Journal of Banking & Finance

Highlights

► Margining is a common mechanism for attaching collateral to derivatives contracts. ► It can increase default risk and reduce trading volume in a market. ► The negative effects are exacerbated during periods of market stress. ► Margins also impose externalities and can be privately and socially sub-optimal. ► Central counterparties only lift some of the inefficiencies caused by margining.

Highlights

► Macro-economic news impacts “tail risk” perceptions in JPY/USD. ► The results point to trade balance/flow model, often cited by practitioners. ► These results are robust to using CHF and AUD as alternative currencies. ► Speculators respond to currency risk hedging cost changes after macro-releases. ► Macro-news can translate in up to one third of yen speculative position changes.

Highlights

► We study the impact of newswire messages on market quality. ► Negative messages convey more information than positive or neutral messages. ► Adverse selection costs around news are especially high around negative messages. ► Liquidity decreases around negative messages and increases for other messages. ► Market participants have different information processing capabilities.

Highlights

► Dynamic model of a firm’s investment timing and sizing. ► Firm invests small-scale, and at lower threshold, for intermediate internal funds. ► Firm invests large-scale, and at higher threshold, for low and high internal funds. ► Thus, both investment threshold and volume U-shaped in internal funds.

Highlights

► We analyze how CEO risk incentives affect R&D investment efficiency. ► Firms with higher compensation vega are more likely to increase R&D investments. ► High-vega firms underperform low-vega firms in stock returns after R&D increases. ► High-vega firms also underperform in operating performance. ► High-vega compensation may induce manager to overinvest in inefficient R&D project.

Highlights

► We investigate the extent of competition in the Turkish credit card market. ► We consider payment and credit services together in a Panzar–Rosse framework. ► We examine the effects of the interchange fee and interest rate regulations. ► The interchange fee regulation affects neither banks’ revenues nor the competition. ► The interest rate regulation leads to a rise in both revenues and the competition.

Highlights

► We derive a dynamic model jointly optimizing growth rate and payout ratio. ► The optimal growth rate follows a mean-reverting process. ► The expected payout is subject to error when stochastic growth is introduced. ► Empirical results support implications of the theoretical model. ► We provide an alternative explanation on disappearing cash dividends.

Highlights

► We investigate the link between measures of financial freedom and bank efficiency. ► We develop a robust bootstrap procedure to test the above hypothesis. ► We estimate bank-specific efficiency scores using data envelopment analysis. ► Higher degrees of financial freedom are associated with higher levels of efficiency. ► The results are robust when controlling for the role of other institutional variables.

Highlights

► We propose a constrained minimum-variance portfolio strategy. ► New strategy is based on a shrinkage theory based framework. ► Our policy improves the performance of the benchmark strategies substantially. ► Turnover and short interest are only moderately increased. ► We validate our strong performance with established bootstrap methods.

Highlights

► We provide a coherent method for measurement and full allocation of systemic risk. ► Risk is defined as expected loss to depositors/investors given a systemic event. ► Additive marginal risk contributions make bank’s systemic importance measurable. ► Default probabilities drive the risk over time; largest banks contribute the most. ► We suggest an application to bank-specific countercyclical systemic capital charges.

Highlights

► This paper examines the impact of the individual dimensions of SP on firm risk. ► Employee, Diversity and Governance concerns positively affect risk of S&P500 firms. ► Community (Diversity) strengths negatively (positively) affect risk of S&P500 firms. ► Employee concerns and Diversity strengths positively affect risk of non-S&P500 firms. ► Environment strengths negatively affect risk of non-S&P500 firms.

Highlights

► We show that changes in the expectations of future income cause movements in RER. ► We provide both a theoretical model and empirical evidence for this relationship. ► We show that a resource boom can cause sharp fluctuations in RER. ► This happened in Azerbaijan in 1994–2004. ► We illustrate that similar phenomena are observed in other countries.

Highlights

► Fund managers deviate from unobservable representative beliefs of peers. ► Portfolio allocations implied by representative beliefs reflect informed beliefs. ► Fund managers with portfolios close to representative beliefs possess more skill. ► Fund managers close to representative beliefs in the past outperform in the future.