Pramuan Bunkanwanicha , Alberta Di Giuli , Federica Salvade
{"title":"Bank CEO careers after bailouts: The effects of management turnover on bank risk","authors":"Pramuan Bunkanwanicha , Alberta Di Giuli , Federica Salvade","doi":"10.1016/j.jfi.2022.100995","DOIUrl":"10.1016/j.jfi.2022.100995","url":null,"abstract":"<div><p>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 bank's contributions to the systemic risk. Finally, we find that TARP CEO turnover was mainly driven by a decrease in the bank's political capital. Overall we provide evidence that bank bailouts have important implications for banks’ risk-taking and systemic risk, insofar as bailouts affect bank CEO turnover.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"52 ","pages":"Article 100995"},"PeriodicalIF":5.2,"publicationDate":"2022-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49244020","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"What do we learn from ratings about corporate social responsibility? New evidence of uninformative ratings","authors":"Ruoke Yang","doi":"10.1016/j.jfi.2022.100994","DOIUrl":"10.1016/j.jfi.2022.100994","url":null,"abstract":"<div><p>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 less future corporate bad behavior. This is of concern because it undermines the signaling value of these ratings. To understand these results, I develop a model where the rating agency may underinvest in greenwashing detection while firms have incentives to window dress and engage in greenwashing. Finally, controlling for greenwashing improves ratings predictive quality.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"52 ","pages":"Article 100994"},"PeriodicalIF":5.2,"publicationDate":"2022-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"55000864","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Asset scarcity and collateral rehypothecation","authors":"Vincent Maurin","doi":"10.1016/j.jfi.2022.100992","DOIUrl":"10.1016/j.jfi.2022.100992","url":null,"abstract":"<div><p>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 incomplete or decentralized, rehypothecation can achieve a superior use of scarce collateral. These results have implications for the repo market and suggest that limits to rehypothecation can cause price fragmentation.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"52 ","pages":"Article 100992"},"PeriodicalIF":5.2,"publicationDate":"2022-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1042957322000456/pdfft?md5=222412f4148404fb9738805b50f8011f&pid=1-s2.0-S1042957322000456-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44843110","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Raphael Auer , Alexandra Matyunina , Steven Ongena
{"title":"The countercyclical capital buffer and the composition of bank lending","authors":"Raphael Auer , Alexandra Matyunina , Steven Ongena","doi":"10.1016/j.jfi.2022.100965","DOIUrl":"https://doi.org/10.1016/j.jfi.2022.100965","url":null,"abstract":"<div><p>Do targeted macroprudential measures impact non-targeted sectors too? We investigate the compositional changes in the supply of credit by Swiss banks, exploiting their differential exposure to the activation in 2013 of the countercyclical capital buffer (CCyB) which targeted banks’ exposure to residential mortgages. We find that the additional capital requirements resulting from the activation of the CCyB are associated with higher growth in banks’ commercial lending. While banks are lending more to all types of businesses, the new macroprudential policy benefits smaller and riskier businesses the most. However, the interest rates and other costs of obtaining credit for these firms rise as well.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"52 ","pages":"Article 100965"},"PeriodicalIF":5.2,"publicationDate":"2022-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1042957322000183/pdfft?md5=bc55ade64389ef9918d8c50befe4cf64&pid=1-s2.0-S1042957322000183-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"71788335","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Implicit benefits and financing","authors":"Franklin Allen , Meijun Qian , Jing Xie","doi":"10.1016/j.jfi.2022.101000","DOIUrl":"https://doi.org/10.1016/j.jfi.2022.101000","url":null,"abstract":"<div><p>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. This result is consistent with the continuing expansion of alternative financing despite formal financial intermediation, the rise of corporate insider debt, and joint ownership of debt and equity. The growing size and complexity of projects and changes in community relationships can explain expansion of financing with standard intermediation.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"52 ","pages":"Article 101000"},"PeriodicalIF":5.2,"publicationDate":"2022-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1042957322000535/pdfft?md5=9536f01e103ceb4784a29d717ed15d97&pid=1-s2.0-S1042957322000535-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"71788339","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Ethics, capital and talent competition in banking","authors":"Fenghua Song , Anjan Thakor","doi":"10.1016/j.jfi.2022.100963","DOIUrl":"10.1016/j.jfi.2022.100963","url":null,"abstract":"<div><p>We model optimal ethical standards, capital requirements and talent allocation in banking. Banks with varying safety-net protections, including depositories and shadow banks, innovate products and compete for talent. Managers dislike unethical behavior, but banks heed it only because detection imposes costs. We find: (i) higher capital induces higher ethical standards, but socially optimal capital requirements may tolerate some unethical behavior; (ii) managerial ethics <em>fails</em> to raise banks’ ethical standards; (iii) banks with lower ethical standards attract better talent and innovate more; and (iv) it is socially optimal to allocate better talent to shadow banks instead of depositories, and this allocation results in higher capital requirements and ethical standards for depositories. Consequently, with capital capacity constraints, the shadow banking sector is larger than the depository sector; talent competition induces a race to the bottom in ethical standards, and the regulator responds by setting capital requirements to <em>magnify</em> this size difference.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"52 ","pages":"Article 100963"},"PeriodicalIF":5.2,"publicationDate":"2022-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49582595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Political influence and banks: Evidence from mortgage lending","authors":"Yongqiang Chu , Tim Zhang","doi":"10.1016/j.jfi.2022.100982","DOIUrl":"10.1016/j.jfi.2022.100982","url":null,"abstract":"<div><p>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 mortgage asset quality in the long run. Our findings imply that political power could distort private capital allocation beyond conventional political contribution channels.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"52 ","pages":"Article 100982"},"PeriodicalIF":5.2,"publicationDate":"2022-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43093070","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Carrot and stick: A role for benchmark-adjusted compensation in active fund management","authors":"Juan Sotes-Paladino , Fernando Zapatero","doi":"10.1016/j.jfi.2022.100981","DOIUrl":"10.1016/j.jfi.2022.100981","url":null,"abstract":"<div><p>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 these benefits despite an inherent inefficiency in the choice of the benchmark, and at no extra cost of compensating managers for exposure to relative-performance risk. Under certain conditions, benchmark-adjusted performance fees are necessary to prevent passive alternatives from dominating active management. Our results shed light on a recent debate on the appropriate fee structure of active funds in contexts of high competition from passive funds.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"52 ","pages":"Article 100981"},"PeriodicalIF":5.2,"publicationDate":"2022-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44440666","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Paul A. Gompers , Steven N. Kaplan , Vladimir Mukharlyamov
{"title":"Private equity and Covid-19","authors":"Paul A. Gompers , Steven N. Kaplan , Vladimir Mukharlyamov","doi":"10.1016/j.jfi.2022.100968","DOIUrl":"https://doi.org/10.1016/j.jfi.2022.100968","url":null,"abstract":"<div><p>We survey more than 200 private equity (PE) managers from firms with $1.9 trillion of assets under management (AUM) about their portfolio performance, decision-making and activities during the Covid-19 pandemic. Given that PE managers have significant incentives to maximize value, their actions during the pandemic should indicate what they perceive as being important for both the preservation and creation of value. PE managers believe that 40% of their portfolio companies are moderately negatively affected and 10% are very negatively affected by the pandemic. The private equity managers—both investment and operating partners—are actively engaged in the operations, governance, and financing in all of their current portfolio companies. These activities are more intensively pursued in those companies that have been more severely affected by the Covid-19 pandemic. As a result of the pandemic, they expect the performance of their existing funds to decline. They are more pessimistic about that decline than the venture capitalists (VCs) surveyed in Gompers et al. (2021). Despite the pandemic, private equity managers are seeking new investments. Rather than focusing on cost cutting, PE investors place a much greater weight on revenue growth for value creation. Relative to the 2012 survey results reported in Gompers, Kaplan, and Mukharlyamov (2016), they appear to give a larger equity stake to management teams and target somewhat lower returns.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"51 ","pages":"Article 100968"},"PeriodicalIF":5.2,"publicationDate":"2022-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1042957322000213/pdfft?md5=8b911ac2705f7c8b66658628479fec82&pid=1-s2.0-S1042957322000213-main.pdf","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"71860013","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The riskiness of credit allocation and financial stability","authors":"Luis Brandão-Marques , Qianying Chen , Claudio Raddatz , Jérôme Vandenbussche , Peichu Xie","doi":"10.1016/j.jfi.2022.100980","DOIUrl":"https://doi.org/10.1016/j.jfi.2022.100980","url":null,"abstract":"<div><p>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 conditions. The riskiness of credit allocation is both a measure of corporate vulnerability and of investor sentiment, but its predictive power does not simply come from its relation to these correlates of future financial stress.</p></div>","PeriodicalId":51421,"journal":{"name":"Journal of Financial Intermediation","volume":"51 ","pages":"Article 100980"},"PeriodicalIF":5.2,"publicationDate":"2022-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"71860040","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}