Nonbank lenders as global shock absorbers: Evidence from US monetary policy spillovers
In: Journal of international economics, S. 103908
ISSN: 0022-1996
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In: Journal of international economics, S. 103908
ISSN: 0022-1996
In: Economic policy, Band 35, Heft 102, S. 213-267
ISSN: 1468-0327
Abstract
Banking crises are recurrent phenomena, often induced by excessive bank risk-taking, which may be due to behavioural reasons (over-optimistic banks neglecting risks) and to conflicts of interest between bank shareholders/managers and debtholders/taxpayers (banks exploiting moral hazard). We test whether US banks' stock returns in the 2007–8 financial crisis are associated with bank insiders' sales of their own bank's shares in the period prior to 2006Q2 (the peak and reversal in real estate prices). We find that top-five executives' sales of shares predict bank performance during the crisis. Interestingly, effects are insignificant for the sales of independent directors and other officers. Moreover, the top-five executives' impact is stronger for banks with higher exposure to the real estate bubble, where a one standard deviation increase of insider sales is associated with a 13.33 percentage point drop in stock returns during the crisis period. Finally, even though bankers in riskier banks sold more shares (furthering their own interests), they did not change their bank's policies, for example, by reducing bank-level exposure to real estate. The informational content of bank insider trading before the crisis suggests that insiders knew that their banks were taking excessive risks, which has important implications for theory, public policy and the understanding of crises, as well as a supervisory tool for early warning signals.
In: LawFin Working Paper No. 12
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Working paper
In: CEPR Discussion Paper No. DP15519
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Working paper
In: Banco de Espana Working Paper No. 2040
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Working paper
In: CEPR Discussion Paper No. DP11302
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Working paper
In: Journal of international economics, Band 81, Heft 1, S. 75-88
ISSN: 0022-1996
Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro's effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the past thirty years. We also construct a dataset that records the timing of legislative-regulatory harmonization policies in financial services across the European Union. We find that the euro's impact on financial integration is primarily driven by eliminating the currency risk. Legislative-regulatory convergence has also contributed to the spur of cross-border financial transactions. Trade in goods, while highly correlated with bilateral financial activities, does not play a key role in explaining the euro's positive effect on financial integration.
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We investigate the effect of financial integration on the degree of international business cycle synchronization. For identfication, we use a confidential database on banks' bilateral exposure over the past three decades and employ a novel bilateral country-pair panel instrumental vari- ables approach. First, we show that conditional on global shocks and country-pair fixed factors countries that become more financially integrated over time have less synchronized growth pat- terns, in line with the standard theories of output fluctuations. Second, to isolate the one-way impact of financial integration on output co-movement and account for measurement error in the financial integration measure, we exploit variation in the transposition dates of the European Union-wide legislative acts (the Directives) from the Financial Services Action Plan (FSAP). These laws are designed to harmonize regulation of financial markets in the European Union. We find that increases in financial integration stemming from regulatory-legislative harmoniza- tion policies in capital markets are followed by more divergent output cycles, even when we condition on monetary unification. Our results contrast with those of the previous empirical studies. We reconcile the different results by showing that the earlier estimates suffer from the standard identification problems.
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In: ECB Working Paper No. 1216
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In: ECB Working Paper No. 1221
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In: NBER Working Paper No. w14887
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In: NBER Working Paper No. w15034
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Working paper
In: Economica, Band 71, Heft 283, S. 417-448
ISSN: 1468-0335
International business transactions pose the problem of deterring bribing of public officials by foreign firms. We first analyse a convention styled after the OECD's 'Convention on Combating Bribery of Foreign Public Officials in International Business Transactions', which requires signatory countries to proceed against firms that have bribed public officials of any foreign country. We then study the case in which the convention requires signatory countries to proceed against firms that have bribed public officials of signatory countries only. We argue that the second type of convention is more likely to ensure the enforcement of penalties.
Although recent research shows that the euro has spurred cross-border financial integration, the exact mechanisms remain unknown. We investigate the underlying channels of the euro's effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the past thirty years. We also construct a dataset that records the timing of legislative-regulatory harmonization policies in financial services across the European Union. We find that the euro's impact on financial integration is primarily driven by eliminating the currency risk. Legislative-regulatory convergence has also contributed to the spur of cross-border financial transactions. Trade in goods, while highly correlated with bilateral financial activities, does not play a key role in explaining the euro's positive effect on financial integration.
BASE