This thesis is concerned with the relation between bank regulation and the risk-taking behaviour of banks. Two major instruments of regulatory intervention are considered: bank levy and bank bailouts. The major objective of this thesis is to provide an answer to the following questions: Do bank levies increase the risk-taking of banks in a competitive environment? When do bank bailouts decrease banks` risk-taking? Does the international coordination of bank bailouts affect the relation between bailouts and the risk-taking behaviour of banks? Who should rescue subsidiaries of multinational banks? How could an efficient bailout policy be designed and implemented? The bank levy and cooperation between national regulators play an important role in the recently adopted Bank Recovery and Resolution Directive (BRRD). This directive is a cornerstone of bank regulation in Europe. Although the conversion of debt into equity (bail-in) in emergencies is the key component of the current regulation, bailouts, or at least the assistance to struggling banks, should not be excluded. As the ordinary resolution tools, for instance, bail-in, have not yet been tested in a real crisis, and due to the fact that it will take time to prepare global institutions for such a tool, it may be useful to have an adequately designed tool of last resort available, such as an adequate bailout policy, in order to avoid the disruption of critical economic functions. We show that a bank levy may decrease banks`risk-taking behaviour. Bank bailouts can also decrease the risk-taking of banks. This depends on the regulator`s ability to condition his bailout policy in accordance with the macroeconomic environment, which has an impact on the banks` probability of success, or on his ability to condition the bailout policy on the banks` systemic relevance. Coordination of bailouts through a multinational regulator can improve welfare. The desirability of internationally coordinated bailouts depends on the dimension of the crisis. If the crisis is severe, it may be more efficient to delegate bank bailouts to a multinational regulator. However, such a delegation is not always feasible. Therefore, a predefined burden sharing of bank bailouts is necessary in order to achieve an efficient resolution of banks in distress.

Share repurchases reached a decade-high level in 2019, just as US equity indices reached a historical zenith, a move in tandem that supports more than merely a correlative relation. However, this relationship moves beyond that of just a close tandem move in indices alongside share repurchases, but to the behavior of firms which began to leverage themselves in order to promote the evermore profitable strategy of large buyback programs. Those repurchases indicate an idiosyncratic and procyclical leveraging that, while much smaller in scope and less combustible by lack of derivative amplification, led to the gorging on unsustainable debt described by Hyman Minsky and experienced in the Great Financial Crisis in the banking industry. In this case, the 'Minsky moment' that may have inevitably popped the self-promotion bubble came in the form of the 'black swan' event of the coronavirus outbreak. This paper aims to historically frame the issues, with delimitation of the effect of buybacks from 2009 to early 2020 with scant reference to historical factors influencing the increased usage of share repurchase programs. The analysis within this historical scope will reflect empirical measures on the market-wide level of share buybacks and debt levels alongside the concurrent equity index acceleration....

This paper will discuss the bankruptcies experienced by U.S. automakers in both 1979 and 2009. The main factors which led the automakers into financial ruin was the uncontrolled power of labor unions, the severe financial impact of oil embargos, the aggressive imposition of federal regulations and the increasing dominance of Japanese imports. After discussing these important factors, the paper will describe the specifics of Chrysler’s bailout experience in 1979 with the positive public acceptance of the government loans, largely due to the character of Lee Iacocca. After delving into Chrysler, this paper will explain the specifics of the government’s bailout of General Motors and Chrysler in 2009. The paper will also review the government’s position regarding the significant economic impact of letting the U.S. automakers fail. In conclusion, this paper will demonstrate that although the 1979 bailout was better perceived by the American public, the long term impact of 2009 bailout has the potential to produce a more strategic change in the U.S. auto industry.

Titel: Basel III – En studie om baselregelverkets påverkan på den svenska banksektorn   Nivå: D-nivå (30 Högskolepoäng) inom ämnet företagsekonomi   Författare: Nour Reda 891029-xxxx, Johan Laryd 850131-xxxx   Handledare: Per-Olof Bjuggren, Professor inom nationalekonomi; Economics, Finance and Statistics, Internationella Handelshögskolan. Louise Nordström, Doktorand inom nationalekonomi; Economics, Finance and Statistics, Internationella Handelshögskolan.   Datum: Jönköping, Maj 2011   Frågeställningar: (i) Vilka behov finns för att det befintliga regelverket skall kompletteras? (ii) Hur kommer införandet av Basel III ändra kostnadsfördelningen mellan banken och dess kunder? (iii) Kommer införandet av Basel III leda till en stabilare finansiell marknad?   Syfte: Det övergripande syftet med denna studie är att beskriva och undersöka Basel III:s påverkan på den svenska banksektorn.   Metod: Författarna har inom studien använt en kvalitativ metod med en deduktiv ansats som tillvägagångssätt. De intervjufrågor som vi tagit fram har grundats på studiens tre frågeställningar. Respondenterna som intervjuats är personer som är ansvariga eller delaktiga i arbetet mot införandet av Basel III. Det har lämnats stort utrymme för respondenterna att kunna föra sina egna diskussioner för att vidare mynna till väldefinierade resultat.   Resultat Resultatet av denna studie visar att de svenska storbankerna är positivt inställda mot införandet av Basel III och tror att det nya regelverket kommer bidra till en stabilare finansiell marknad. Kritik riktas mot regelverkets nya krav på bankers likviditet, samt det bruttosoliditetskrav som kommer införas. Som en effekt av det nya regelverket kommer bankernas kostnader öka, vilket i sin tur kommer drabba deras kunder negativt, i form av högre räntekostnader. / Title: Basel III – An investigation about the impact of Basel III on the Swedish banking sector   Level: D-level (30 ECTS) Master Degree in Business Administration   Arthur: Nour Reda 891029-xxxx, Johan Laryd 850131-xxxx   Supervisor: Per-Olof Bjuggren, Professor in Economics, Department; Economics, Finance and Statistics, International Business School. Louise Nordstrom, PhD in economics, Department; Economics, Finance and Statistics, International Business School.   Date: Jonkoping, May 2011   Questions: (i) Is there any needs for the existing set of regulations to be complemented? (ii) How will the new set of regulations effect the cost distribution between the Swedish banks and their clients? (iii) Will the effects of Basel III lead to a more stable financial market?   Purpose: The overall goal of this paper is to describe and examine the impact of Basel III on the Swedish banking sector.   Method: The authors have used a qualitative method with a deductive approach for the thesis. The interview questions are founded on the basis of the three question formulations of the thesis. The respondents who were interviewed are persons responsible or somehow involved in work towards the introduction of Basel III. There has been considerable scope for respondents to bring their own discussions in order to achieve well-defined results.   Result: The result of this study shows that the major Swedish banks have a positive attitude towards the implementation of Basel III, and that they believe the new regulation will contribute to a more stable financial market. The new liquidity ratios and the leverage ratio are given criticism from the banks. A direct effect of the new regulation is increased costs for Swedish Banks. Which will affect their customers negatively through a higher cost of capital.

Zombie banks are banks that are practically insolvent but continue to exist through hiding bad loans on their balance sheet. This can be achieved by rolling over bad loans instead of writing them off, a process known as forbearance lending, zombie lending or evergreening. Zombie banks have received increased attention of late, not least because of the sovereign debt and banking crisis in Europe. This follows other banking crises in the US and Japan which have equally seen an increased number of bank failures, and where insolvent companies have been kept alive by banks. This study aims to give a theoretical assessment of the phenomenon around zombie banks and forbearance lending. Although zombie banks are the focus of a wide public debate, the existing research has not been able to fully explain many aspects around them, such as the several motives for forbearance lending, the impact of forbearance lending on the overall portfolio of zombie banks, or the right policy response in dealing with them. In light of this, the study presents three models that simulate the behavior of banks when rolling over bad loans. These models offer insights into the causes and effects of zombie banking, and also allow us to analyze the context of policy measures by the government and the central bank. To put the models into the right context, the study also provides a detailed overview of the theoretical and empirical literature as well as the practical experience with zombie banks and forbearance lending in Japan and Europe.

This thesis is concerned with the relation between bank regulation and the risk-taking behaviour of banks. Two major instruments of regulatory intervention are considered: bank levy and bank bailouts. The major objective of this thesis is to provide an answer to the following questions: Do bank levies increase the risk-taking of banks in a competitive environment? When do bank bailouts decrease banks` risk-taking? Does the international coordination of bank bailouts affect the relation between bailouts and the risk-taking behaviour of banks? Who should rescue subsidiaries of multinational banks? How could an efficient bailout policy be designed and implemented? The bank levy and cooperation between national regulators play an important role in the recently adopted Bank Recovery and Resolution Directive (BRRD). This directive is a cornerstone of bank regulation in Europe. Although the conversion of debt into equity (bail-in) in emergencies is the key component of the current regulation, bailouts, or at least the assistance to struggling banks, should not be excluded. As the ordinary resolution tools, for instance, bail-in, have not yet been tested in a real crisis, and due to the fact that it will take time to prepare global institutions for such a tool, it may be useful to have an adequately designed tool of last resort available, such as an adequate bailout policy, in order to avoid the disruption of critical economic functions. We show that a bank levy may decrease banks`risk-taking behaviour. Bank bailouts can also decrease the risk-taking of banks. This depends on the regulator`s ability to condition his bailout policy in accordance with the macroeconomic environment, which has an impact on the banks` probability of success, or on his ability to condition the bailout policy on the banks` systemic relevance. Coordination of bailouts through a multinational regulator can improve welfare. The desirability of internationally coordinated bailouts depends on the dimension of the crisis. If the crisis is severe, it may be more efficient to delegate bank bailouts to a multinational regulator. However, such a delegation is not always feasible. Therefore, a predefined burden sharing of bank bailouts is necessary in order to achieve an efficient resolution of banks in distress.

The four essays included in this dissertation are in the field of open economy Macroeconomics. Essays I, II and IV deal with a work-horse model in this field – a two-sector small open economy growth model with traded and nontraded goods. Writing down such a model requires an assumption about the role of traded and nontraded goods in domestic consumption and investments. While several empirical studies have looked at the consumption side, a systematic examination of the role of traded and nontraded goods in investments is missing. Essay I aims to fill this gap. Drawing on extensive empirical evidence, we show that aggregate investment expenditure shares on traded and nontraded goods are very similar in rich and poor countries. Furthermore, the two expenditure shares have remained close to constant over time, with the average nontraded expenditure share varying between 0.54-0.60 over the 1960-2002 period. Combined with the fact that the relative price of nontraded goods correlates positively with income and exhibits large differences across space and time, our findings suggest that investment can be modeled using the Cobb-Douglas aggregator. The results of this essay offer a new restriction for the two-sector growth model, which can alter the conclusions drawn from the model. To demonstrate this, we apply the new restriction to a study by Hsieh and Klenow (2003), which argues that differences in relative productivity between traded and nontraded sectors, i.e., the Balassa-Samuelson effect, is the main cause of higher PPP-adjusted investment rates in rich countries. With the restriction imposed on the model, no more than 25 percent of the differences in PPP-adjusted investment rates between rich and poor counties can be attributed to the Balassa-Samuelson effect. In Essays II and IV the same two-sector growth model is put to the test using the recent economic developments in countries of Eastern and Central Europe. Essay II investigates whether the two-sector growth model can explain the magnitudes and the timing of the trade flows in the Baltic countries. The model is calibrated for each of the three countries, which we simulate as small closed economies that suddenly open up to international trade and capital flows. The results show that the model can account for the observed magnitudes of the trade deficits in the 1995-2001 period. Introducing a real interest rate risk premium in the model increases its explanatory power. According to the model, trade balances will turn positive in the Baltic states around 2010. Essay IV starts by summarizing empirical regularities for the key aggregate real sector variables in the eight countries that joined the EU in May 2004. It is shown that, following the reforms in the early 1990s, real sector developments in all eight countries exhibit remarkable similarities. Interestingly, this is the case despite the fact that different reform policies were pursued in several dimensions (e.g., privatization, nominal exchange rate). Next, we show that a calibrated two-sector small open economy growth model can account for most of the real sector adjustments in early post-reform years. Empirical studies have found rapid traded sector productivity growth in Central and Eastern European countries over the last decade. When traded sector productivity growth is added to the model, it captures the development in all key real sector variables during the post-reform period. Finally, Essay III contributes to the study of financial crises in emerging markets. In contrast to the other essays, this paper develops a highly stylized theoretical model that allows us to study analytically government response to financial crises. In particular, Essay III develops a framework for analyzing optimal government bailout policy in a dynamic stochastic general equilibrium model where financial crises are exogenous. Important elements of the model are that private borrowers internalize only part of the social cost of foreign borrowing in the emerging market and that the private sector is illiquid in the event of a crisis. The distinguishing feature of our paper is that it addresses the optimal bailout policy in an environment where there are both costs and benefits of bailouts, and where bailout guarantees potentially distort investment decisions in the private sector. We show that it is always optimal to commit to a bailout policy that only partially protects investment against inefficient liquidation, both in a centralized economy and a market economy. Due to overinvestment in the market economy, the government's optimal level of bailout guarantees is lower than in the social optimum. Further, we show that, in contrast to a social planner, the government in the market economy should optimally bail out a smaller fraction of private investments when the probability of a crisis is higher. / Diss. Stockholm : Handelshögskolan, 2005 S. i-x: sammanfattning, s. 1-187: 4 uppsatser

Submitted by ramon silva vilarins (rsvilarins@gmail.com) on 2016-06-23T12:02:04Z No. of bitstreams: 1 tese_final.pdf: 914787 bytes, checksum: f76ebd195ce25157615f7f14bebdee55 (MD5) / Rejected by Pamela Beltran Tonsa (pamela.tonsa@fgv.br), reason: Bom dia Ramon, Para que possamos dar andamento a sua submissão é necessário um pequeno ajuste. RESUMO E ABSTRACT não pode ter borda. Apos o ajuste submeter novamente para analise. Qualquer duvida estamos a disposição. Att, Pâmela. Tonsa on 2016-06-23T14:25:04Z (GMT) / Submitted by ramon silva vilarins (rsvilarins@gmail.com) on 2016-06-23T14:43:13Z No. of bitstreams: 1 tese_final.pdf: 914257 bytes, checksum: c2720e7e809ab96d52c03e041847360c (MD5) / Approved for entry into archive by Pamela Beltran Tonsa (pamela.tonsa@fgv.br) on 2016-06-23T14:48:08Z (GMT) No. of bitstreams: 1 tese_final.pdf: 914257 bytes, checksum: c2720e7e809ab96d52c03e041847360c (MD5) / Made available in DSpace on 2016-06-23T14:49:28Z (GMT). No. of bitstreams: 1 tese_final.pdf: 914257 bytes, checksum: c2720e7e809ab96d52c03e041847360c (MD5) Previous issue date: 2016-06-01 / This dissertation analyzes the impact of government bailout policies on the risk of the banking sector in OECD countries between 2005 and 2013. First, in line with the moral hazard hypothesis, I verify that financial institutions with high bailout expectations assume higher risks than others. Second, I find that, in normal times, rescue guarantees to large financial institutions distort competition in the sector and increase the risk of the other institutions. However, during the recent financial crisis, increases in the rescue expectation of competitors of an institution, to the extent that they represent a reduction in its chance of bailout, decrease its risk taking. Additionally, in a crisis period, I find that the deterioration in the countries’ sovereign capacity to bailout banks is associated with lower risk taking; on average, i.e., the increase in risk taking is higher in countries with a lower credit default swap spread. / Esta tese analisa, entre 2005 e 2013, o impacto das políticas governamentais de resgate sobre o risco do setor bancário nos países da OCDE. Primeiro, em linha com a hipótese de moral hazard, verifica-se que instituições financeiras com expectativa elevada de bailout, assumem riscos mais elevados do que as demais. Segundo, constata-se que, em períodos normais, garantias de socorro às grandes instituições distorcem a competição no setor e incrementa o risco das demais. Durante a crise, entretanto, mostra-se que elevações na expectativa de resgate dos concorrentes de uma instituição, à medida que representa uma redução em sua chance de eventual socorro governamental, diminuem sua tomada de riscos. Adicionalmente, em período de crise também é evidenciado que: reduções na capacidade financeira dos países estão associadas a menor assunção de riscos; em média, o aumento na tomada de riscos é maior nos países com menor spread de Credit Default Swap.

Submitted by Weichao Wang (weichao.wang@fgv.edu.br) on 2018-05-11T16:03:27Z No. of bitstreams: 1 Wang2018_Thesis_TARP_Interbank_Risk_May9.pdf: 2618673 bytes, checksum: dc1254edf6febf9dacf740dc3f7d48a8 (MD5) / Rejected by Diego Andrade (diego.andrade@fgv.br), reason: A ordem dos documentos está errada. on 2018-05-14T18:11:37Z (GMT) / Submitted by Weichao Wang (weichao.wang@fgv.edu.br) on 2018-05-14T18:24:47Z No. of bitstreams: 1 Wang2018_Thesis_TARP_Interbank_Risk_May9.pdf: 2618806 bytes, checksum: add9b0e474645e1acb2fd7f4b86eb1f2 (MD5) / Approved for entry into archive by ÁUREA CORRÊA DA FONSECA CORRÊA DA FONSECA (aurea.fonseca@fgv.br) on 2018-05-15T16:30:20Z (GMT) No. of bitstreams: 1 Wang2018_Thesis_TARP_Interbank_Risk_May9.pdf: 2618806 bytes, checksum: add9b0e474645e1acb2fd7f4b86eb1f2 (MD5) / Made available in DSpace on 2018-05-18T12:30:42Z (GMT). No. of bitstreams: 1 Wang2018_Thesis_TARP_Interbank_Risk_May9.pdf: 2618806 bytes, checksum: add9b0e474645e1acb2fd7f4b86eb1f2 (MD5) Previous issue date: 2018-05-09 / I investigate how the Troubled Asset Relief Program (TARP) affected the stressed interbank money market trading during the recent financial crisis via a difference-in-difference (DiD) design. I find that the TARP capital injection significantly enlarged the interbank exposure for the TARP recipients relative to others, particularly for banks in smaller size, with lower level of interbank trading and located in relatively poor economic conditions. I further test whether the distorted interbank liquidity position of the TARP recipients stimulated their credit risk appetite. I find that TARP recipient banks with larger interbank exposure also significantly shifted to riskier credit portfolios than others after the TARP implementation, suggested by estimates on forward- and backward-looking risk measures. Results are robust to the instrumental variable analysis, the sample self-selection model, the propensity score matching analysis, various placebo experiments and alternative econometric models. My results are most consistent with the “capital spillover” hypothesis that banks used the TARP capital to develop more interconnected interbank relationships, and the moral hazard effect that higher future bailout expectation and increased systemic relevance jointly construct a “new government safety net” for the TARP beneficiaries to take excessive credit risks under the implicitly perceived “too interconnected to fail” protection.

Cette thèse étudie le risque de crédit souverain et son impact sur les banques et les entreprises. Le premier essai montre que le risque de crédit bancaire est lié au risque de crédit souverain via l’exposition commune au risque systémique au lieu du sauvetage implicite ou de l’exposition excessive aux obligations émises par le pays d’origine. Dans le deuxième essai, je construis un modèle de structure du capital qui prédit une corrélation négative entre le niveau d’endettement des grands entreprises et le risque de crédit souverain à cause du sauvetage implicite. Cette prédiction est confirmée en suite par des preuves empiriques des entreprises dans la zone euro. Le troisième essai donne un modèle joint de CDS et d’obligation pour identifier les composantes de défaut et de liquidité dans les spreads de CDS et les rendements obligataires. Je trouve une composante de liquidité importante dans les spreads de CDS des pays périphériques de la zone euros et conclus que le fait de ne pas prendre en compte de l’illiquidité des CDS conduit à surestimer la composante de défaut dans le rendement obligataire. / This thesis studies sovereign credit risk and its impact on banks and industrial firms. The first essay shows that bank credit risk is linked to sovereign credit risk through common exposure to systemic risk instead of implicit bailout or excessive holding of home country bonds. In the second essay, I build a trade-off model of capital structure which predicts negative correlation between optimal leverage of big firms and sovereign credit risk due to implicit bailout. The model prediction is confirmed by empirical evidence from firms in the euro area. The third essay provides a joint pricing model of CDS and bond to disentangle the default and liquidity component in CDS spread and bond yield spread. I find a remarkable liquidity component in the CDS spreads of peripheral euro area countries and conclude that ignoring CDS illiquidity leads to overestimation of default component in bond yield.