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The Economic Costs of Financial Distress

Custodio, Claudia - 2020

We estimate the economic costs of financial distress by exploiting cross-supplier variation in real estate assets and leverage, and the timing of real estate shocks. We show that for the same client buying from different suppliers, its purchases from distressed suppliers decline by an additional...

Persistent link: https://www.econbiz.de/10012850487

Default Contagion and Systemic Risk with Cross-Ownership of Equities, Debts, and Financial Derivatives

Nishide, Katsumasa - 2020

We consider a situation in which general financial products such as options, CDS, and other derivatives, are traded to investigate the effect of cross-ownerships on market stability. We prove the existence and uniqueness of a clearing payment vector under the assumption of the fictitious default...

Persistent link: https://www.econbiz.de/10012855070

Financial constraints and propagation of shocks in production networks

Demir, Banu; Javorcik, Beata K. Smarzynska; Michalski, … - 2020

empirical tests, motivated by a simple theory, demonstrate that low-liquidity firms amplified its transmission. …

Persistent link: https://www.econbiz.de/10012294883

Commercial and banking credit network in Uruguay

Barón, Andrea; Landaberry, María Victoria; Lluberas, … - In: Latin American journal of central banking : LAJCB 2 (2021) 3, pp. 1-17

We build a commercial credit network, identify the most central economic sectors in terms of commercial debt, and provide a more complete idea of total indebtedness and financial interlinks between firms and banks in Uruguay. "Commerce," "manufacturing," and "transportation, storage, and...

Persistent link: https://www.econbiz.de/10012659012

Competition Network, Distress Propagation, and Stock Returns

Dou, Winston; Johnson, Shane A.; Shao, MingMing Ao; Wu, Wei - 2021

We build a competition network that links two industries through their common market leaders. Industries with higher centrality on the competition network have higher expected stock returns because of higher exposure to the cross-industry spillover of distress shocks. The competition intensity...

Persistent link: https://www.econbiz.de/10013240149

Insolvency of Significant Non-Financial Enterprises : Lessons from Bank Failures and Bank Resolution

Kokorin, Ilya - 2020

In the aftermath of the global financial crisis the EU bank resolution regime went through fundamental changes that seek to preserve financial stability and ensure continuity of critical functions. The same cannot be said of insolvency rules applicable to non-financial enterprises. Unlike bank...

Persistent link: https://www.econbiz.de/10012833155

The role of interbank relationships and liquidity needs

Craig, Ben R.; Fecht, Falko; Tümer-Alkan, Günseli - 2013

In this paper, we focus on the interconnectedness of banks and the price they pay for liquidity. We assess how the … to meet its liquidity demand. We use quarterly data of bilateral interbank credit exposures between all German banks from …’s willingness to pay for liquidity since they had variable rate tenders with a “pay-your-bid” price. Controlling for bank …

Persistent link: https://www.econbiz.de/10010238510

Supplier-Customer Relationships and Corporate Hedging Policy

Kang, Jun-Koo - 2018

We investigate the relation between a firm's hedging policy and its major customer relationships. We find that the likelihood of a supplier using derivatives to hedge interest rate risk is higher when a major customer has high leverage. This result is increasing in the supplier's dependence on a...

Persistent link: https://www.econbiz.de/10012938396

Do Individual Investors Ignore Transaction Costs?

Anginer, Deniz - 2018

liquid stocks in their portfolios, consistent with Amihud and Mendelson's (1986) theory of liquidity clienteles. The … liquidity. Our findings challenge the notion that individual investors ignore non-salient costs when making investment decisions …

Persistent link: https://www.econbiz.de/10012933926

Formation of Optimal Interbank Lending Networks under Liquidity Shocks

Rigobon, Daniel; Sircar, Ronnie - 2022

We formulate a model of the banking system in which banks control both their supply of liquidity, through cash holdings …, and their exposures to risky interbank loans. The value of interbank loans jumps when banks suffer liquidity shortages …, which can be caused by the arrival of large enough liquidity shocks. In two distinct settings, we compute the unique optimal …

Persistent link: https://www.econbiz.de/10014236007

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