Articles

Bank Interest Rate Risk Management

G. VUILLEMEY

Management Science

A paraître

Départements : Finance, GREGHEC (CNRS)

Mots clés : Interest rate risk; Derivatives; Bank capital structure; Hedging


Empirically, bank equity value is decreasing in the interest rate. Yet (i) manybanks do not hedge interest rate risk and (ii) above 50% of hedging banks usederivatives to increase exposure. I model a bank’s capital structure, and showthat these facts are consistent with optimal hedging under financial frictions.Novel predictions on the characteristics of banks taking long or short interest ratederivative positions are tested, and supported by the data. Therefore, banks’derivatives exposures are not necessarily evidence of excessive risk-taking, andcan be explained by hedging in the presence of frictions. More broadly, theresults challenge the view that “hedging” and “speculative” positions can beidentified using the comovement between derivatives payoffs and equity value

Banking Deregulation and The Rise in House Price Comovement

A. LANDIER, D. SRAER, D. THESMAR

Journal of Financial Economics

A paraître

Départements : Finance, GREGHEC (CNRS)

Mots clés : Financial Integration, Comovement, House Prices

http://faculty.haas.berkeley.edu/dsraer/correlation_final.pdf


The correlation across US states in house price growth increased steadily between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first theoretically derive an appropriate measure of banking integration across state pairs and document that house price growth correlation is strongly related to this measure of financial integration. Our IV estimates suggest that banking integration can explain up to one fourth of the rise in house price correlation over this period

Brokers and Order Flow Leakage: Evidence from Fire Sales

A. BARBON, M. DI MAGGIO, F. FRANZONI, A. LANDIER

The Journal of Finance

A paraître

Départements : Finance, GREGHEC (CNRS)


Corporate Strategy, Conformism, and the Stock Market

T. FOUCAULT, L. FRESARD

Review of Financial Studies

A paraître

Départements : Finance, GREGHEC (CNRS)


Distracted Institutional Investors

D. SCHMIDT

Journal of Financial and Quantitative Analysis

A paraître

Départements : Finance

Mots clés : Inattention, Institutional Investors, Trading Behavior

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2789001


We investigate how distraction affects the trading behavior of professional asset managers. Exploring detailed transaction-level data, we show that managers with a large fraction of portfolio stocks exhibiting an earnings announcement are significantly less likely to trade in other stocks, suggesting that these announcements absorb attention which is missing for the choice of which stocks to trade. Hence, attention constraints can be binding even among this elite group of traders. Finally, we identify two channels through which distraction hurts managers’ performance: distracted managers fail to close losing positions, partly explained by these managers displaying a stronger disposition effect, and incur slightly higher transaction costs

Financing Capacity with Stealing and Shirking

D. GROMB, Francis DE VÉRICOURT

Management Science

A paraître

Départements : Finance, GREGHEC (CNRS)


Financing Investment: The Choice between Bonds and Bank Loans

E. MORELLEC, P. VALTA

Management Science

A paraître

Départements : Finance

Mots clés : Debt structure, Capital structure, Investment, Credit supply, Competition,

http://dx.doi.org/10.2139/ssrn.2162896


We build a model of investment and financing decisions to study the choice between bonds and bank loans in a firm's marginal financing decision and its effects on corporate investment. We show that firms with more growth options, higher bargaining power in default, operating in more competitive product markets, and facing lower credit supply are more likely to issue bonds. We also demonstrate that, by changing the cost of financing, these characteristics affect the timing of investment. We test these predictions using a sample of U.S. firms and present new evidence that supports our theory

How Much Do Means Tested Benefits Reduce the Demand for Annuities?

Monika BUTLER, K. PEIJNENBURG, Stefan STAUBLI

Journal of Pension Economics and Finance

A paraître

Départements : Finance, GREGHEC (CNRS)

Mots clés : Means-Tested Benefits, Occupational Pension, Annuity


We analyze the effect of means-tested benefits on annuitization decisions using an administrative dataset of pension wealth cash-out choices. Availability of means-tested payments creates an incentive to cash out pension wealth for low and middle income earners, instead of taking the annuity. Agents trade off the advantages from annuitization, receiving longevity risk insurance, to the disadvantages, giving up “free” wealth in the form of means-tested supplemental income. Our life-cycle model demonstrates that the availability of means-tested benefits substantially reduces the desire to annuitize especially for low and intermediate levels of pension wealth. In our empirical analysis we show that the model’s predicted fraction of retirees choosing the annuity is able to match the annuitization pattern of occupational pension wealth observed in Switzerland

Multinational Banks and Supranational Supervision

Giacomo CALZOLARI, J. E. COLLIARD, Gyongyi LORANTH

Review of Financial Studies

A paraître

Départements : Finance, GREGHEC (CNRS)

Mots clés : Cross-border banks, Multinational banks, Supervision, Monitoring, Regulation, Banking Union

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2912802


Supervision of multinational banks (MNBs) by national supervisors suffers from coordination failures. We show that supranational supervision solves this problem, and decreases the expected costs of a MNB's default, taking its organizational structure as given. However, the MNB strategically adjusts its structure to the new supervisory framework. It converts its subsidiary into a branch, or conversely, with a view to reducing supervisory monitoring. We identify the cases in which this endogenous reaction leads to unintended consequences, such as higher costs to the deposit insurance fund, lower welfare, or closure of the MNB's foreign unit. Current reforms of MNB supervision should thus take into account that MNBs adapt their organizational structures to changes in supervision

Noisy stock prices and corporate investment

T. FOUCAULT, O. DESSAINT, L. FRESARD, A. MATRAY

Review of Financial Studies

A paraître

Départements : Finance, GREGHEC (CNRS)

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2707999


Firms significantly reduce their investment in response to non-fundamental drops in the stock price of their product-market peers. We argue that this result arises because of managers' limited ability to filter out the noise in stock prices when using them as signals about their investment opportunities. The resulting losses of capital investment and shareholders' wealth are economically large, and affect even firms that are not facing severe financing constraints or agency problems. Our findings offer a novel perspective on how stock market inefficiencies can affect the real economy, even in the absence of financing or agency friction


JavaScriptSettings