| 1. |
- Becker, Bo, et al.
(författare)
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Disruption and Credit Markets
- 2024
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Ingår i: SSRN Electronic Journal. - : Elsevier BV. - 1556-5068 .- 1556-5068. ; , s. 1-60
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- We show that over the past half century innovative disruptions were central to understanding corporate defaults. In a given year, industries experiencing abnormally high VC or IPO activity subsequently see higher default rates, higher segment exits by conglomerates, and higher yields on bonds issued by the firms in these industries. Overall, we find that disruption is a broad phenomenon, negatively affecting incumbent firms across the spectrum of age, valuation, and levers, with the exception of very large and low-leverage firms, which confirms our central hypothesis.
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| 2. |
- Becker, Bo, et al.
(författare)
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Bad Times, Good Credit
- 2020
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Ingår i: Journal of Money, Credit and Banking. - : Wiley. - 0022-2879 .- 1538-4616. ; 52, s. 107-142
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Tidskriftsartikel (refereegranskat)abstract
- Banks' limited knowledge about borrowers' creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit, or is the friction reduced, as bad times reveal information about firm quality? We test these alternative hypotheses using internal ratings data from a large Swedish cross-border bank and credit scores from a credit bureau. The ability to classify corporate borrowers by credit quality is greater during bad times and worse during good times. Soft and hard information measures both display countercyclical patterns. Our results suggest that information frictions in corporate credit markets are intrinsically countercyclical and not due to cyclical variation in monitoring effort. The presence of countercyclical information frictions provides a rationale for countercyclical provisions or capital in banks to smooth credit cycles.
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| 3. |
- Becker, Bo, et al.
(författare)
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Insolvency Resolution and the Missing High-Yield Bond Markets
- 2016
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Ingår i: The Review of financial studies. - : Oxford University Press (OUP). - 0893-9454 .- 1465-7368. ; 29:10, s. 2814-2849
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Tidskriftsartikel (refereegranskat)abstract
- In many countries, poorly functioning bankruptcy procedures force viable but insolvent firms to restructure out of court, where banks may have a bargaining advantage over other creditors. We model the choice of restructuring process and derive implications for the corporate mix of bank and bond financing. Empirical patterns match the model: inefficient bankruptcy in a country is associated with less bond issuance by risky, but not by safe, borrowers. This pattern holds for both levels of and changes in bankruptcy recovery. Our results establish a link between bankruptcy reform and corporate bond markets, especially high-yield markets. (JEL G32, G33, G21)
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| 4. |
- Albertazzi, Ugo, et al.
(författare)
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Portfolio rebalancing and the transmission of large-scale asset purchase programs: Evidence from the Euro area
- 2021
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Ingår i: Journal of Financial Intermediation. - : Elsevier. - 1096-0473 .- 1042-9573. ; 48
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Tidskriftsartikel (refereegranskat)abstract
- The European Central Bank's large-scale asset purchase program targeted safe assets, but also aimed to impact prices of risky assets. The mechanism for this is the “portfolio rebalancing channel”, where financial institutions’ portfolio decisions impact financial prices more broadly. We examine this mechanism using cross-sectional heterogeneity in how the financial portfolios of different sectors of the European economy were affected around the purchase program. We find evidence of rebalancing. In vulnerable countries, where macroeconomic unbalances and relatively high risk premia remained, we document rebalancing towards riskier securities. In less vulnerable countries, based on granular information for large European banks, we document rebalancing toward bank loans.
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| 5. |
- Baghai, Ramin, et al.
(författare)
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Non-rating revenue and conflicts of interest
- 2018
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Ingår i: Journal of Financial Economics. - : Elsevier. - 0304-405X. ; 127:1, s. 94-112
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Tidskriftsartikel (refereegranskat)abstract
- Rating agencies produce ratings used by investors, but obtain most of their revenue from issuers, leading to a conflict of interest. We employ a unique data set on the use of non-rating services, and the associated payments, in India, to test if this conflict affects ratings quality. Agencies rate issuers that pay them for non-rating services higher (than agencies not hired for such services). Such issuers also have higher default rates. Both effects are increasing in the amount paid. These results suggest that issuers which hire agencies for non-rating services receive higher ratings despite having higher default risk. (C) 2017 Elsevier B.V. All rights reserved.
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| 6. |
- Baghai, Ramin, et al.
(författare)
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Reputations and credit ratings — evidence from commercial mortgage-backed securities
- 2016
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- We examine a quasi-experimental setting where a rating agency (S&P) is completely shut out of a large segment of the commercial mortgage-backed securities market for more than one year, following a procedural mistake. We exploit the fact that many tranches of CMBS deals have multiple ratings. Subsequent to the drop in its business volume (but not before), S&P assigned higher ratings than other raters, in particular for large deals and for deals from important issuers. The results suggest that issuing optimistic ratings is a strategy that can be used by a rating agency with a weak reputation to gain market share in a market with strong competition.
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| 7. |
- Baghai, Ramin, et al.
(författare)
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The Private Use of Credit Ratings: Evidence from Mutual Fund Investment Mandates
- 2019
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Ingår i: SSRN Electronic Journal. - : Elsevier BV. - 1556-5068.
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Credit ratings have been shown to be imperfect and sometimes biased measures of risk. Has this affected their use in unregulated settings? Using textual analysis, we measure the use of credit ratings in investment mandates of fixed income mutual funds, where ratings serve to limit investment in risky assets. We find that this use has steadily increased from high initial levels over the past two decades. Fixed income markets' extensive and continued reliance on credit ratings either points to a lack of practically useful alternatives, a positive view of ratings by market participants, or inefficient contracting
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| 8. |
- Baghai, Ramin, et al.
(författare)
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The Use of Credit Ratings in the Delegated Management of Fixed Income Assets
- 2022
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Investment mandates of fixed income funds constrain managers’ portfolio decisions, often employing credit ratings to classify asset risk. We categorize U.S. and European fixed income funds’ mandates using textual analysis and measure the use of ratings. Over the past two decades, despite the weaknesses of ratings revealed in the global financial crisis, ratings use has increased significantly. Since 2010, the fraction of funds not using ratings in any way has fallen by almost half in both the U.S. and Europe. By 2020, 94% of U.S. funds and 65% of European funds use ratings. These patterns fit agency-based models of investment mandates and point to a lack of practically useful alternatives.
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| 9. |
- Becker, Bo, et al.
(författare)
-
Bad Times, Good Credit
- 2015
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Ingår i: SSRN Electronic Journal. - Stockholm, Sweden : Swedish House of Finance (SHOF). - 1556-5068.
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Banks’ limited knowledge about borrowers’ creditworthiness constitutes an important friction in credit markets. Is this friction deeper in recessions, thereby contributing to cyclical swings in credit, or is the depth of the friction reduced, as bad times reveal information about firm quality? We test these alternative hypotheses using internal ratings data from a large Swedish cross-border bank and credit scores from a credit bureau. The ability to classify corporate borrowers by credit quality is greater during bad times and worse during good times Soft and hard information measures both display countercyclical patterns. Our results suggest that information frictions in corporate credit markets are intrinsically counter-cyclical and not due to cyclical variation in monitoring effort.
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| 10. |
- Becker, Bo, et al.
(författare)
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Banking Without Branches
- 2024
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- The decline in cash use and growing use of digital distribution for retail banking leads to a reduced need for bank branches. Lending to small and medium sized firms (SMEs) has not benefited as much from a digital transformation, and widespread branch closures may reduce their supply of credit. Using the closing of two thirds of Swedish branches as a laboratory, we document that corporate lending declines rapidly following branch closures, mainly via reduced lending to small and young firms. The reduced credit supply has real effects: local firms experience a decline in employment and sales and an increase in exit risk after branch closures. Our results thus suggest that the disappearance of bank branches have far-reaching implications for the economy.
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