João Santos

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Mohammed Seyam

Mansoura University

Vinicius Garcia

Universidade Federal de Pernambuco

Geylani Kardas

Ege University

Remo Caponi

University of Cologne

Rubby Casallas

Universidad de los Andes (Colombia)

Vanea CHIPRIANOV

University of Adelaide

Shahliza Halim

Universiti Teknologi Malaysia - UTM

Hadi Winarto

RMIT International University Vietnam

Salma Imtiaz

International Islamic University Islamabad

Viacheslav Kuleshov

Stockholm University

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Papers by João Santos

P XIX.10 Analytical methods of toxic and genotoxic evaluation to the control of environmental quality

Mutation Research/Fundamental and Molecular Mechanisms of Mutagenesis, 1997

Optimal Supervisory Policies and Depositor-Preferences Laws

SSRN Electronic Journal, 2000

This publication is available on the BIS website (www.bis.org).

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Performance and Asset Management Effects of Bank Acquisitions

SSRN Electronic Journal, 2000

Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to s... more

Commercial Banks in the Securities Business: A Review

SSRN Electronic Journal, 2000

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Identifying the Effect of Managerial Control on Firm Performance

SSRN Electronic Journal, 2000

Using a unique sample, we attempt to identify the consequence of the separation between inside ow... more Using a unique sample, we attempt to identify the consequence of the separation between inside ownership and control for firm performance. We exploit the fact that banking institutions may hold their own shares in trust to construct a clean measure of the wedge between inside voting control and cash flow rights. These shares provide managers with no monetary incentives, since their dividends accrue to trust beneficiaries. However, managers may have the authority to vote these shares. Contrary to the belief that managerial control is purely detrimental, we find that it has positive effects on performance over at least some range. r

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Bank Capital Regulation in Contemporary Banking Theory: A Review of the Literature

SSRN Electronic Journal, 2000

Fax: +41 61 / 280 91 00 and +41 61 / 280 81 00 This publication is available on the BIS website (... more

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Endogenous Financial Fragility and Prudential Regulation

SSRN Electronic Journal, 2000

We study the fragility of the banking system and its implications for prudential regulation. In o... more We study the fragility of the banking system and its implications for prudential regulation. In our framework, fragility stems from the interconnections banks establish to protect themselves from liquidity shocks. We show that when banks do not provide payment services they have an incentive to choose the optimal degree of mutual insurance. Under these conditions, the flexibility with which financial assets can be designed and priced causes all market participants to correctly to take into account the economic effects of their own interdependence. When banks provide payment services this flexibility is no longer available.

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Systemic Risk and Deposit Insurance Premiums

SSRN Electronic Journal, 2000

When there are widespread bank failures, deposit insurance agencies such as the Federal Deposit I... more When there are widespread bank failures, deposit insurance agencies such as the Federal Deposit Insurance Corporation (FDIC) …nd it di¢ cult to sell failed banks at attractive prices. Thus, the deposit insurance fund su¤ers higher drawdowns per dollar of insured deposit when there is a systemic crisis. In turn, the actuarially-fair deposit insurance premium that is charged ex ante to banks increases in joint failure risk in addition to individual failure risk. Further, since bank closure policies re ‡ect greater forbearance in a systemic crisis, banks have incentives to herd. The incentive-e¢ cient premium that accounts for such moral hazard requires a higher charge for joint failure risk than the actuarially-fair one. Similarly, as large bank failures are more likely to be associated with asset …re sales (and regulatory forbearance), the e¢ cient premium for large banks is higher per dollar of insured deposits compared to that for small banks.

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Liquidity Risk, Maturity Management and the Business Cycle

SSRN Electronic Journal, 2000

ABSTRACT We use the Shared National Credit data on syndicate loans to investigate U.S. firms’ ref... more ABSTRACT We use the Shared National Credit data on syndicate loans to investigate U.S. firms’ refinancing behavior over the last two decades. As credit conditions tighten, refinancing likelihood goes down and draw down on loan commitments increases sharply. Surprisingly, refinancing propensity is most sensitive to credit market conditions for credit worthy firms. We show that this is a result of active maturity management by credit worthy firms to avoid being exposed to liquidity risk. Credit worthy firms refinance early at a significantly higher rate when credit conditions are good in order to keep the effective maturity of their loans long. They can then afford to refinance at a lower rate when credit conditions tighten. We show that these results are driven by variation in credit market conditions and not business cycle fluctuation.

Bank Capital, Borrower Power, and Loan Rates

SSRN Electronic Journal, 2000

We test the predictions of several recent theories of how bank capital affects the rates that ban... more We test the predictions of several recent theories of how bank capital affects the rates that banks charge their borrowers. Key to all these theories is the notion that the relative bargaining power of a bank and its borrower are critical. We find that banks with low capital are more sensitive to borrower cash flow than are banks with high capital: lowcapital banks charge relatively more for borrowers with low cash flow, but offer relatively steeper discounts for borrowers with high cash flow. These effects are robust to controls for business conditions and bank fixed effects. Our results suggest that low bank capital generally toughens bank bargaining power, especially vis-a-vis low-cash-flow borrowers, but weakens bank bargaining power vis-a-vis high-cash-flow borrowers. This is consistent with Diamond and Rajan's (2000) theory of bank capital. By contrast, although earlier work has found that rates for borrowers with access to public debt markets are unaffected by their bank's capital level, once we control for economic conditions, lower bank capital leads to higher spreads for these borrowers as well.

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Do Banks Price Their Informational Monopoly?

SSRN Electronic Journal, 2000

Modern corporate finance theory argues that although bank monitoring is beneficial to borrowers, ... more Modern corporate finance theory argues that although bank monitoring is beneficial to borrowers, it also allows banks banks to use the private information they gain through monitoring to "hold-up" borrowers for higher interest rates. In this paper, we seek empirical evidence for this information hold-up cost. Since new information about a firm's creditworthiness is revealed at the time of its first issue in the public bond market, it follows that after firms undertake their bond IPO, banks with an exploitable information advantage will be forced to adjust their loan interest rates downwards, particularly for firms that are revealed to be safe. Our findings show that firms are able to borrow from banks at lower interest rates after they issue for the first time in the public bond market and that the magnitude of these savings is larger for safer firms. We further find that among safe firms, those that get their first credit rating at the time of their bond IPO benefit from larger interest rate savings than those that already had a credit rating when they entered the bond market. Since more information is revealed at the time of the bond IPO on the former firms and since this information will increase competition from uninformed banks, these findings provide support for the hypothesis that banks price their informational monopoly. Finally, we find that while entering the public bond market may reduce these informational rents, it is costly to firms because they have to pay higher underwriting costs on their IPO bonds. Moreover, IPO bonds are subject to more underpricing than subsequent bonds when they first trade in the secondary bond market.

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Is the Secondary Loan Market Valuable for Borrowers?

SSRN Electronic Journal, 2000

Bank Corporate Loan Pricing Following the Subprime Crisis

SSRN Electronic Journal, 2000

Systemic Risk and Deposit Insurance Premiums

SSRN Electronic Journal, 2000

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Do Banks Propagate Debt Market Shocks?

SSRN Electronic Journal, 2000

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Did the Rise of CLOs Lead to Riskier Lending?

SSRN Electronic Journal, 2000

Banks' Liquidity and Cost of Liquidity for Corporations

SSRN Electronic Journal, 2000

Cross Selling and Banking Efficiency

SSRN Electronic Journal, 2000

... João AC Santos¤ Federal Reserve Bank of New York May 2001 Abstract We show that e±ciency is g... more

The Paradox of Priority

SSRN Electronic Journal, 2000

The ubiquity of bank seniority is now a widely accepted fact in the academic literature. At the s... more The ubiquity of bank seniority is now a widely accepted fact in the academic literature. At the same time, trade creditors are sometimes granted a purchase money security interest in the materials or equipment they provide the firm. These two conflicting facts present a puzzle: Why would banks willingly give up a valuable priority claim on the firm, but only with respect to a subset of the firm's assets? We propose a resolution to this paradox of priority by arguing that trade creditors are better able to liquidate the materials they supply to a firm. When trade creditors have a security interest in these assets, their claims are state-contingent, and therefore dependent on the value of the assets pledged as collateral. Surprisingly, this ability of trade creditors to more efficiently liquidate the materials they supply to a firm also makes it desirable to subordinate the non-collateralized portion of their claims. Doing so increases the face value of a trade creditor's claim for a given level of borrowing, thereby increasing the "liquidation bang" from each trade credit buck. This combined priority structure maximizes social welfare by reducing the firm's overall cost of funding.

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Do Markets 'Discipline' All Banks Equally?

SSRN Electronic Journal, 2000

P XIX.10 Analytical methods of toxic and genotoxic evaluation to the control of environmental quality

Mutation Research/Fundamental and Molecular Mechanisms of Mutagenesis, 1997

Optimal Supervisory Policies and Depositor-Preferences Laws

SSRN Electronic Journal, 2000

This publication is available on the BIS website (www.bis.org).

Download

Performance and Asset Management Effects of Bank Acquisitions

SSRN Electronic Journal, 2000

Working papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to s... more