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The Effects of Focus and Diversification on Bank Risk and Return: Evidence from Individual Bank Loan Portfolios

Acharya, Viral V; Hasan, Iftekhar; Saunders, Anthony - C.E.P.R. Discussion Papers - 2002

We study empirically the effect of focus (specialization) versus diversification on the return and the risk of banks …) focus and diversification using a unique data set that is able to identify individual bank loan exposures to different … expansion into newer or competitive industries. We find that industrial loan diversification reduces bank return while …

Persistent link: https://www.econbiz.de/10005136462

Security Design: Signaling versus Speculative Markets

Chemla, Gilles; Hennessy, Christopher - C.E.P.R. Discussion Papers - 2011

We determine optimal security design and retention of asset-backed securities by a privately informed issuer with positive NPV uses for immediate cash. In canonical models, investors revert to prior beliefs if issuers pool at zero-retentions (originate-to-distribute), and separating equilibria...

Persistent link: https://www.econbiz.de/10008915803

Liquidity shocks, roll-over risk and debt maturity

Segura, Anatoli; Suarez, Javier - C.E.P.R. Discussion Papers - 2011

We develop an infinite horizon model of an economy in which banks finance long term assets by placing non-tradable debt among savers. Banks choose the overall principal, interest rate, and maturity of their debt taking into account two opposite forces: (i) investors' preference for short...

Persistent link: https://www.econbiz.de/10008921772

Privately versus Publicly Optimal Skin in the Game: Optimal Mechanism and Security Design

Chemla, Gilles; Hennessy, Christopher - C.E.P.R. Discussion Papers - 2011

We examine screening incentives, welfare and the case for mandatory skin-in-the-game. Ex ante banks can screen, using interim private information to choose retentions and structuring. Ex post speculators trade with rational hedging investors. Absent regulation, there is a separating equilibrium...

Persistent link: https://www.econbiz.de/10009024483

Of Religion and Redemption: Evidence from Default on Islamic Loans

Baele, Lieven; Farooq, Moazzam; Ongena, Steven - C.E.P.R. Discussion Papers - 2011

Do religious beliefs affect real economic decisions? We investigate this fundamental question by comparing default rates on conventional and Islamic loans using a comprehensive monthly dataset from Pakistan that follows more than 150,000 loans over the period 2006:04 to 2008:12. We find robust...

Persistent link: https://www.econbiz.de/10009209832

Bank Capital, Liquid Reserves, and Insolvency Risk

Hugonnier, Julien; Morellec, Erwan - C.E.P.R. Discussion Papers - 2015

We develop a dynamic model to assess the effects of liquidity and leverage requirements on banks' insolvency risk. The model features endogenous capital structure, liquid asset holdings, payout, and default decisions. In the model, banks face taxation, flotation costs of securities, and default...

Persistent link: https://www.econbiz.de/10011165669

Aggregate Risk and the Choice between Cash and Lines of Credit

Acharya, Viral V; Almeida, Heitor; Campello, Murillo - C.E.P.R. Discussion Papers - 2012

We model corporate liquidity policy and show that aggregate risk exposure is a key determinant of how firms choose between cash and bank credit lines. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result, firms with high aggregate risk find it costly to get credit...

Persistent link: https://www.econbiz.de/10011083590

Market-Based Bank Capital Regulation

Bulow, Jeremy I.; Klemperer, Paul - C.E.P.R. Discussion Papers - 2013

Today’s regulatory rules, especially the easily-manipulated measures of regulatory capital, have led to costly bank failures. We design a robust regulatory system such that (i) bank losses are credibly borne by the private sector (ii) systemically important institutions cannot collapse...

Persistent link: https://www.econbiz.de/10011083692

Is Bank Debt Special for the Transmission of Monetary Policy? Evidence from the Stock Market

Ippolito, Filippo; Ozdagli, Ali; Perez Orive, Ander - C.E.P.R. Discussion Papers - 2013

We combine existing balance sheet and stock market data with two new datasets to study whether, how much, and why bank lending to firms matters for the transmission of monetary policy. The first new dataset enables us to quantify the bank dependence of firms precisely, as the ratio of bank debt...

Persistent link: https://www.econbiz.de/10011083693

Loan Sales and Screening Incentives

Bester, Helmut; Gehrig, Thomas; Stenbacka, Rune - C.E.P.R. Discussion Papers - 2012

We analyze the effect of loan sales on the intensity of costly screening. Loan sales strengthen screening incentives when screening primarily improves the bank’s ability to identify profitable loans and when banks retain most of those profitable loans. However, loan sales dampen screening...

Persistent link: https://www.econbiz.de/10011083726

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