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This paper proposes that whether interconnectedness among banks leads to financial instability depends on banks' leverage decisions. It extends the network model in Allen et al. (2012) to study the relationship between interconnectedness and the banks' failure probability. In the model, banks...
Persistent link: https://www.econbiz.de/10012979287
Modern banking institutions were virtually non-existent in the planned economies of central Europe and the former … Soviet Union. In the early transition period, banking sectors began to develop during several years of macroeconomic decline … participation of foreign banks. By the mid 2000s the banking sectors in many transition countries were dominated by foreign owners …
Persistent link: https://www.econbiz.de/10013056272
Formal enforcement actions issued against banks for violations of laws and regulations related to safety and soundness can theoretically have both positive and negative effects on the terms of lending. Using hand-collected data on such enforcement actions issued against U.S. banks, we show that...
Persistent link: https://www.econbiz.de/10012985264
Do banks use credit default swap hedging to substitute for loan sales? By tracking banks' lending exposures and CDS positions on individual firms, we find that banks use CDS hedging to complement rather than to substitute for loan sales. Consequently, bank loan sales are higher for firms that...
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Banks play a unique role in society. They not only maximize profits but also consider the interests of stakeholders. We investigate whether banks consider firms’ pollution records in their lending decisions. The evidence shows that banks offer significantly higher loan spreads, higher total...
Persistent link: https://www.econbiz.de/10012704249
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We investigate the impact of going-concern opinions on price and non-price terms of bank loans. We argue that the existence of going-concern opinions increases both the default risk ex post and the information risk ex ante. Therefore, upon the issuance of these opinions, banks impose more...
Persistent link: https://www.econbiz.de/10013062206