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In competitive capital markets, risky debt claims that offer high yields in good times have high systematic risk exposure in bad times. We apply this idea to bank risk measurement. We find that banks with high accounting return on equity (ROE) prior to a crisis have higher systematic tail risk...
Persistent link: https://www.econbiz.de/10014337867
This paper models and estimates ex ante safety-net benefits at a sample of large banks in US and Europe during 2003-2008. Our results suggest that difficult-to-fail and unwind (DFU) banks enjoyed substantially higher ex ante benefits than other institutions. Safety-net benefits prove...
Persistent link: https://www.econbiz.de/10012461870
Economists have argued that a high concentration of land holdings in a country can create powerful interest groups that retard the creation of economic institutions, and thus hold back economic development. Could these arguments apply beyond underdeveloped countries with backward political...
Persistent link: https://www.econbiz.de/10012463566
In the last two decades the European financial markets have become more market oriented. We analyze the economic and political forces that have triggered these changes as well as their likely welfare implications. We also try to assess whether this trend will continue. Based on our analysis, we...
Persistent link: https://www.econbiz.de/10012469104
This paper examines the evolving importance of banks and securities markets during the process of economic development. We find that as countries develop economically, (1) the size of both banks and securities markets increases relative to the size of the economy, (2) the association between an...
Persistent link: https://www.econbiz.de/10012460656
We measure the repo funding extended by money market funds (MMF) and securities lenders to the shadow banking system, including quantities, haircuts, and repo rates by type of underlying collateral. We find that repo played only a small role in funding private sector assets prior to the crisis,...
Persistent link: https://www.econbiz.de/10012460892
The importance of information asymmetries in the capital markets is commonly accepted as one of the main reasons for home bias in investment. We posit that effects of such asymmetries may be reduced through relationships between banks established through bank-to-bank lending and provide evidence...
Persistent link: https://www.econbiz.de/10012461302
This paper is an exploratory analysis of the role that banks play in supporting the mechanism of exchange. It considers a model economy in which exchange activities are facilitated and coordinated by a self-organizing network of entrepreneurial trading firms. Collectively, these firms play the...
Persistent link: https://www.econbiz.de/10012461555
In this paper we argue that in 19th century U.S, households and firms that were located in cities with banks enjoyed a higher level of both consumption and production amenities than those who were located in cities without banks. We use data on banks location and city population growth in the...
Persistent link: https://www.econbiz.de/10012462656
We measure how securitized assets, including mortgage-backed securities and other asset-backed securities, have shifted across financial institutions over this crisis and how the availability of financing has accommodated such shifts. Sectors dependent on repo financing - in particular, the...
Persistent link: https://www.econbiz.de/10012462732