Leverage pro-cyclicality and securitization in US banking

Beccalli, Elena; Boitani, Andrea; Giuliantonio, Sonia Di

doi:10.1016/j.jfi.2014.04.005

Cited by 29 publications

(18 citation statements)

References 24 publications

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“…Shin (2010, 2014); Adrian, Boyarchenko, and Shin (2015) document that the U. S. brokerdealer sector and the banking sector more generally in the U. S. has procyclical leverage, managing the size of their balance sheets through debt issuance to target a constant trendgrowth rate of equity. These aggregate banking sector results have also been confirmed using individual bank data in the U. S. in Beccalli, Boitani, and Di Giuliantonio (2015), in Europe in Baglioni, Beccalli, Boitani, and Monticini (2013), and in Canada in Damar, Meh, and Terajima (2013). Adrian and Shin (2014) also document that the share of intermediated credit is procyclical: the banking sector accounts for a bigger fraction of the total credit extended to the non-financial sector during expansions.…”

Section: Introductionmentioning

confidence: 63%

Corporate Credit Provision

Boyarchenko

Mueller²

2019

SSRN Journal

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Productive firms can access credit markets directly by issuing corporate bonds or by borrowing through financial intermediaries. In this paper, we study the cyclical properties of corporate credit provision through these two types of debt instruments in major advanced economies. We argue that the cyclicality of corporate credit is closely related to the cyclicality of the types of financial intermediaries active in the provision of credit. When a debt instrument is held by institutions that manage their balance sheets through debt issuance, credit provision through that instrument is procyclical. But when a debt instrument is held by institutions that manage their balance sheets through equity issuance, credit provision through that instrument is countercyclical. We show that crosscountry differences in the cyclicality of corporate credit can be ascribed to differences in the composition of the aggregate financial sector, and not to differences in the balance sheet management practices of each type of financial intermediary.

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Section: Introductionmentioning

confidence: 63%

Corporate Credit Provision

Boyarchenko

Mueller²

2019

SSRN Journal

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“…Jiangli and Pritsker (2008) show that bank holding companies active in mortgage securitization were also more heavily leveraged, and Dionne and Harchaoui (2008) find similar results for Canadian banks. Drawing from a sample of US bank holding companies between 2001 and 2010, Beccalli et al (2015) find a positive relationship between the extent of securitization activity and the procyclicality of bank leverage. Minton et al (2009, p. 22) show that most US banks used credit derivatives to achieve leveraged profits as derivatives dealers-e.g.…”

Section: Securitization and Derivatives As Tools To Reduce Regulatorymentioning

confidence: 91%

Market governance, financial innovation, and financial instability: lessons from banks’ adoption of shareholder value management

Pernell

2020

Theor Soc

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As the economy has grown increasingly financialized, the relationship between financial innovation and instability has attracted more attention. Previous research finds that the proliferation of complex financial innovations, like asset securitization and new financial derivatives, helped to erode the market governance arrangements that kept excessive bank risk-taking in check, inviting instability. This article presents an alternative way of understanding how financial innovations and market governance arrangements combine to shape instability. Market governance arrangements also shape how financial firms receive innovations, leading to greater or lesser instability at particular times and places. I illustrate this argument by tracing the effects of changing corporate governance arrangements at large US banks in the 1990s and 2000s. Like non-financial firms in the preceding decade, banks adopted reforms associated with the shareholder value model of corporate governance. These changes to internal bank governance arrangements affected the agendas of bank executives in ways that encouraged expanded use of securitization and derivatives. Drawing from this case, I argue that a full understanding of instability in the financialized era requires closer attention to the (institutionally-structured) interests of financial innovation users-not just to features of financial innovations themselves. Keywords Bank risk-taking. Corporate governance of banks. Financial derivatives. Financialization of banking. Securitization. Shareholder value management Increasing bank reliance on complex financial innovations is a hallmark of the recent turn towards financialization (Bryan and Rafferty 2006; van der Zwan 2014; Cetorelli et al. 2012). Prior to the 1980s, US banks made most of their money from traditional banking activities, like accepting deposits, making loans to consumers and businesses,

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“…The so-called asset securitization is the process of repackaging the cash flows that can be generated by the underlying assets into asset-backed securities. A key step in the asset securitization process is the establishment of SPE, VIE, or SE to achieve risk isola- Beccalli et al (2015) analyzed the relationship between the procyclical effect of leverage in the US banking industry and asset securitization. Studies have shown that the level of leverage and profit of banks performing asset securitization are procyclical.…”

Section: Asset Securitizationmentioning

confidence: 99%

Literature Review of Structured Entities

Luo¹

2020

AJIBM

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The "Accounting Standards for Business Enterprises No. 41-Disclosure of Rights and Interests in Other Entities" promulgated in China in 2014 proposed the concept of "structured entities", and the 2014 revised "Enterprise Accounting Standards No. 33-Consolidated Financial Statements" made clear a single control-based consolidation model for all entities, and stated that "structured entities" controlled by the parent company should be included in the scope of consolidation of the company's financial statements. The introduction of the concept of "structured entities" and changes in related standards have placed new requirements on accounting theory researchers and practical staff. The article reviews related research on what is a "structured entities" and its similar special purpose entities and variable interest entities.

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Leverage pro-cyclicality and securitization in US banking

Cited by 29 publications

References 24 publications

Corporate Credit Provision

Corporate Credit Provision

Market governance, financial innovation, and financial instability: lessons from banks’ adoption of shareholder value management

Literature Review of Structured Entities

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