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comments by Evren ÖRS HEC Paris

45 th Conference on Bank Structure & Competition. Session on Bank Structure & Competition. comments by Evren ÖRS HEC Paris. Session on Bank Structure & Competition. - U.S. banking market deregulation & the banking firm

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comments by Evren ÖRS HEC Paris

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  1. 45th Conference on Bank Structure & Competition Session on Bank Structure & Competition comments by Evren ÖRSHEC Paris

  2. Session on Bank Structure & Competition • - U.S. banking market deregulation & the banking firm • - Zarutskie: does deregulation push banks to specialize in the lending market? • - Brickley, Linck and Smith: how do community banks respond to market entry by their correspondent banks? • - U.S. banking market deregulation & the borrower firm • - Santos and Winton: how do the power-plays between banks and borrowers get resolved? • - Cetorelli: does banking deregulation affect the nature of cohorts of borrower firms? Örs – Comments – 45th BSC – May 6, 2009

  3. Zarutskie: Competition & Specialization • - Does deregulation push banks to specialize in the lending markets? • - evidence suggests that large banks specialize in hard-info real-estate loans whereas small banks specialize soft-info unsecured C&I and personal loans. • - comments/suggestions: • - discussion to clarify the impact of securitization on B/S-observed loan amounts and loan losses; • - lnTA & lnTA2: • - what are the marginal effects of size? what are the economic significances? • - “community bank”, “mid-size bank”, “large bank” indicator variables instead? • - are members of a BHC treated as a single institution? • - identification tests for the IV regressions and standard errors clustered at the bank-level (instead of state level). Örs – Comments – 45th BSC – May 6, 2009

  4. Brickley, Linck & Smith: Bankers’ Banks • - How do community banks respond to increased market competition and entry by their corresponding banks? • - safeguarding proprietary information by creating/joining bank co-ops (bankers’ banks) in order to avoid sharing critical information on their borrowers. • - comments/suggestions: • - an alternative to true, full-blown vertical integration; • - community banks’ approach has a precedent, even if histories differ: credit unions and their corporate-CUs; • - other potential test variables: • - number of small establishments in the local market (from the Census Bureau); • - number of small banks in a market using a correspondent bank (rssd9043); • - amount of loans originated by small banks (rcon3431 available 1983-1993); • - Any evidence from small- to large-bank switches in DealScan? If yes, under what terms? Örs – Comments – 45th BSC – May 6, 2009

  5. Santos & Winton: Bank-Firm Power Plays • - How do the power-plays between lenders and borrowers get resolved? • - Tests of Diamond and Rajan (2000) hypothesis are robust after controlling for business cycle effects; whereas tests of Boot, Greenbaum and Thakor (1993), Sharpe (1990) and Rajan (1992) hypothesis show that once business cycle effects are controlled for, bank capital matters even for firms with access to markets. • - comments/suggestions: • - “everything but the kitchen sink” approach: robust results; • - exploiting time-series/within-firm variation to know more about the dynamics: • - do low-CF/low-Cap borrowers switch to high-Cap banks when CF improves? • - do high-Cap banks have difficulty renewing loans when their capital worsens? Örs – Comments – 45th BSC – May 6, 2009

  6. Cetorelli: Deregulation & Nature of Firms • - Do structural changes in the credit availability affect firms’ “nature”? • - Post-deregulation cohorts of firms’ failure hazard is higher than that of pre- deregulation cohorts, pre-dereg firms do not necessarily adapt to their new environment: lower availability of credit appears to imprint pre-dereg firms. • - comments/suggestions: • - what is more predominant: the managers or the corporate culture (i.e., policies)? • - is it possible to keep track of managers? if yes, additional testable hypotheses: • - pre- vs. post-dereg firm frailty when managers change • - frailty of post-dereg establishments acquired by pre-dereg establishments, or vice-versa • - more details about the dataset would be welcome: • - plant closings vs. bankruptcies • - what are the mechanisms? i.e., what are the implications for the capital structure choices and investment decisions? Örs – Comments – 45th BSC – May 6, 2009

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