convertible Bond Pricing Journal of Financial Intermediation (IF 5.979) Pub Date : 2024-02-21 Bruce Grundy, Patrick Verwijmeren, Antti Yang
Buy-and-hedge intermediaries are important investors in the convertible bond market as they intermediate between firms that require capital quickly and investors requiring time to assess the security. Their strategy requires them to manage the trade-offs involved with the costs and benefits of hedging. We find that prices of convertible securities reflect the costs that intermediaries incur when managing
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Central bank asset purchases and lending: Impact on search frictions Journal of Financial Intermediation (IF 5.979) Pub Date : 2024-02-16 Reiko Tobe, Jun Uno
We investigate the impact of two central bank policies, asset purchases and asset lending, on the search frictions in the government bond market in Japan. We build a search-theoretic model to explore the impact of a central bank’s securities lending facility (SLF) by introducing a central bank as a lender. We test model predictions using intraday data from an electronic platform for Japanese government
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Pre-publication revisions of bank financial statements: A novel way to monitor banks? Journal of Financial Intermediation (IF 5.979) Pub Date : 2024-02-06 Andre Guettler, Mahvish Naeem, Lars Norden, Bernardus Van Doornik
We investigate whether pre-publication revisions of bank financial statements contain forward-looking information about bank risk. Using 7.4 million observations of monthly financial reports from all banks in Brazil during 2007–2019, we show that 78 % of all revisions occur before the publication of these statements. The frequency, missing of reporting deadlines, and severity of revisions are positively
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Financial intermediation services and competition analyses: Review and paths forward for improvement Journal of Financial Intermediation (IF 5.979) Pub Date : 2024-01-21 Allen N. Berger, Arnoud W.A. Boot
Financial intermediation has distinct value from transforming financial claims to create liquidity and mitigate risks. However, research and policy competition analyses often neglect this value or minimally account for it. We review findings to better incorporate this value. We suggest shifting the mix of individual services analyzed to better represent the distinct value, focusing more on topics closely
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Agree to disagree: Lender equity holdings, within-syndicate conflicts, and covenant design Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-11-20 Yongqiang Chu, Luca X. Lin, Zhanbing Xiao
Lenders’ simultaneous equity holdings introduce conflicts of interest among members of syndicated loans. We argue that lenders address such within-syndicate conflicts with financial covenant design to improve contracting efficiency. We show that loans with higher conflicts rely less on performance-based covenants, which serve as tripwires to facilitate ex-post control transfer and require coordination
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Internal ratings and bank opacity: Evidence from analysts’ forecasts Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-11-01 Brunella Bruno, Immacolata Marino, Giacomo Nocera
We document that reliance on internal ratings-based (IRB) models to compute credit risk and capital requirements reduces bank opacity. Greater reliance on IRB models is associated with lower absolute forecast error and reduced disagreement among analysts regarding expected bank earnings per share. These results are stronger for banks that apply internal ratings to the most opaque loans and adopt the
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Bank capital buffers and lending, firm financing and spending: What can we learn from five years of stress test results? Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-10-26 Jose M. Berrospide, Rochelle M. Edge
We use bank-firm matched data to study how the capital buffers that large U.S. banks must satisfy to “pass” the Federal Reserve's stress tests impact banks’ lending and firms’ loan volumes, overall debt, investment, and employment. We find that larger stress-test capital buffers lead to reductions in banks’ lending, modest increases in loan rates and spreads, and reductions in new loan originations
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Determinants of strategic behavior: Evidence from a foreclosure moratorium Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-10-06 Nikolaos Artavanis, Ioannis Spyridopoulos
We study mortgagors’ attitudes toward strategic behavior following a foreclosure moratorium in Greece. To identify strategic delinquencies, we exploit the concurrent introduction of a debt discharge process that provides generous debt relief for borrowers who prove their inability to pay but entails high costs for those who can afford their mortgages. This setting creates distinct optimal strategies
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Testing dividend tax theory: Firm and industry heterogeneity Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-09-29 Robert DeYoung, Karen Y. Jang
The Jobs Growth and Tax Relief Reconciliation Act of 2003 cut the top dividend tax rate in the U.S. by more than half, yet numerous studies of nonfinancial firms have failed to detect the expected supply-side stimulus to capital investment. We test the impact of this tax cut on U.S. commercial banks and find that bank lending responded differently, conditional on banks’ access to external capital as
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The information content from lending relationships across the supply chain Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-09-16 Theo Cotrim Martins, Rafael Schiozer, Fernando de Menezes Linardi
Using unique administrative data on firm-to-firm payments and bank-to-firm lending, we investigate how lending to a firm is affected by same-bank lending to the firm's customers and suppliers. We show that the supply of loans to a firm increases when the firm's customers have loans from the same bank. We also find that negative information about a firm's top customer causes banks to tighten the loan
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Bank restructuring under asymmetric information: The role of bad loan sales Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-09-16 Anatoli Segura, Javier Suarez
We study restructuring solutions to the debt overhang problem faced by banks with a deteriorated loan portfolio in the presence of asymmetric information on loan quality. Classical liability restructuring solutions fail to work because banks can overstate the severity of their bad loan problem to obtain additional concessions from existing creditors. A sufficiently large loan sale requirement to the
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Did doubling reserve requirements cause the 1937–38 recession? New evidence on the impact of reserve requirements on bank reserve demand and lending Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-09-06 Charles W. Calomiris, Joseph R. Mason, David C. Wheelock
In 1936–37, the Federal Reserve doubled member banks’ reserve requirements. Friedman and Schwartz (1963) famously argued that the doubling increased reserve demand and forced the money supply to contract, which they argued caused the recession of 1937–38. Using a new database on individual banks, we find that higher reserve requirements did not generally increase banks’ reserve demand or contract lending
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Crowded out from the beginning: Impact of government debt on corporate financing Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-08-25 Cagri Akkoyun, Nuri Ersahin, Christopher M. James
Using hand-collected data on corporate bond and stock offerings, we identify the impact of government debt on corporate financing during World War I. The early twentieth century provides a unique opportunity to identify the impact of government debt on private financing because during this period (1) firms announced the amount they wanted to raise before each security offering and (2) the Treasury
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Editorial Board Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-08-16
Abstract not available
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Whose bailout is it anyway? The roles of politics in PPP bailouts of small businesses vs. banks Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-07-25 Allen N. Berger, Mustafa U. Karakaplan, Raluca A. Roman
We address whether politics played important roles in allocating Paycheck Protection Program (PPP) bailout funds, and whether PPP allocations effectively bailed out small businesses vs. banks. Our econometric evidence suggests that politicians/other government agents at national and local levels effectively steered PPP funds toward small businesses and banks based on their locations to try to influence
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Pricing, issuance volume, and design of innovative securities: The role of investor information Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-06-20 Manuel Ammann, Marc Arnold, Simon Straumann
This study investigates the role of asymmetric information for the pricing, issuance volume, and design of innovative securities. By analyzing the information that structured product issuers provide to the investors of those products, we can identify specific sources of asymmetric information between the issuers and investors in this market. We show that issuers exploit this information friction to
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The impact of bank regulation on the cost of credit: Evidence from a discontinuity in capital requirements Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-06-15 Emilia Bonaccorsi di Patti, Mirko Moscatelli, Stefano Pietrosanti
We study the effect on credit relationships of the Small and Medium Enterprises Supporting Factor (SME-SF), a regulatory risk weight reduction on small loans to SMEs. Employing a regression discontinuity design and matched bank-firm data from Italy, we find that a 1 percent drop in capital requirements causes an average 13 basis points reduction in the cost of credit. Moreover, with a novel measure
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Florida (Un)chained Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-06-10 Charles W. Calomiris, Matthew Jaremski
Excessively easy bank credit – visible in unusually small credit risk spreads and rapid loan growth – is often posited as a root cause of unsustainable asset price booms. This paper considers whether an increase in bank risk tolerance drove high loan growth that coincided with Florida's land boom of the mid-1920s, the first Florida housing boom in which buyers from around the nation participated. Estimates
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The effect of the Federal Reserve’s lending facility on PPP lending by commercial banks Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-06-07 Sriya Anbil, Mark Carlson, Mary-Frances Styczynski
We investigate whether the Federal Reserve’s Paycheck Protection Program Liquidity Facility (PPPLF) boosted commercial bank Paycheck Protection Program (PPP) lending. To determine whether this facility had a causal effect, we use pre-existing familiarity with the Federal Reserve’s discount window as an instrumental variable. We show that the PPPLF materially bolstered bank PPP lending and provided
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Editorial Board Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-05-08
Abstract not available
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Purpose, profit and social pressure Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-05-04 Fenghua Song, Anjan Thakor, Robert Quinn
We develop a model in which there are firms and employees who care about profit-sacrificing higher purpose (HP) and those who do not. Firms and employees search for each other in the labor market. Each firm chooses its HP investment. When there is no social pressure on firms to adopt a purpose, HP dissipates agency frictions, lowers wage costs, yet elicits higher employee effort in firms that intrinsically
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The agency costs of tranching: Evidence from RMBS Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-04-11 Sanket Korgaonkar
This paper documents the agency costs resulting from the deeper tranching of subprime residential mortgage pools. Mortgage servicers are less likely to renegotiate delinquent loans collateralizing a greater number and variety of tranches. We find that an interquartile increase in tranching reduces mortgage servicers’ probability of loan renegotiation by 14% relative to the mean. This effect is concentrated
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Credit default swaps and debt specialization Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-03-28 Brian Clark, James Donato, Bill B. Francis
We examine the effect of credit default swaps (CDSs) on debt specialization. We argue that reference firms in CDS contracts, seeking to minimize creditor conflicts and bankruptcy costs, exhibit higher debt concentration than firms on which no CDSs are traded. Our results show that firms engage in greater debt specialization and are more likely to specialize following the inception of CDS trading. Additionally
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Bank stability and the price of loan commitments Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-03-05 Asad Rauf
Firms insure themselves from liquidity shocks by contracting on credit lines from banks. I document novel empirical evidence on how the risk of contract nonperformance by banks is priced. Firms pay a higher price for loan commitments from safer banks. A one standard deviation increase in the cross-sectional mean of bank capital increases the commitment fees by 5%. To investigate a potential causal
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Financial intermediation and the funding of biomedical innovation: A review Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-03-03 Andrew W. Lo, Richard T. Thakor
We review the literature on financial intermediation in the process by which new medical therapeutics are financed, developed, and delivered. We discuss the contributing factors that lead to a key finding in the literature—underinvestment in biomedical R&D—and focus on the role that banks and other intermediaries can play in financing biomedical R&D and potentially closing this funding gap. We conclude
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The fintech gender gap Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-02-16 S. Chen, S. Doerr, J. Frost, L. Gambacorta, H.S. Shin
Can fintech close the gender gap in access to financial services? Using novel survey data for 28 countries, this paper finds a large and ubiquitous ‘fintech gender gap’: while 29% of men use fintech products, only 21% of women do. This difference exceeds the gender gap in bank account ownership at traditional financial institutions. While country characteristics and individual-level controls explain
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Fund ownership, wealth, and risk-taking: Evidence on private equity managers Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-02-14 Carsten Bienz, Karin S. Thorburn, Uwe Walz
Private equity (PE) managers are required to invest their own money in the funds they manage. We examine the incentive effects of this ownership on the delegated acquisition decision. A simple model shows that PE managers select less risky firms and use more debt, the higher their ownership. We test these predictions for a sample of Norwegian PE funds, using managers’ wealth to capture their relative
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Editorial Board Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-01-30
Abstract not available
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The role of culture in firm-bank matching Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-01-19 Antonio Accetturo, Giorgia Barboni, Michele Cascarano, Emilia Garcia-Appendini
We assemble a unique dataset containing population-level information on loan applications in a region hosting two cultural groups to study the role of culture in firm borrowing decisions. We find that firms are more likely to apply for loans from culturally close banks. This effect is stronger for opaque firms, but not for less performing firms, indicating that firms do not expect preferential treatment
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Small business lending under the PPP and PPPLF programs Journal of Financial Intermediation (IF 5.979) Pub Date : 2023-01-04 Jose A. Lopez, Mark M. Spiegel
We use Call Report data to examine the effects of the Paycheck Protection Program (PPP) and the PPP Liquidity Facility (PPPLF) on small business and farm lending by individual commercial banks. As program participation was associated with small business lending, we adopt an instrumental variables approach to identify causal implications based on historical bank relationships with the Small Business
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The disciplining effect of supervisory scrutiny in the EU-wide stress test Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-11-24 Christoffer Kok, Carola Müller, Steven Ongena, Cosimo Pancaro
Relying on confidential supervisory data related to the 2016 EU-wide stress test, this paper presents novel empirical evidence that supervisory scrutiny associated to stress testing has a disciplining effect on bank risk. We find that banks that participated in the 2016 EU-wide stress test subsequently reduced their credit risk relative to banks that were not part of this exercise. Relying on new metrics
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Cost of monitoring and risk taking in the money market funds industry Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-11-17 Stefano Lugo
Increasing the cost associated with gathering information can hamper the monitoring activity of the market even when information remains public. Using the 2015 US money market funds (MMFs) reform as a quasi-natural experiment, I find a positive effect of removing information requirements over credit ratings on the allocation by MMFs toward securities rated as second tier. The effect is driven by monitored
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Do prime brokers intermediate capital? Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-11-03 Andrew J. Sinclair
Prime brokers play an important role in intermediating arbitrage capital to hedge funds. A fund’s peer-group ranking, relative to funds that share the same prime broker, significantly affects how investors respond to its past performance. I decompose the standard performance-flow relationship into two components: (1) flows that respond to overall performance rank, and (2) flows that respond to relative
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Banks, maturity transformation, and monetary policy Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-11-03 Pascal Paul
Banks engage in maturity transformation and the term premium compensates them for bearing the associated interest rate risk. Consistent with this view, I show that banks’ net interest margins and term premia have comoved in the United States over the last decades. On monetary policy announcement days, bank equity falls more sharply than nonbank equity following an increase in expected future short-term
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Restoring confidence in troubled financial institutions after a financial crisis Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-11-03 Charles W. Calomiris, Mark Carlson
After an unprecedented number of banks suspended operations in the during Panic of 1893, the head regulator of banks chartered by the United States government allowed about 100 banks to reopen after certifying their solvency. We evaluate whether actions by bank owners to change management, contract with depositors to extend liability maturity structure, write off bad assets, and/or inject capital affected
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Monetary policy effects in times of negative interest rates: What do bank stock prices tell us? Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-10-31 Joost V. Bats, Massimo Giuliodori, Aerdt C.F.J. Houben
This paper investigates bank stock performance following different monetary policy actions in times of positive and negative interest rates. Controlling for the broader stock market, monetary policy announcements that cause an unanticipated downward shift in the yield curve and a flattening of the shorter-end of the yield curve are found to persistently reduce bank stock prices once the interest rate
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Editorial Board Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-10-29
Abstract not available
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Gender differences in reward-based crowdfunding Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-10-27 Tse-Chun Lin, Vesa Pursiainen
We document several gender differences in reward-based crowdfunding by analyzing a large sample of Kickstarter campaigns. We argue that these differences are most plausibly explained by male entrepreneurs’ relative over-optimism. Suggesting a tendency to overestimate the demand for their products, we find that male entrepreneurs set higher goal amounts, resulting in more frequent campaign failures
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Firm R&D and financial analysis: How do they interact? Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-10-26 Jim Goldman, Joel Peress
This paper demonstrates, theoretically and empirically, that firms’ research and development (R&D) efforts and investors’ analyses of their prospects are mutually reinforcing. Entrepreneurs attempt more research when financiers are better informed about projects’ profitability because they expect financiers to provide more funding to successful projects. Conversely, financiers collect more information
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What do mutual fund managers’ private portfolios tell us about their skills? Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-10-19 Markus Ibert
I study a registry-based dataset of Swedish mutual fund managers’ personal portfolios. The majority of managers do not invest personal wealth into the very same funds they professionally manage. The managers who do invest personal money into their funds subsequently outperform the managers who do not. The results suggest that fund managers, in contrast to regular investors, are certain about their
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Gender quotas and bank risk Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-10-08 Rose C. Liao, Gilberto Loureiro, Alvaro G. Taboada
We assess the effects of board gender quota laws using a sample of banks from 39 countries. We document an increase in both stand-alone and systemic risk post-quota among banks that did not meet the quota pre-reform; the effect is stronger for banks in countries with a smaller pool of women in finance and low gender equality. We find that the propagation of poor governance practices by overlapping
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Implicit benefits and financing Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-10-13 Franklin Allen, Meijun Qian, Jing Xie
Social relationship and business connections create implicit benefits between borrowers and lenders. We model how implicit benefits and repayment enforcement costs influence credit allocation, cost, and renegotiation. The optimal solution illustrates that financing with implicit benefits may achieve lower financing costs, higher managerial effort, and better outcomes for both borrowers and lenders
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Inefficient liquidity creation Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-10-03 Stephan Luck, Paul Schempp
We present a model in which intermediaries create liquidity by issuing safe debt. Two types of intermediaries emerge: Traditional banks that create liquidity by issuing equity and holding assets to maturity, and market-based intermediaries that create liquidity by selling assets in fire sales in downturns. We show that the reliance on market-based intermediation is necessarily too high, but liquidity
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Finance and inequality: The distributional impacts of bank credit rationing Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-09-30 M. Ali Choudhary, Anil Jain
We analyze reductions in bank credit using a natural experiment where unprecedented flooding in Pakistan differentially affected banks that were more exposed to the floods. Using a unique data set that covers the universe of consumer loans in Pakistan and this exogenous shock to bank funding, we find two key results. First, following an increase in their funding costs, banks disproportionately reduce
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What do we learn from ratings about corporate social responsibility? New evidence of uninformative ratings Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-09-28 Ruoke Yang
The rise of investments professionally managed with a socially responsible mandate has generated growing interest in environmental and social ratings. However, it is not clear how informative these ratings are or whether they are distorted by greenwashing. Based on the ratings of the leading provider, I offer the first evidence linking greenwashing to ratings inflation. Better ratings do not predict
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Housing booms and bank growth Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-09-28 Mark J. Flannery, Leming Lin, Luxi Wang
The rapid increase in U.S. house prices during the 2001–2006 period was accompanied by a historically rapid expansion of bank assets. We exploit cross-regional variation in local housing booms to study how housing demand shocks affected the growth of the banking sector. We estimate the effect of housing demand shocks that are orthogonal to observed non-housing demand shocks and credit supply shocks
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Bank CEO careers after bailouts: The effects of management turnover on bank risk Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-09-20 Pramuan Bunkanwanicha, Alberta Di Giuli, Federica Salvade
We study whether bank bailouts affect CEO turnover and its subsequent impact on bank risk. Exploiting the Troubled Asset Relief Program (TARP) of 2008, we find that TARP funds temporarily decreased the likelihood of bank CEO turnover during the crisis (2008–2010) but significantly increased CEO changes afterwards. Our results show that replacing TARP CEOs reduced individual bank's risk as well as the
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Asset scarcity and collateral rehypothecation Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-09-17 Vincent Maurin
This paper introduces collateral rehypothecation, a widespread practice in derivatives, swaps, and repo markets, in a general equilibrium model with default. Rehypothecation frees up collateral because it allows lenders to resell or repledge assets pledged by borrowers. The risk that lenders will not return the asset, however, limits gains from rehypothecation. Still, when markets are contractually
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On stock-based loans Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-09-15 Thomas A. McWalter, Peter H. Ritchken
We investigate the equilibrium interest rate charges on non-recourse and recourse loans secured by stock. In such loans, the client retains the option to prepay and recover the collateral stock. We adopt a structural model of the firm where debt levels, with endogenous bankruptcy, affect equity dynamics. Complicating matters, the link between total equity and the price of a share of stock that forms
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The dark side of liquidity regulation: Bank opacity and funding liquidity risk Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-08-11 Arisyi F. Raz, Danny McGowan, Tianshu Zhao
We evaluate how the liquidity coverage rule affects US banks’ opacity and funding liquidity risk. Banks subject to the rule become significantly more opaque and funding liquidity risk increases by $245 million per quarter. Higher funding liquidity risk is more pronounced among banks that are subject to the rule’s more stringent liquidity buffers, and systemically riskier banks. Rising opacity reflects
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Political influence and banks: Evidence from mortgage lending Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-07-19 Yongqiang Chu, Tim Zhang
We show that banks expand mortgage lending in the home states of Senate Banking Committee chairs, and the effect is more pronounced in counties where the incumbent senator faces a competitive re-election race. Banks strategically target politically active borrowers. Consequently, banks’ profitability increases after favoring the incumbent politicians’ constituents, but they suffer a deterioration in
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Carrot and stick: A role for benchmark-adjusted compensation in active fund management Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-06-30 Juan Sotes-Paladino, Fernando Zapatero
Investors delegating their wealth to privately informed managers face not only an intrinsic asymmetric information problem but also a potential misalignment in risk preferences. In this setting, we show that by tying fees symmetrically to the appropriate benchmark investors can tilt a fund portfolio toward their optimal risk exposure and realize nearly all the value of managers’ information. They attain
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The riskiness of credit allocation and financial stability Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-06-18 Luis Brandão-Marques, Qianying Chen, Claudio Raddatz, Jérôme Vandenbussche, Peichu Xie
Using firm-level data for 42 countries over 1991-2016, we show that the extent to which credit flows to relatively risker firms—which we label riskiness of credit allocation—is a distinct dimension of the credit cycle that helps predict downside risks to GDP growth and financial stress episodes, one to three years ahead, even after controlling for the magnitude of credit expansions and for financial
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Bailing out conflicted sovereigns Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-05-31 Charles W. Calomiris, Theofanis Tsoulouhas
How should sovereign bailouts take account of the effects bailouts have on policy reforms? Conflicted recipient governments complicate bailout choices because some reforms that spur growth reduce rents that benefit government decision makers. Our model takes account of whether bailout generosity and policy reforms are strategic substitutes, strategic complements or both, and each case implies a different
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What lies beneath—Negative interest rates and bank lending Journal of Financial Intermediation (IF 5.979) Pub Date : 2022-05-04 Tan Schelling, Pascal Towbin
We study the transmission of negative interest rates to bank lending around an unexpected policy rate cut into deep negative territory by the Swiss National Bank (−0.75%). We exploit a rich data set on transaction-level corporate loans matched with bank balance sheet data. We find that banks more affected by negative interest rates offer looser lending terms and lend more than other banks. This result