We use cross country data on a sample of 210 large Western European banks during the ten year period from 2000 to 2009 to evaluate the impact of government ownership on bank risk and lending activity across the economic and political cycles. Three main results emerge from our analysis. First,...

We investigate how the link between bond spreads and credit ratings is affected by the credit cycle. Using a simple model of the credit assessment process, we show that when the debt market is more opaque, the information content of ratings becomes poorer, creating an incentive for investors to...

A model is presented that shows when (Basel Accord) capital standards and (FDIC) insurance premiums primarily reflect a bank's physical expected default losses, a bank can increase its shareholder value by making loans and investing in bonds that have relatively high systematic risk. Such an...

We use cross-country data on a sample of large European banks to evaluate the impact of government ownership on bank risk. We distinguish between default risk (likelihood of creditors' losses) and operating risk (likelihood of negative equity). Our analysis is based on the joint use of issuer...

Given the central role of firm opacity in most finance theories, empirical proxies that identify firm opacity correctly should allow for more powerful tests of these theories. The last decade has seen adoption of several different empirical proxies that aim to capture firm opacity. However,...

We investigate bank opaqueness by looking at the frequency of large, negative, market-adjusted returns (crashes). We analyze crashes on a sample of US stocks traded in the 1990-2007 period. Jin and Myers (2006) predict that opaqueness coupled with weak investors' protection generate more...

The question of whether banks are relatively more opaque than non-banking firms is empirically investigated by analyzing the disagreement between rating agencies (split ratings) on 2,473 bonds issued by European firms during the 1993-2003 period. Four main results emerge from the empirical...

Research Question/Issue: The level and effectiveness of investors' protection is considered to foster financial markets development and economic growth. While previous studies focused on the relationship between the institutional setting and investors' protection at country level, we investigate...

We evaluate the impact of government ownership on the issuer and individual ratings of a sample of 224 large European banks over the 1999-2004 period. Individual ratings differ from traditional ones in that they focus on banks' economic and financial conditions and do not take into account any...