This chapter presents an empirical investigation of the relationship between bank performance and... more This chapter presents an empirical investigation of the relationship between bank performance and corporate culture in European banking using a sample of quoted banks over the period 2001–03. There is a substantial literature dealing with bank performance and shareholder value,2 but few studies have attempted to conduct an empirical analysis of the relationship with business conditions that may lead to create shareholder value.
Cooperative Banking: Innovations and Developments, 2009
This chapter aims to assess (a) the shareholder value created by cooperative banks and (b) their ... more This chapter aims to assess (a) the shareholder value created by cooperative banks and (b) their cost-efficiency levels, using a large sample of cooperative banks in France, Germany, Italy and the United Kingdom over the period 1995–2002.
... ed il mercato mondiale è passato dai 60 miliardi di USD del 1980 ai 530 miliardi di USD del 1... more ... ed il mercato mondiale è passato dai 60 miliardi di USD del 1980 ai 530 miliardi di USD del 1998 2. Come evidenziato nella fi-gura 1, i mercati europei si sono sviluppati in misura decisamente più soste-nuta rispetto agli Stati Uniti: in particolare, il mercato italiano, spagnolo e ...
The recent period of crisis in credit markets has highlighted the crucial role of bank risk takin... more The recent period of crisis in credit markets has highlighted the crucial role of bank risk taking. Our paper assesses the inter-temporal relationships among bank efficiency, capital and bank risk-taking in the EU-26 commercial banking industry between 1995 and 2007. Our results support the bad management-, luck-, cost and revenue skimping hypotheses. Overall, our paper provides evidence that higher performance (enhanced efficiency) has been not related to higher managerial skills, rather to cost and revenue skimping and bad management.
ABSTRACT Stock market prices reflect information on firms' business environments, operati... more ABSTRACT Stock market prices reflect information on firms' business environments, operations and, in general, firms' fundamentals. Recently, various studies analyze the link between news coverage and stock prices showing that mass media has a significant impact on financial markets. This paper analyze the interactions between the mass media and the stock market focusing on corporate governance news release. By using a large sample of corporate governance news released between 2003 and 2007, we examine the link between abnormal stock returns and corporate governance news. We find evidence that stock returns are influenced by the semantic content of corporate governance news, by firm performance and health and by the interaction of these variables.
Enforcement actions (or sanctions) pursue two complementary goals, namely to penalize guilty comp... more Enforcement actions (or sanctions) pursue two complementary goals, namely to penalize guilty companies and to provide an example to other companies that bad behaviour will be penalized. Although the recent financial crisis showed that this topic is critical in banking, only a few papers (e.g. Delis, Staikouras and Tsoumas, 2015) have analyzed the consequence of sanctions, and no papers have investigated the cross-effects on non-sanctioned banks. Focusing on the Italian banking industry (i.e. as an ideal case study), we assume that non-sanctioned banks care about the enforcement actions taken against other similar banks. By adopting a two-step model based on a propensity score matching technique to calculate the probability of a bank to be subject to sanctions, we show that the stability of non-sanctioned banks increases as the probability of being sanctioned increases (and also as the Mahalanobis distance from the group of sanctioned bank is reduced).
This paper examines shareholder value drivers in European banking focusing on the efficiency and ... more This paper examines shareholder value drivers in European banking focusing on the efficiency and productivity features of individual banks. In particular, we analyse the value relevance of bank cost efficiency and total factor productivity (TFP) (in all its components, including technological change, pure technical efficiency change and scale efficiency change) to see how these influence shareholder value creation in European banking. The paper focuses on the French, German, Italian and UK banking systems over the period 1995-2002 and includes both listed and non-listed banks. We find that TFP changes best explain variations in shareholder value (measured by marketadjusted returns, MAR, for listed banks and by the ratio of EVAbkg to invested capital at time t-1 for non-listed banks). In both samples, we also find that technological change seems to be the most important component of TFP influencing shareholder value creation in European banking.
Journal of International Financial Markets, Institutions and Money, 2013
Cooperative banks are small credit institutions, and they are more likely than commercial banks t... more Cooperative banks are small credit institutions, and they are more likely than commercial banks to default in periods of financial stability. Focusing on Italy (one of the largest cooperative banking markets), we analyse the contribution of efficiency to the estimation of the probability of default of cooperative banks. We estimate several measures of bank efficiency, and we run a discrete-time survival model to determine whether different managerial abilities play different roles in predicting bank failures. We show that higher efficiency levels (both in cost minimization and revenue and profit maximization) have a positive and statistically significant link with the probability of survival of cooperative banks. We also find that capital adequacy reduces the probability of default, supporting the view that higher capital buffers provide additional loss absorbency and reduce moral hazard problems.
This paper examines the determinants of shareholder value creation for a large sample of European... more This paper examines the determinants of shareholder value creation for a large sample of European banks between 1998 and 2005. As the recent turmoil in global banking systems has illustrated, bank performance can have a substantial influence on efficient capital allocation, company growth and economic development. We use a dynamic panel data model where the bank's shareholder value is a linear function of various bank-specific, industry-specific and macroeconomic variables. We show that shareholder value has a positive relationship with cost efficiency changes, while economic profits are linked to revenue efficiency changes. Credit losses, market and liquidity risk and leverage are also found to substantially influence bank performance. These results are robust to a variety of different model specifications.
We evaluate the impact of commonly used indicators of bank distress on broad (sector and country)... more We evaluate the impact of commonly used indicators of bank distress on broad (sector and country) risks. Our results show that several measures of individual bank risk impact on banking (systemic) and overall (systematic) stock market risk. Our results provide strong evidence suggesting that banks' default risk tends to be systematic (i.e. undiversifiable). This issue deserves special attention in the banking industry where the default of single bank may cause a cascading failure, which could potentially bankrupt the entire system.
This paper analyses the information content of traditional and innovative performance indicators ... more This paper analyses the information content of traditional and innovative performance indicators in the light of creating shareholder value within the banking industry. We examine both relative-and incremental-information content focussing on quoted European banks ...
How does competition affect the investment banking business and the risks individual institutions... more How does competition affect the investment banking business and the risks individual institutions are exposed to? Using a large sample of investment banks operating in seven developed economies over 1997-2014, we apply a panel VAR model to examine the relationships between competition and risk without assuming any a priori restrictions. Our main finding is that investment banks' higher risk exposure, measured as a long-term capital-at-risk and return volatility, was facilitated by greater competitive pressures especially for full service investment banks but also for boutique investment banks. Overall, we find some evidence that more competition leads to more fragility before and during the recent financial crisis.
Over the past three decades, new types of credit institution have been developed and new forms of... more Over the past three decades, new types of credit institution have been developed and new forms of intermediation are have succeeded in establishing themselves as important competitors in the credit market. The literature on regulation has never paid much attention to the behaviour of quasi-banking institutions, from the point of view of their distinctive characteristics and management peculiarities This paper investigates the relationship between regulation and competition among non banking credit intermediaries and banks. This study assess the importance of the management characteristics and profiles of quasi-banking institutions, for regulatory purposes, and to examine the relationship between the regulatory process and differing business behaviours. This study deals with a specific aspect of the regulation of financial systems. In any case, in the wide-ranging and animated discussions on regulation, recently there seems to be a growing interest in this specific issue, in respect ...
This chapter presents an empirical investigation of the relationship between bank performance and... more This chapter presents an empirical investigation of the relationship between bank performance and corporate culture in European banking using a sample of quoted banks over the period 2001–03. There is a substantial literature dealing with bank performance and shareholder value,2 but few studies have attempted to conduct an empirical analysis of the relationship with business conditions that may lead to create shareholder value.
Cooperative Banking: Innovations and Developments, 2009
This chapter aims to assess (a) the shareholder value created by cooperative banks and (b) their ... more This chapter aims to assess (a) the shareholder value created by cooperative banks and (b) their cost-efficiency levels, using a large sample of cooperative banks in France, Germany, Italy and the United Kingdom over the period 1995–2002.
... ed il mercato mondiale è passato dai 60 miliardi di USD del 1980 ai 530 miliardi di USD del 1... more ... ed il mercato mondiale è passato dai 60 miliardi di USD del 1980 ai 530 miliardi di USD del 1998 2. Come evidenziato nella fi-gura 1, i mercati europei si sono sviluppati in misura decisamente più soste-nuta rispetto agli Stati Uniti: in particolare, il mercato italiano, spagnolo e ...
The recent period of crisis in credit markets has highlighted the crucial role of bank risk takin... more The recent period of crisis in credit markets has highlighted the crucial role of bank risk taking. Our paper assesses the inter-temporal relationships among bank efficiency, capital and bank risk-taking in the EU-26 commercial banking industry between 1995 and 2007. Our results support the bad management-, luck-, cost and revenue skimping hypotheses. Overall, our paper provides evidence that higher performance (enhanced efficiency) has been not related to higher managerial skills, rather to cost and revenue skimping and bad management.
ABSTRACT Stock market prices reflect information on firms' business environments, operati... more ABSTRACT Stock market prices reflect information on firms' business environments, operations and, in general, firms' fundamentals. Recently, various studies analyze the link between news coverage and stock prices showing that mass media has a significant impact on financial markets. This paper analyze the interactions between the mass media and the stock market focusing on corporate governance news release. By using a large sample of corporate governance news released between 2003 and 2007, we examine the link between abnormal stock returns and corporate governance news. We find evidence that stock returns are influenced by the semantic content of corporate governance news, by firm performance and health and by the interaction of these variables.
Enforcement actions (or sanctions) pursue two complementary goals, namely to penalize guilty comp... more Enforcement actions (or sanctions) pursue two complementary goals, namely to penalize guilty companies and to provide an example to other companies that bad behaviour will be penalized. Although the recent financial crisis showed that this topic is critical in banking, only a few papers (e.g. Delis, Staikouras and Tsoumas, 2015) have analyzed the consequence of sanctions, and no papers have investigated the cross-effects on non-sanctioned banks. Focusing on the Italian banking industry (i.e. as an ideal case study), we assume that non-sanctioned banks care about the enforcement actions taken against other similar banks. By adopting a two-step model based on a propensity score matching technique to calculate the probability of a bank to be subject to sanctions, we show that the stability of non-sanctioned banks increases as the probability of being sanctioned increases (and also as the Mahalanobis distance from the group of sanctioned bank is reduced).
This paper examines shareholder value drivers in European banking focusing on the efficiency and ... more This paper examines shareholder value drivers in European banking focusing on the efficiency and productivity features of individual banks. In particular, we analyse the value relevance of bank cost efficiency and total factor productivity (TFP) (in all its components, including technological change, pure technical efficiency change and scale efficiency change) to see how these influence shareholder value creation in European banking. The paper focuses on the French, German, Italian and UK banking systems over the period 1995-2002 and includes both listed and non-listed banks. We find that TFP changes best explain variations in shareholder value (measured by marketadjusted returns, MAR, for listed banks and by the ratio of EVAbkg to invested capital at time t-1 for non-listed banks). In both samples, we also find that technological change seems to be the most important component of TFP influencing shareholder value creation in European banking.
Journal of International Financial Markets, Institutions and Money, 2013
Cooperative banks are small credit institutions, and they are more likely than commercial banks t... more Cooperative banks are small credit institutions, and they are more likely than commercial banks to default in periods of financial stability. Focusing on Italy (one of the largest cooperative banking markets), we analyse the contribution of efficiency to the estimation of the probability of default of cooperative banks. We estimate several measures of bank efficiency, and we run a discrete-time survival model to determine whether different managerial abilities play different roles in predicting bank failures. We show that higher efficiency levels (both in cost minimization and revenue and profit maximization) have a positive and statistically significant link with the probability of survival of cooperative banks. We also find that capital adequacy reduces the probability of default, supporting the view that higher capital buffers provide additional loss absorbency and reduce moral hazard problems.
This paper examines the determinants of shareholder value creation for a large sample of European... more This paper examines the determinants of shareholder value creation for a large sample of European banks between 1998 and 2005. As the recent turmoil in global banking systems has illustrated, bank performance can have a substantial influence on efficient capital allocation, company growth and economic development. We use a dynamic panel data model where the bank's shareholder value is a linear function of various bank-specific, industry-specific and macroeconomic variables. We show that shareholder value has a positive relationship with cost efficiency changes, while economic profits are linked to revenue efficiency changes. Credit losses, market and liquidity risk and leverage are also found to substantially influence bank performance. These results are robust to a variety of different model specifications.
We evaluate the impact of commonly used indicators of bank distress on broad (sector and country)... more We evaluate the impact of commonly used indicators of bank distress on broad (sector and country) risks. Our results show that several measures of individual bank risk impact on banking (systemic) and overall (systematic) stock market risk. Our results provide strong evidence suggesting that banks' default risk tends to be systematic (i.e. undiversifiable). This issue deserves special attention in the banking industry where the default of single bank may cause a cascading failure, which could potentially bankrupt the entire system.
This paper analyses the information content of traditional and innovative performance indicators ... more This paper analyses the information content of traditional and innovative performance indicators in the light of creating shareholder value within the banking industry. We examine both relative-and incremental-information content focussing on quoted European banks ...
How does competition affect the investment banking business and the risks individual institutions... more How does competition affect the investment banking business and the risks individual institutions are exposed to? Using a large sample of investment banks operating in seven developed economies over 1997-2014, we apply a panel VAR model to examine the relationships between competition and risk without assuming any a priori restrictions. Our main finding is that investment banks' higher risk exposure, measured as a long-term capital-at-risk and return volatility, was facilitated by greater competitive pressures especially for full service investment banks but also for boutique investment banks. Overall, we find some evidence that more competition leads to more fragility before and during the recent financial crisis.
Over the past three decades, new types of credit institution have been developed and new forms of... more Over the past three decades, new types of credit institution have been developed and new forms of intermediation are have succeeded in establishing themselves as important competitors in the credit market. The literature on regulation has never paid much attention to the behaviour of quasi-banking institutions, from the point of view of their distinctive characteristics and management peculiarities This paper investigates the relationship between regulation and competition among non banking credit intermediaries and banks. This study assess the importance of the management characteristics and profiles of quasi-banking institutions, for regulatory purposes, and to examine the relationship between the regulatory process and differing business behaviours. This study deals with a specific aspect of the regulation of financial systems. In any case, in the wide-ranging and animated discussions on regulation, recently there seems to be a growing interest in this specific issue, in respect ...
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