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Product market relationships and cost of bank loans: evidence from strategic alliances
Fang, Yiwei; Francis, Bill; Hasan, Iftekhar; Wang, Haizhi - Suomen Pankki - 2011
This paper examines the effects of strategic alliances on non-financial firms’ bank loan financing. We construct several measures to capture firms’ alliance activities using the frequency of alliance activities, the prominence of the alliance partner and the relative networking position in...
Persistent link: https://www.econbiz.de/10008867449
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Leverage ratio requirement, credit allocation and bank stability
Kiema, Ilkka; Jokivuolle, Esa - Suomen Pankki - 2011
We study the effects on credit allocation and bank stability of introducing a leverage ratio requirement (LRR) on top …
Persistent link: https://www.econbiz.de/10009003108
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Optimal bank transparency
Moreno, Diego; Takalo, Tuomas - Suomen Pankki - 2012
Consider a competitive bank whose illiquid asset portfolio is funded by short-term debt that has to be refinanced before the asset matures. We show that in this setting maximal transparency is not socially optimal, and that the existence of social externalities of bank failures further lowers...
Persistent link: https://www.econbiz.de/10009651893
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Credit allocation, capital requirements and output
Jokivuolle, Esa; Kiema, Ilkka; Vesala, Timo - Suomen Pankki - 2010
We show how banks’ excessive risk-taking, stemming from informational asymmetries in loan markets, can lead to an excessive output loss when a recession starts. Risk-based capital requirements can alleviate the output loss by reducing excessive risk-taking in ‘normal’ times. Model...
Persistent link: https://www.econbiz.de/10008774238
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Why is equity capital expensive for opaque banks?
Kauko, Karlo - Suomen Pankki - 2012
Bank managers often claim that equity is expensive relative to debt, which contradicts the Modigliani-Miller irrelevance theorem. This paper combines dividend signalling theories and the Diamond-Dybvig bank run model. An opaque bank must signal its solvency by paying high and stable dividends in...
Persistent link: https://www.econbiz.de/10010611665
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Credit allocation, capital requirements and procyclicality
Jokivuolle, Esa; Kiema, Ilkka; Vesala, Timo - Suomen Pankki - 2009
of capital requirements on the allocation of credit and its interaction with procyclicality, and compare Basel I and … Basel II type capital requirements. We consider competitive credit markets where entrepreneurs of varying ability can apply …
Persistent link: https://www.econbiz.de/10008496441
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Bank safety under Basel II capital requirements
Vauhkonen, Jukka - Suomen Pankki - 2009
We consider the impact of mandatory information disclosure on bank safety in a spatial model of banking competition in which a bank’s probability of success depends on the quality of its risk measurement and management systems. Under Basel II capital requirements, this quality is either fully...
Persistent link: https://www.econbiz.de/10008509437
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Asymmetric information in credit markets and entrepreneurial risk taking
Vesala, Timo - Suomen Pankki - 2004
The paper constructs a search-theoretic model of credit markets with a bilateral trading mechanism that enables the … equilibrium depends negatively/positively on the credit market ´tightness´/liquidity. In general equilibrium, where the underlying … market conditions are endogenously determined, steady states with greater credit market tightness are always associated with …
Persistent link: https://www.econbiz.de/10005207166
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Bank competition and collateral: theory and evidence
Hainz, Christa; Weill, Laurent; Godlewski, Christophe - Suomen Pankki - 2008
We investigate the impact of bank competition on the use of collateral in loan contracts. We develop a theoretical model incorporating information asymmetries in a spatial competition framework where banks choose between screening the borrower and asking for collateral. We show that presence of...
Persistent link: https://www.econbiz.de/10005190728
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Relationship lending and competition: Higher switching cost does not necessarily imply greater relationship benefits
Vesala, Timo - Suomen Pankki - 2005
This paper studies relationship lending in a framework where the cost of switching banks measures the degree of banking competition. The relationship lender’s (insider bank’s) informational advantage creates a lock-in effect, which is at its height when the switching cost is infinitesimal....
Persistent link: https://www.econbiz.de/10005190762