The paper shows that mispriced deposit insurance and capital regulation were of second order importance in determining the capital structure of large U.S. and European banks during 1991 to 2004. Instead, standard cross-sectional determinants of non-financial firms' leverage carry over to banks,...

This paper analyzes the link between Foreign Direct Investment (FDI), corporate taxation, and corporate tax revenues. We find strong evidence that FDI in (out) flows are affected by tax regimes in the host (home) countries and FDI flows in turn affect the corporate tax base. Simulations of EU...

The paper analyses the relationship between deposit insurance, debt-holder monitoring, charter values and risk taking. Utilising cross-sectional and time series variation in the existence of deposit insurance schemes in the EU, we find that the establishment of explicit deposit insurance...

The recent wave of mergers in the euro area raises the question, whether the increase in concentration has at least in part offset the increase in competition in European banking through deregulation. We test this question by estimating a simple Cournot model of bank pricing. We construct...

The recent consultative papers by the Basel Committee suggest an explicit role for external rating agencies in the assessment of the credit risk of banks' assets. In this context, an assessment of the information contained in credit ratings is important. We address this issue via an event study...

We analyse the ability of the distance-to-default and bond spreads to signal bank fragility. We show that both indicators are complete and unbiased and that spreads are non-linear in the probability of bank default. We empirically test these properties in a sample of EU banks. We find leading...

This paper uses the co-incidence of extreme shocks to banks’ risk to examine within country and across country contagion among large EU banks. Banks’ risk is measured by the first difference of weekly distances to default and abnormal returns. Using Monte Carlo simulations, the paper...

The paper analyses the relationship between deposit insurance, debt-holder monitoring, and risk taking. In a stylised banking model we show that deposit insurance may reduce moral hazard, if deposit insurance credibly leaves out non-deposit creditors. Testing the model using EU bank level data...

This paper analyses cross-border contagion in a sample of European banks from January 1994 to January 2003. We use a multinomial logit model to estimate the number of banks in a given country that experience a large shock on the same day (“coexceedances”) as a function of variables measuring...

We propose a new approach to measuring the effect of unobservable private information or beliefs on volatility. Using high-frequency intraday data, we estimate the volatility effect of a well identified shock on the volatility of the stock returns of large European banks as a function of the...