| 1. |
- Adams, RB, et al.
(author)
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Is Pay a Matter of Values?
- 2012
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In: International Review of Finance. - : Wiley. - 1369-412X. ; 12:2, s. 133-173
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Journal article (peer-reviewed)abstract
- Public outrage over executive compensation reached an all-time high during the financial crisis. Around the world, many argued that CEOs and boards were immoral in setting their pay and pressured governments to impose restrictions on executive pay. Using a unique sample of data on human values for CEOs, we show that CEOs and directors have different values than general members of the population. CEOs and directors place more emphasis on power and achievement values than members of the population, and they emphasize self-direction values more. However, values appear to have little explanatory power for pay, in contrast to economic variables. While some CEOs may be unethical in setting their pay, our results suggest that pay is not a matter of values on average.
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| 2. |
- Adelino, Manuel, et al.
(author)
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Trade Credit and the Transmission of Unconventional Monetary Policy
- 2024
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Other publication (other academic/artistic)abstract
- We show that trade credit in production networks is important for the transmission of unconventional monetary policy. We find that firms with bonds eligible for purchase under the European Central Bank’s Corporate Sector Purchase Program act as financial intermediaries and extend more trade credit to their customers. The increase in trade credit flows is more pronounced from core countries to periphery countries and towards financially constrained customers. Customers increase investment and employment in response to the additional financing, while suppliers with eligible bonds increase their customer base, potentially favoring upstream industry concentration. Our findings suggest that the trade credit channel of monetary policy produces heterogeneous effects on regions, industries, and firms.
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| 3. |
- Adelino, Manuel, et al.
(author)
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Trade Credit and the Transmission of Unconventional Monetary Policy
- 2023
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In: Review of Financial Studies. - : Oxford University Press (OUP): Policy F - Oxford Open Option D. - 1465-7368 .- 0893-9454. ; 36:2, s. 775-813
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Journal article (peer-reviewed)abstract
- We show that production networks are important for the transmission of unconventional monetary policy. Firms with bonds eligible for purchase under the European Central Bank's Corporate Sector Purchase Program act as financial intermediaries by extending additional trade credit to their customers. The increase in trade credit is pronounced from core countries to periphery countries and for financially constrained customers. Customers then increase investment and employment in response to the increased trade financing, whereas suppliers expand their customer base, contributing to upstream industry concentration. Our findings suggest that trade credit redistributes the effects of monetary policy across regions and firms.
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| 4. |
- Altavilla, Carlo, et al.
(author)
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Money Markets and Bank Lending : Evidence from the Adoption of Tiering
- 2022
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In: SSRN Electronic Journal. - : SSRN. - 1556-5068 .- 1556-5068.
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Other publication (other academic/artistic)abstract
- Exploiting the introduction of the ECB’s tiering system for remunerating excess reserve holdings, we document the importance of access to the money market for bank lending. We show that the two-tier system produced positive wealth effects for banks with excess reserves and encouraged a reallocation of liquidity toward banks with unused exemptions. This ultimately decreased the fragmentation in the money market and enhanced the monetary policy transmission mechanism. The increased access to money market by banks with unused allowances incentivizes them to extend more credit than other banks, including banks with excess liquidity whose valuations increase the most
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| 5. |
- Baghai, Ramin, et al.
(author)
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Liability Structure and Risk-Taking: Evidence from the Money Market Fund Industry
- 2018
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Other publication (other academic/artistic)abstract
- We exploit a change in regulation of money market funds to investigate how the structure of liabilities impacts financial intermediaries' asset holdings. We show that following a change in regulation, which has made prime money market funds' liabilities less money-like, safer funds exited the industry. The remaining funds have increased the riskiness of their portfolios, possibly in response to an increase in the sensitivity of flows to performance. As a result, issuers with lower risk of default have less access to funding from US money market funds. To the best of our knowledge, our paper provides the first evidence in support of theories highlighting that the characteristics of financial intermediaries' assets and liabilities are jointly determined.
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| 6. |
- Braggion, Fabio, et al.
(author)
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Changing corporate governance norms : Evidence from dual class shares in the UK
- 2019
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In: Journal of Financial Intermediation. - : Elsevier. - 1096-0473 .- 1042-9573. ; 37, s. 15-27
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Journal article (peer-reviewed)abstract
- In the UK, between 1955 and 1970, dual class shares quickly lost popularity without any regulatory inter- vention. The decline in the use of dual class shares was positively correlated with the relative valuations of one-share-one-vote and dual class firms, which in turn was related to media pessimism on the use of dual class shares. Following periods with high relative valuations of one-share-one-vote, one-share- one-vote firms exhibited lower returns than dual class firms suggesting that the latter were undervalued. These and other results suggest that investor demand may lead firms to abandon dual class shares
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| 7. |
- Burkart, Mike, et al.
(author)
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What you sell is what you lend? Explaining trade credit contracts
- 2011
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In: Review of Financial Studies. - : Oxford University Press. - 0893-9454 .- 1465-7368. ; 24:4, s. 1261-1298
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Journal article (peer-reviewed)abstract
- We relate trade credit to product characteristics and aspects of bank–firm relationships and document three main empirical regularities. First, the use of trade credit is associated with the nature of the transacted good. In particular, suppliers of differentiated products and services have larger accounts receivable than suppliers of standardized goods and firms buying more services receive cheaper trade credit for longer periods. Second, firms receiving trade credit secure financing from relatively uninformed banks. Third, a majority of the firms in our sample appear to receive trade credit at low cost. Additionally, firms that are more creditworthy and have some buyer market power receive larger early payment discounts.
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| 8. |
- Burlon, Lorenzo, et al.
(author)
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Is there a zero lower bound? The effects of negative policy rates on banks and firms
- 2022
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In: Journal of Financial Economics. - : Elsevier. - 1879-2774 .- 0304-405X. ; 144:3, s. 885-907
-
Journal article (peer-reviewed)abstract
- Exploiting confidential data from the euro area, we show that sound banks pass negative rates on to their corporate depositors and that pass-through is not impaired when policy rates move into negative territory. We do not observe a contraction in deposits, reflecting a general increase in corporate liquidity during the sample period. When their banks charge negative rates on deposits, firms with ex ante high liquidity invest more than comparable firms that are not charged negative rates and increase their liquid holdings less. These results challenge the common view that conventional monetary policy becomes ineffective at the zero lower bound. © 2021 The Authors
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| 9. |
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| 10. |
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| 11. |
- Ersahin, Nuri, et al.
(author)
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Supply Chain Risk : Changes in Supplier Composition and Vertical Integration
- 2022
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In: SSRN Electronic Journal. - : SSRN. - 1556-5068 .- 1556-5068.
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Other publication (other academic/artistic)abstract
- Using textual analysis of earnings conference calls, we quantify firm level risk arising from the reliability of the supply chain from 2002 to 2020. Our proxy for perceived supply chain risk exhibits cross-sectional and time-series variation that aligns with reasonable priors and is unprecedently high following the COVID-19 pandemic. We find that firms that face higher supply chain risk establish relationships with closer and domestic suppliers and with suppliers that are industry leaders. In addition, firms that do not face financial constraints are more likely to engage in vertical M&As when they face supply chain risk
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| 12. |
- Ersahin, Nuri, et al.
(author)
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Supply Chain Risk : Changes in Supplier Composition and Vertical Integration
- 2023
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Other publication (other academic/artistic)abstract
- Using textual analysis of earnings conference calls, we quantify firms’ supply chain risk and its sources. Our proxy for supply chain risk exhibits large cross-sectional and time-series variation that aligns with reasonable priors and is unprecedently high during the Covid-19 pandemic. In addition, a firm exhibits high supply chain risk when its suppliers also do so. We find that firms that experience an increase in supply chain risk establish relationships with closer and domestic suppliers and with suppliers that are industry leaders, but also continue to work with suppliers in other continents. In addition, firms that do not face financial constraints become more likely to engage in vertical mergers and acquisitions.
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| 13. |
- Ersahin, Nuri, et al.
(author)
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Trade credit and the stability of supply chains
- 2024
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In: Journal of Financial Economics. - : Elsevier B.V. - 1879-2774 .- 0304-405X. ; 155
-
Journal article (peer-reviewed)abstract
- We show that trade credit flows increase when a firm in a production network becomes a less reliable supplier due to an operating shock. Affected firms extend more trade credit when their customers have lower switching costs or expect more disruption. Suppliers that are more dependent on the affected firms facilitate the trade credit extension. However, when financial constraints at the affected firms and their suppliers prevent the increase in trade credit, customers sever their relationships with the affected firms, and the sales of the affected firms and their suppliers drop, suggesting that trade credit enhances production network stability.
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| 14. |
- Favara, Giovanni, et al.
(author)
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Forced Asset Sales and the Concentration of Outstanding Debt : Evidence from the Mortgage Market
- 2015
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In: CEPR Discussion Paper Series Centre for Economic Policy Research. - : Centre for Economic Policy Research (CEPR). - 0265-8003.
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Other publication (other academic/artistic)abstract
- We provide evidence that lenders differ in their ex post incentives to internalize price-default externalities associated with the liquidation of collateralized debt. Using the mortgage market as a laboratory, we conjecture that lenders with a large share of outstanding mortgages on their balance sheets internalize the negative spillovers associated with the liquidation of defaulting mortgages and are thus less inclined to foreclose. We find that zip codes with higher concentration of outstanding mortgages experience fewer foreclosures, more renegotiations of delinquent mortgages, and smaller house prices declines. These results are not driven by prior local economic conditions, mortgage securitization or unobservable lender characteristics.
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| 15. |
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| 16. |
- Fernandes, Nuno, et al.
(author)
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On the fortunes of stock exchanges and their reversals : Evidence from foreign listings
- 2014
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In: Journal of Financial Intermediation. - : Elsevier. - 1096-0473 .- 1042-9573. ; 23:2, s. 157-176
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Journal article (peer-reviewed)abstract
- Using a sample that provides unprecedented detail on foreign listings for 29 exchanges in 24 countries starting from the early 1980s, we show that although firms list in countries with better investor protection, they are less likely to list in countries with excessively stronger investor protection. We provide evidence based on ex ante firm and market characteristics and ex post listing outcomes that our findings are due to lack of investor interest in firms from environments with much weaker investor protection. We also argue that our findings, together with a general trend of improvement in investor protection in many firms' countries of origin, can explain why US and UK exchanges have attracted an increasing number of foreign listings during our sample period. © 2013 Elsevier Inc.
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| 17. |
- Franzoni, Francesco A., et al.
(author)
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Costs and Benefits of Financial Conglomerate Affiliation : Evidence from Hedge Funds
- 2019
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In: Journal of Financial Economics. - : Elsevier. - 1879-2774 .- 0304-405X. ; 134:2, s. 355-380
-
Journal article (peer-reviewed)abstract
- This paper explores how affiliation to financial conglomerates affects asset managers’ access to capital, risk taking, and performance. Focusing on a sample of hedge funds, we find that financialconglomerate-affiliated hedge funds (FCAHFs) have lower flow-performance sensitivity than other hedge funds and that this difference is particularly pronounced during financial turmoil. Arguably, thanks to more stable funding, FCAHFs allow their investors to redeem capital more freely and are able to capture price rebounds. Since investors may value these characteristics, our findings provide a rationale for why financial conglomerate affiliation is widespread, although it slightly hampers performance on average.
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| 18. |
- Franzoni, Francesco A., et al.
(author)
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Supply Chain Shortages, Large Firms' Market Power, and Inflation
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Other publication (other academic/artistic)abstract
- We suggest an equilibrium mechanism for the widely debated argument that “greedflation” has fostered widespread price hikes. We construct firm and industry-level measures of supply chain backlogs and delivery delays and provide evidence that supply chain shortages lead to a decrease in competition at the industry level. We show that “star” firms acquire market shares and increase their markups and profitability relative to the smaller firms in the industry. We also show that the large increase in supply chain backlogs during the COVID-19 pandemic can help explain about 19% of the US inflation in industries with more asymmetric firm size distribution, where supply chain shortages are more likely to benefit large firms at the expense of smaller firms. Economic magnitudes are comparable in the international sample.
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| 19. |
- Gantchev, Nickolay, et al.
(author)
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Does Money Talk? Divestitures and Corporate Environmental and Social Policies
- 2022
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In: Review of Finance. - : Oxford Univ Press. - 1573-692X .- 1572-3097. ; 26:6, s. 1469-1508
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Journal article (peer-reviewed)abstract
- Can shareholders' divestitures and threats of exit trigger improvements in firms' environmental and social (E&S) policies? We show that E&S incidents are followed by some, but relatively small, divestitures. Nevertheless, following E&S incidents, firms with a one-standard-deviation higher E&S-conscious institutional ownership decrease their greenhouse gas emissions by 36.5% and improve their E&S scores by 7.2% more than other firms if their managers receive equity compensation. We do not observe any improvements associated with sales in E&S-conscious countries. Our results suggest that the threats of future exits and divestitures can improve E&S policies if shareholders are E&S-conscious and managers' compensation is linked to the stock price.
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| 20. |
- Gantchev, Nickolay, et al.
(author)
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Does Money Talk? Market Discipline Through Selloffs and Boycotts
- 2019
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Other publication (other academic/artistic)abstract
- Using a novel dataset of negative news coverage of the environmental and social (E&S) practices of firms around the world, we show that customers and investors can provide market discipline and impose their ethical standards on firm policies. Investors sell firms with heightened E&S risk, especially if they are from E&S conscious countries or hold portfolios with high sustainability ratings. Similarly, heightened E&S risk is associated with a drop in firms' sales in E&S conscious countries. This behavior of E&S conscious investors and customers leads to declines in stock prices, which push firms to improve their E&S policies in the years following negative realizations of E&S risk. Overall, our results indicate that customers and shareholders are able to impose their social preferences on firms, suggesting that market discipline works.
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| 21. |
- Gantchev, Nickolay, et al.
(author)
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Sustainability or performance? Ratings and fund managers’ incentives
- 2024
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In: Journal of Financial Economics. - : Elsevier B.V. - 1879-2774 .- 0304-405X. ; 155
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Journal article (peer-reviewed)abstract
- We explore how mutual fund managers and investors react when the tradeoff between a fund's sustainability and performance becomes salient. Following the introduction of Morningstar's sustainability ratings (the “globe” ratings), mutual funds increased their holdings of sustainable stocks to attract flows. Such sustainability-driven trades, however, underperformed, impairing the funds’ overall performance. Consequently, a tradeoff between sustainability and performance emerged. In the new equilibrium, the globe ratings do not affect investor flows and funds no longer trade to improve their globe ratings.
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| 22. |
- Gantchev, Nickolay, et al.
(author)
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The Costs and Benefits of Shareholder Democracy: Gadflies and Low-Cost Activism
- 2021
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In: Review of Financial Studies. - : Oxford University Press (OUP): Policy F - Oxford Open Option D. - 1465-7368 .- 0893-9454. ; 34:12, s. 5629-5675
-
Journal article (peer-reviewed)abstract
- We show that there is cross-sectional variation in the quality of shareholder proposals. On average, proposals submitted by the most active individual sponsors are less likely to receive majority support, but they occasionally pass if shareholders mistakenly support them and may even be implemented due to directors' career concerns. While gadfly proposals destroy shareholder value if they pass, shareholder proposals on average are value enhancing in firms with more informed shareholders. We conclude that more informed voting could increase the benefits associated with shareholder proposals.
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| 23. |
- Gao, Janet, et al.
(author)
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Uncertainty, access to debt, and firm precautionary behavior
- 2021
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In: Journal of Financial Economics. - : Elsevier. - 1879-2774 .- 0304-405X. ; 141:2, s. 436-453
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Journal article (peer-reviewed)abstract
- Better access to debt markets mitigates the effects of uncertainty on corporate policies. We establish this result using the staggered introduction of anti-recharacterization laws in US states. These laws enhanced firms’ ability to borrow by strengthening creditors’ rights to repossess collateral pledged in special purpose vehicles. After the passage of the laws, firms that face more uncertainty hoard less cash and increase payouts, leverage, and investment in intangible assets. Our findings suggest that better access to debt markets shields firms from fluctuations in uncertainty and decreases firms’ precautionary behavior, contributing to the deployment of cash and other internal resources to investment in intangible capital. © 2021
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| 24. |
- Gao, Janet, et al.
(author)
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Uncertainty, Access to Debt, and Firm Precautionary Behavior
- 2017
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In: SSRN Electronic Journal. - : Elsevier BV. - 1556-5068.
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Other publication (other academic/artistic)abstract
- Uncertainty affects corporate policies and the real economy, but little is known on whether financial frictions affect firms’ vulnerability to (economic and financial) uncertainty. We show that facilitating access to debt markets mitigates the effects of uncertainty on corporate policies. We use the staggered introduction of anti-recharacterization laws in US states—which strengthened creditors’ rights to repossess collateral pledged in SPVs—to identify firms’ improved access to debt markets. After the passage of the laws, firms that face more uncertainty hoard less cash, and increase payouts, leverage and investment in intangible assets, indicating that firms’ vulnerability to uncertainty is reduced.
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| 25. |
- Giannetti, Mariassunta, et al.
(author)
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Adapting to Radical Change: The Benefits of Short-Horizon Investors
-
Other publication (other academic/artistic)abstract
- We show that following large permanent negative shocks, firms with more short-term institutional investors suffer smaller drops in sales, investment and employment and have better long-term performance than similar firms affected by the shocks. To do so, these firms increase their R&D and advertising expenses, differentiate their products from those of the competitors, conduct more diversifying acquisitions, and have higher executive turnover in the aftermath of the shocks, suggesting that they put stronger effort in adapting their business to the new competitive environment. Endogeneity of institutional ownership and other selection problems do not appear to drive our findings.
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| 26. |
- Giannetti, Mariassunta, et al.
(author)
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Adapting to Radical Change: The Benefits of Short-Horizon Investors
-
Other publication (other academic/artistic)abstract
- We show that following large permanent negative shocks, firms with more short-term institutional investors suffer smaller drops in sales, investment and employment and have better long-term performance than similar firms affected by the shocks. To do so, these firms increase their R&D and advertising expenses, differentiate their products from those of the competitors, conduct more diversifying acquisitions, and have higher executive turnover in the aftermath of the shocks, suggesting that they put stronger effort in adapting their business to the new competitive environment. Endogeneity of institutional ownership and other selection problems do not appear to drive our findings.
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| 27. |
- Giannetti, Mariassunta, et al.
(author)
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Board Ancestral Diversity and Firm Performance Volatility
- 2016
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Other publication (other academic/artistic)abstract
- Diverse directors may have diverse preferences over firms’ policies and objectives. As shown by Arrow (1951), diverse individual preferences may fail to univocally aggregate in collective preferences and may consequently lead to arbitrary and volatile decisions. Using the board of directors as a laboratory, we test whether diversity leads to higher performance volatility. We show that firms with more diverse boards have greater stock return and fundamental volatility suggesting that board diversity indeed makes decision making more erratic. Also, firms with diverse boards have less persistent strategies and analysts make larger forecast errors in predicting their performance supporting the conjecture that board members’ diverse preferences lead to hard to predict decisions. Consistent with the presence of conflicts in the boardroom, we find that executive and director turnovers are higher in firms with diverse boards. These firms also have more board meetings. We find no evidence that our results may be driven by firm risk-taking or complexity.
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| 28. |
- Giannetti, Mariassunta, et al.
(author)
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Board Ancestral Diversity and Firm Performance Volatility
- 2024
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In: SSRN Electronic Journal. - Stockholm, Sweden : Elsevier BV. - 1556-5068.
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Other publication (other academic/artistic)abstract
- We proxy for board members’ opinions and values using directors’ ancestral origins and show that diversity has costs and benefits, which lead to high performance volatility. Consistent with the idea that diverse groups experiment more, firms with ancestrally diverse boards have more numerous and more cited patents. In addition, their strategies conform less to those of the industry peers. However, firms with greater ancestral diversity also have more board meetings and make less predictable decisions. These findings suggest that diversity may lead to inefficiencies in the decision-making process and conflicts in the boardroom.
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| 29. |
- Giannetti, Mariassunta, et al.
(author)
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Board Ancestral Diversity and Firm-Performance Volatility
- 2019
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In: Journal of Financial and Quantitative Analysis. - : Cambridge University Press (CUP): HSS Journals. - 1756-6916 .- 0022-1090. ; 54:3, s. 1117-1155
-
Journal article (peer-reviewed)abstract
- We proxy for board members' opinions and values using directors' ancestral origins and show that diversity has costs and benefits, leading to high performance volatility. Consistent with the idea that diverse groups experiment more, firms with ancestrally diverse boards have more numerous and more cited patents. In addition, their strategies conform less to those of the industry peers. However, firms with greater ancestral diversity also have more board meetings and make less predictable decisions. These findings suggest that diversity may lead to inefficiencies in the decision-making process and conflicts in the boardroom.
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| 30. |
- Giannetti, Mariassunta, et al.
(author)
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Bond Price Fragility and the Structure of the Mutual Fund Industry
- 2024
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In: Review of Financial Studies. - : Oxford University Press. - 1465-7368 .- 0893-9454. ; 37:7, s. 2063-2109
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Journal article (peer-reviewed)abstract
- We conjecture that mutual funds with large shares of outstanding bond issues are more inclined to internalize the negative price spillovers of fire sales and thus sell their holdings in those issues, to a lower extent, when they experience redemptions. We provide evidence consistent with this conjecture and further show that ownership concentration limits bonds' exposures to flow-induced fire sales. We exploit variation in negative spillovers arising from the Fed's SMCCF to confirm the economic mechanism and explore our findings' implications for fund performance and fire-sale spillovers to other funds. (JEL G12, G23, E52)
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| 31. |
- Giannetti, Mariassunta, et al.
(author)
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Central Bank Liquidity Reallocation and Bank Lending : Evidence from the Tiering System
- 2022
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In: SSRN Electronic Journal. - Stockholm : Swedish House of Finance (SHOF). - 1556-5068.
-
Other publication (other academic/artistic)abstract
- We document that the reallocation of central bank reserves towards banks with higher liquidity needs fosters bank lending. Exploiting the ECB’s tiered reserve remuneration system for identification, we show that this system encouraged banks with ex ante low reserve holdings to obtain more reserves through the money market. Having increased their resilience against liquidity shocks, these banks lowered their securities holdings and extended more credit. We find no negative effects on the loan supply of banks with ex ante high reserves, which decreased their reserves holdings, and our results are not driven by banks’ exposures to other policy measures.
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| 32. |
- Giannetti, Mariassunta, et al.
(author)
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Cheap Trade Credit and Competition in Downstream Markets
-
Other publication (other academic/artistic)abstract
- Using a unique dataset with information on 20 million inter-firm transactions, we provide evidence that suppliers offer trade credit to high-bargaining-power customers to ease competition in downstream markets in which they have a large number of other clients. Differently from price discounts, trade credit targets infra-marginal units and does not lower the marginal cost of high-bargaining-power customers. As a consequence, the latter do not gain market share and the supplier can preserve profitable sales to low-bargaining-power customers. We show that empirically trade credit is not monotonically increasing in past purchases, as is consistent with our conjecture that it targets infra-marginal units. In addition, the supplier grants trade credit to high-bargaining-power-customers only when it fears the cannibalization of sales to other low-bargaining-power clients. Our results are not driven by differences in suppliers' ability to provide trade credit, customer-specific shocks, or endogenous location decisions.
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| 33. |
- Giannetti, Mariassunta, et al.
(author)
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Compensation and competition for talent: Evidence from the financial industry
- 2015
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In: Finance Research Letters. - : Elsevier. - 1544-6123. ; 12, s. 11-16
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Journal article (peer-reviewed)abstract
- We show that long-term compensation is associated with higher pay in the financial industry and this association is stronger in markets with high competition for talent. We argue that this evidence supports models of competition for talent based on retention motives.
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| 34. |
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| 35. |
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| 36. |
- Giannetti, Mariassunta, et al.
(author)
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Corporate Scandals and Household Stock Market Participation
- 2016
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In: Journal of Finance. - : Wiley: No OnlineOpen. - 1540-6261 .- 0022-1082. ; 71:6, s. 2591-2636
-
Journal article (peer-reviewed)abstract
- We show that, after the revelation of corporate fraud in a state, household stock market participation in that state decreases. Households decrease holdings in fraudulent as well as nonfraudulent firms, even if they do not hold stocks in fraudulent firms. Within a state, households with more lifetime experience of corporate fraud hold less equity. Following the exogenous increase in fraud revelation due to Arthur Andersen's demise, states with more Arthur Andersen clients experience a larger decrease in stock market participation. We provide evidence that the documented effect is likely to reflect a loss of trust in the stock market.
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| 37. |
- Giannetti, Mariassunta, et al.
(author)
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Economic Development and Relationship-Based Financing
- 2015
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In: Review of Corporate Finance Studies. - : Oxford University Press (OUP): Policy F - Oxford Open Option D - RCUK. - 2046-9136 .- 2046-9128. ; 4:1, s. 69-107
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Journal article (peer-reviewed)abstract
- Formal finance involves the costly acquisition of information about distant entrepreneurs, while relationship-based finance allows financiers to fund a narrow circle of close entrepreneurs without acquiring costly information. In developing economies with low capital endowments, relationship-based finance is optimal because only high-quality entrepreneurs receive funding. However, formal finance may emerge in equilibrium, and it has the only effect of shifting rents from entrepreneurs to financiers. In more-developed economies with higher capital endowments, formal finance becomes necessary to prevent funding of low-quality entrepreneurs. Nevertheless, relationship-based financing may persist in equilibrium, and low-quality close entrepreneurs are funded even when there are high-quality distant entrepreneurs
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| 38. |
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| 39. |
- Giannetti, Mariassunta, et al.
(author)
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Financial Conglomerate Affiliated Hedge Funds: Risk Taking Behavior and Liquidity Provision
-
Other publication (other academic/artistic)abstract
- This paper explores how affiliation to financial conglomerates relates to hedge funds’ funding and risk taking. We find that financial-conglomerate-affiliated hedge funds (FCAHFs) have more stable funding than other hedge funds. This may explain our finding that FCAHFs are able to take more risk and to purchase less liquid and more volatile stocks than other hedge funds during financial turmoil. In good times, instead, FCAHFs expand their assets less than other funds and are less exposed to systematic risk. Thus, FCAHFs perform a stabilizing function for the financial system, even though they do not generate higher returns for their investors.
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| 40. |
- Giannetti, Mariassunta, et al.
(author)
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Financial Conglomerate Affiliated Hedge Funds: Risk Taking Behavior and Liquidity Provision
-
Other publication (other academic/artistic)abstract
- This paper explores how affiliation to financial conglomerates relates to hedge funds’ funding and risk taking. We find that financial-conglomerate-affiliated hedge funds (FCAHFs) have more stable funding than other hedge funds. This may explain our finding that FCAHFs are able to take more risk and to purchase less liquid and more volatile stocks than other hedge funds during financial turmoil. In good times, instead, FCAHFs expand their assets less than other funds and are less exposed to systematic risk. Thus, FCAHFs perform a stabilizing function for the financial system, even though they do not generate higher returns for their investors.
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| 41. |
- Giannetti, Mariassunta
(author)
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Finanskriser och den finansiella integrationens kollaps
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In: Ekonomisk debatt. - 0345-2646. ; 42:7, s. 6-10
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Journal article (other academic/artistic)abstract
- Internationella marknader kollapsar ofta under finanskrisen. Under exempelvis den japanska bankkrisen på 1990-talet så drog sig japanska banker och företag tillbaka från de internationella finans- och varumarknaderna. Den finanskris som började i USA under sommaren 2007 var inte på något sätt annorlunda. Den åtföljdes av en kollaps i den globala handeln, en minskning av brutto kapitalflöden, en omkastning av kapitalflöden från avancerade ekonomier till s k tillväxtmarknader och en minskning av den internationella bankutlåningen. Samtidigt är det ännu outforskat huruvida denna kollaps i de internationella kapitalflödet speglar att det skett en ökning av internationella hinder till följd av finansiell protektionism, förmögenhetseffekten som gör att investerare allokerar en mindre andel av sin portfölj till utländska tillgångar, eller snarare en portföljallokering mot inhemska tillgångar, vilket speglaren starkare preferens för geografiskt närliggande investeringar i osäkra tider. Vi saknar likaså kunskap om i vilken utsträckning dessa förändringar i marknadens segmentering har en effekt på lokala tillgångspriser och ökar de lokala tillgångarnas exponering mot systematiska riskfaktorer.
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| 42. |
- Giannetti, Mariassunta, et al.
(author)
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Flight home, flight abroad, and international credit cycles
- 2012
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In: American Economic Review. - : American Economic Association. - 0002-8282. ; 102:3, s. 219-224
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Journal article (peer-reviewed)abstract
- This paper shows that banks exhibit a weaker (stronger) home bias in the extension of new loans when funding conditions in their home country improve (deteriorate). We refer to these changes in home bias as flight abroad and flight home effects, respectively, and show that they are unrelated to the better known flight to quality effect that arises during periods of market turmoil. Our results also indicate that global banks amplify the effect of homegrown shocks on foreign countries while they are a stabilizing factor for the supply of credit in their home countries.
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| 43. |
- Giannetti, Mariassunta, et al.
(author)
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Forced Asset Sales and the Concentration of Outstanding Debt: Evidence from the Mortgage Market
- 2017
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In: Journal of Finance. - : Wiley: No OnlineOpen. - 1540-6261 .- 0022-1082. ; 72:3, s. 1081-1118
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Journal article (peer-reviewed)abstract
- We provide evidence that lenders differ in their ex post incentives to internalize price-default externalities associated with the liquidation of collateralized debt. Using the mortgage market as a laboratory, we conjecture that lenders with a large share of outstanding mortgages on their balance sheets internalize the negative spillovers associated with the liquidation of defaulting mortgages and thus are less inclined to foreclose. We provide evidence consistent with our conjecture. Arguably as a consequence, zip codes with a higher concentration of outstanding mortgages experience smaller house prices declines. These results are not driven by unobservable zip code or lender characteristics.
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| 44. |
- Giannetti, Mariassunta, et al.
(author)
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'Glossy Green' Banks: The Disconnect Between Environmental Disclosures and Lending Activities
- 2023
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Other publication (other academic/artistic)abstract
- Using a credit registry of European banks’ new loan issuance and content analysis on their environmental disclosures, we show that banks that portray themselves as environmentally conscious extend a higher volume of credit to borrowers in brown industries. These results are robust even after controlling for banks’ climate risk discussions and cannot be attributed to the financing of borrowers’ transition towards greener technologies. Examining the mechanisms behind strategic disclosure choices, we highlight that banks are hesitant to sever ties with existing brown borrowers, particularly when those borrowers exhibit financial underperformance. The discrepancy between environmental disclosures and lending activities is more pronounced when banks have low capital adequacy.
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| 45. |
- Giannetti, Mariassunta, et al.
(author)
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“Glossy Green” Banks: The Disconnect Between European Banks’ Sustainability Reporting and Lending Activities
-
Conference paper (other academic/artistic)abstract
- We study the relation between banks’ environmental disclosures and lending activities. Taking advantage of granular loan-level data from a euro-area credit registry, we show that banks with extensive environmental disclosures lend more to brown borrowers and do not provide more credit to firms in green industries. These results are not driven by banks’ financing of brown borrowers’ transition to greener technologies. Instead, banks lend to the weakest borrowers in brown industries, especially if they have low capital adequacy. Our results suggest that banks overemphasize their climate goals and credentials while continuing their relationships with polluting borrowers.
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| 46. |
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| 47. |
- Giannetti, Mariassunta, et al.
(author)
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Information Sharing and Rating Manipulation
- 2017
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In: Review of Financial Studies. - : Oxford University Press (OUP): Policy F - Oxford Open Option D. - 0893-9454 .- 1465-7368. ; 30:9, s. 3269-3304
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Journal article (peer-reviewed)abstract
- We show that banks manipulate the credit ratings of their borrowers before being compelled to share them with competing banks. Using a unique feature on the timing of information disclosure of the Argentinean public credit registry, we are able to disentangle the effect of manipulation from learning of credit ratings. In particular, we show that banks downgrade high quality borrowers on which they have positive private information to protect their informational rents. Banks also upgrade low quality borrowers to avoid creditor runs. Our results can explain the limited effectiveness of public credit registries and cast doubt on the use of credit ratings in reducing information asymmetry.
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| 48. |
- Giannetti, Mariassunta, et al.
(author)
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Intermediary Balance Sheet Constraints, Bond Mutual Funds' Strategies, and Bond Returns
- 2023
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Other publication (other academic/artistic)abstract
- We show that after the introduction of leverage ratio constraints on bank-affiliated dealers, bond mutual funds have engaged in more liquidity provision in investment-grade corporate bonds and that the performance of funds with liquidity-supplying strategies has benefited. Not only have regulations transferred profits associated with liquidity provision in the corporate bond market to mutual funds, but the liquidity and returns of investment-grade corporate bonds have become more exposed to redemptions from the bond mutual fund industry, suggesting that the regulations may have made investment-grade corporate bonds more volatile. Accordingly, we observe that investment-grade corporate bonds more exposed to leverage ratio constraints experienced more severe deterioration in liquidity and returns at the onset of the COVID-19 pandemic.
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| 49. |
- Giannetti, Mariassunta, et al.
(author)
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Investor protection, equity returns, and financial globalization
- 2010
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In: Journal of Financial and Quantitative Analysis. - : Cambridge University Press (CUP): HSS Journals. - 0022-1090. ; 45:1, s. 135-168
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Journal article (peer-reviewed)abstract
- We study the effects of investor protection on stock returns and portfolio allocation decisions. In our theoretical model, if investor protection is weak, wealthy investors have an incentive to become controlling shareholders. In equilibrium, the stock price reflects the demand from both controlling shareholders and portfolio investors. Due to the high demand from controlling shareholders, the price of weak corporate governance stocks is not low enough to fully discount the extraction of private benefits. Thus, stocks have lower expected returns when investor protection is weak. This has implications for domestic and foreign investors’ stockholdings. In particular, we show that portfolio investors’ participation in the domestic stock market and home equity bias are positively related to investor protection and provide original evidence in their support.
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| 50. |
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