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- 23 February 2023
- WORKING PAPER SERIES - No. 2790Details
- Abstract
- This paper investigates to what extent the introduction of negative monetary policy rates altered competitive behaviour in the euro area banking sector. Specifically, it analyses the effect that negative policy rates had on euro area banks’ market power in comparison to banks that have not been subject to negative rates. The analysis, considering a sample of 4,223 banks over the period 2011–2018 and relying on a difference-in-differences methodology, finds that negative monetary policy rates led to an increase in euro area banks’ market power. Furthermore, it shows that, during the negative interest rate policy period, change in banks’ competitive behaviour affected the bank lending channel and discouraged banks from taking excessive risks.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G20 : Financial Economics→Financial Institutions and Services→General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 28 February 2022
- WORKING PAPER SERIES - No. 2650Details
- Abstract
- We match firm-corporate governance characteristics with firm-level carbon dioxide (CO2) emissions over the period 2009-2019 to study the relationship between gender diversity in the workplace and firm carbon emissions. We find that a 1 percentage point increase in the percentage of female managers within the firm leads to a 0.5% decrease in CO2 emissions. We document that this effect is statically significant, also when controlling for institutional differences caused by more patriarchal and hierarchical cultures and religions. At the same time, we show that gender diversity at the managerial level has stronger mitigating effects on climate change if females are also well-represented outside the organization, e.g. in political institutions and civil society organizations. Finally, we find that, after the Paris Agreement, firms with greater gender diversity reduced their CO2 emissions by about 5% more than firms with more male managers.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G30 : Financial Economics→Corporate Finance and Governance→General
D62 : Microeconomics→Welfare Economics→Externalities
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
- 14 May 2021
- WORKING PAPER SERIES - No. 2550Details
- Abstract
- Do climate-oriented regulatory policies affect the flow of credit towards polluting corporations? We match loan-level data to firm-level greenhouse gas emissions to assess the impact of the Paris Agreement. We find that, following this agreement, European banks reallocated credit away from polluting firms. In the aftermath of President Trump’s 2017 announcement that the United States was withdrawing from the Paris Agreement, lending by European banks to polluting firms in the United States decreased even further in relative terms. It follows that green regulatory initiatives in banking can have a significant impact combating climate change.
- JEL Code
- E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
H23 : Public Economics→Taxation, Subsidies, and Revenue→Externalities, Redistributive Effects, Environmental Taxes and Subsidies
- 21 May 2014
- WORKING PAPER SERIES - No. 1678Details
- Abstract
- We find that the increased use of securitisation activity in the banking sector prior to the 2007- 2009 crisis augmented the effect of competition on realised bank risk (i.e. more intense competition and greater use of securitisation is correlated with higher levels of realised risk) during the crisis. In contrast, higher levels of capital did not buffer the impact of competition on realised risk. It follows that cooperation between supervisory and competition authorities is warranted to account for the stability implications of financial innovation and capital regulation.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
- 15 March 2012
- WORKING PAPER SERIES - No. 1427Details
- Abstract
- We analyze whether the impact of monetary policy on bank risk depends upon bank characteristics. We relate the materialization of bank risk during the financial crisis to differences in the monetary policy stance and bank characteristics in the pre-crisis period for a large sample of listed banks operating in the European Union and the United States. We find that the insulation effect produced by capital and liquidity buffers on bank risk was lower for banks operating in countries that, prior to the crisis, experienced a particularly prolonged period of low interest rates.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages - Network
- Macroprudential Research Network
- 4 November 2011
- WORKING PAPER SERIES - No. 1394Details
- Abstract
- We exploit the 2007-2009 financial crisis to analyze how risk relates to bank business models. Institutions with higher risk exposure had less capital, larger size, greater reliance on short-term market funding, and aggressive credit growth. Business models related to significantly reduced bank risk were characterized by a strong deposit base and greater income diversification. The effect of business models is non-linear: it has a different impact on riskier banks. Finally, it is difficult to establish in real time whether greater stock market capitalization involves real value creation or the accumulation of latent risk.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G15 : Financial Economics→General Financial Markets→International Financial Markets
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill - Network
- Macroprudential Research Network
- 31 March 2010
- WORKING PAPER SERIES - No. 1166Details
- Abstract
- This paper investigates the relationship between short-term interest rates and bank risk. Using a unique database that includes quarterly balance sheet information for listed banks operating in the European Union and the United States in the last decade, we find evidence that unusually low interest rates over an extended period of time contributed to an increase in banks' risk. This result holds for a wide range of measures of risk, as well as macroeconomic and institutional controls.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 31 July 2009
- WORKING PAPER SERIES - No. 1075Details
- Abstract
- We find evidence of a bank lending channel for the euro area operating via bank risk. Financial innovation and the new ways to transfer credit risk have tended to diminish the informational content of standard bank balance-sheet indicators. We show that bank risk conditions, as perceived by financial market investors, need to be considered, together with the other indicators (i.e. size, liquidity and capitalization), traditionally used in the bank lending channel literature to assess a bank
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
- 10 March 2009
- WORKING PAPER SERIES - No. 1028Details
- Abstract
- Following the introduction of the euro, the markets for large debt financing experienced a historical expansion. We investigate the financial factors behind the issuance of syndicated loans for an extensive sample of euro area non-financial corporations. For the first time we compare these factors to those of its major competitor: the corporate bond market. We find that large firms, with greater financial leverage, more (verifiable) profits and higher liquidation values tend to prefer syndicated loans. In contrast, firms with larger levels of short-term debt and those perceived by markets as having more growth opportunities favour financing through corporate bonds.
- JEL Code
- D40 : Microeconomics→Market Structure and Pricing→General
F30 : International Economics→International Finance→General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 17 December 2007
- WORKING PAPER SERIES - No. 838Details
- Abstract
- The dramatic increase in securitisation activity has odified the functioning of credit markets by reducing the fundamental role of liquidity transformation performed by financial intermediaries. We claim that the changing role of banks from
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
- 28 June 2007
- OCCASIONAL PAPER SERIES - No. 63Details
- Abstract
- This report analyses the financial position of non-financial enterprises in the euro area, in particular the amount of external financing, the choice between debt and equity and the composition and maturity structure of debt. It aims at identifying the main features of the euro area, as well as the peculiarities that depend on the country of origin and the sector of activity. Attention is also devoted to assessing whether a country's institutional features are correlated with different financial structures by firms. In light of the particular interest in the access of small and medium-sized enterprises (SMEs) to financing, the report also analyses how financing patterns differ across large, medium-sized and small enterprises. Finally, the report discusses the recent trends observed in the corporate finance landscape of the euro area over the past few years. Although it is still too early to pass final judgement, vast structural changes are underway that could have already influenced in a positive way in the availability of external funds for firms. All in all, a comprehensive understanding of corporate finance in the euro area is important from a monetary policy perspective, given its impact on the transmission mechanism and for productivity and economic growth. Moreover, such an understanding is also relevant from a financial stability perspective. A first assessment is now possible eight years into the third stage of Economic and Monetary Union (EMU), given that sufficient data have been accumulated during this period. This assessment is particularly important as the introduction of the single currency has had significant structural effects on the working of financial markets, increasing their size and liquidity, and fostering cross-border competition. The data available for this report generally cover the period 1995-2005, and the cut-off date for the statistics included is 10 March 2007.
- JEL Code
- D92 : Microeconomics→Intertemporal Choice→Intertemporal Firm Choice, Investment, Capacity, and Financing
G30 : Financial Economics→Corporate Finance and Governance→General
G10 : Financial Economics→General Financial Markets→General
O16 : Economic Development, Technological Change, and Growth→Economic Development→Financial Markets, Saving and Capital Investment, Corporate Finance and Governance
K40 : Law and Economics→Legal Procedure, the Legal System, and Illegal Behavior→General
- 29 October 2004
- WORKING PAPER SERIES - No. 398Details
- Abstract
- An unprecedented process of financial consolidation has taken place in the European Union over the past decade. Building on earlier US evidence, we examine the impact of strategic similarities between bidders and targets on post-merger financial performance. We find that, on average, bank mergers in the European Union resulted in improved return on capital. By making the assumption that balance-sheet resource allocation is indicative of the strategic focus of banks, we also find significantly different results for domestic and cross-border mergers. For domestic deals, it could be quite costly to integrate dissimilar institutions in terms of their loan, earnings, cost, deposits and size strategies. For cross-border mergers and acquisitions (M&As), differences of merging partners in their loan and credit risk strategies are conducive to a higher performance whereas diversity in their capital, cost structure as well as technology and innovation investments strategies are counterproductive from a performance standpoint.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G34 : Financial Economics→Corporate Finance and Governance→Mergers, Acquisitions, Restructuring, Corporate Governance