Liquidity Risk Drivers and Bank Business Models

Galletta, Simona; Mazzù, Sebastiano

doi:10.3390/risks7030089

Cited by 20 publications

(11 citation statements)

References 45 publications

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“…Accordingly, financial institutions have had to change their business models (Altunbas, Manganelli, & Marques‐Ibanez, 2011), especially when dealing with the various phases of the last financial crisis. Indeed, banks' funding structure remains crucial for both the soundness and the stability of the banks themselves (Galletta & Mazzù, 2019). The prior literature has verified that customer deposits, gathered from households, are the first source of bank funds and are considered to be the most stable (Gatev & Strahan, 2006; Huang & Ratnovski, 2011; Song & Thakor, 2007).…”

Section: Methodsmentioning

confidence: 99%

Sustainable development and financial institutions: Do banks' environmental policies influence customer deposits?

et al. 2020

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This paper investigates the relationship between the environmental policies taken by financial institutions and the choice of depositors on where to save their money. Prior research has shown that increases in the number of customers making deposits are driven by bank pricing policy and switching costs for depositors. By employing a dynamic panel data model, this study empirically tests how environmental performance influences the depositors' choice on where to put their money in a sample of worldwide financial institutions from 2011 to 2018. The main results suggest that there is a negative relationship between banks' environmental performance and customers' deposits. Furthermore, the banks that are the best at managing carbon emissions and at pursuing sustainable development pay lower interest rates on customer deposits.

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Section: Methodsmentioning

confidence: 99%

Sustainable development and financial institutions: Do banks' environmental policies influence customer deposits?

et al. 2020

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“…The empirical findings revealed that core banking activities based on the process of maturity transformation are the most exposed to liquidity risk [25]. Another study examined the dynamic relationship between credit risk and liquidity in the Italian sovereign bond market during the Eurozone crisis and the subsequent European Central Bank (ECB) interventions-the results showed that credit risk drove the liquidity of the market [26]. Moreover, analysis of debt maturity structure for borrowers with private information about their future credit rating has documented that borrowers with a high CR prefer short-term debt, and those with somewhat lower ratings prefer long-term debt [27].…”

Section: Sovereign Credit Ratings and Financial Marketsmentioning

confidence: 99%

On the Asymmetries of Sovereign Credit Rating Announcements and Financial Market Development in the European Region

Pervaiz

Khan

et al. 2019

Sustainability

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In modeling the impact of sovereign credit rating (CR) on financial markets, a considerable amount of the literature to date has been devoted to examining the short-term impact of CR on financial markets via an event-study methodology. The argument has been established that financial markets are sensitive to CR announcements, and market reactions to such announcements (both upgrading and degrading) are not the same. Using the framework of an autoregressive distributed lag setting, the present study attempted to empirically test the linear and non-linear impacts of CR on financial market development (FMD) in the European region. Nonlinear specification is capable to capture asymmetries (upgrades and downgrades) in the estimation process, which have not been considered to date in financial market literature. Overall findings identified long-term asymmetries, while there was little evidence supporting the existence of short-term asymmetries. Thus, the present study has extended the financial market literature on the subject of the asymmetrical impact of a sovereign CR on European FMD and provides useful input for policy formation taking into account these nonlinearities. Policies solely based upon linear models may be misleading and detrimental.

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“…To summarize, holding other variables unchanged, inside debt is positively correlated with the default risk. From Equations (10) and (12), inside debt value is calculated using a special method that overall characterizes the same monotonicity with the sum of inside equity and cash salary, although it is paid delayed. Under Assumption 14, executives inevitably take greater risks to obtain more inside debt in the future if it is possible for the bank to become bankrupt.…”

Section: Analysis Of Simulation Resultsmentioning

confidence: 99%

Pay Me Later is Not Always Positively Associated with Bank Risk Reduction—From the Perspective of Long-Term Compensation and Black Box Effect

Jiang

Yuan

2019

Sustainability

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The relationship between executive compensation and bank risk-taking is one of the core topics of corporate governance theory. Especially after the 2008 global financial crisis, due to the characteristics of banks, such as systemic risk, this relationship has become more important. However, though usually calculated on the basis of cash salary and inside equity, which can promote risk incentives, inside debt was considered a tool for risk reduction in prior empirical analyses. Based on actual bank situations, we had doubts about this relationship and wanted to verify the specific relationship between inside debt and risk. We initiated this research by setting up a theoretical model between inside debt and bank default risk and by simulating the result using data from Wells Fargo & Co. to draw the function image. We are the first to define the three kinds of compensation in three dimensions. Then, considering bankruptcy, we found the black box effect exists. Therefore, different from prior views, pay me later not only reduces but also increases risk. We expect our findings to offer help to the formulation of policies for pay contracts.

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Liquidity Risk Drivers and Bank Business Models

Cited by 20 publications

References 45 publications

Sustainable development and financial institutions: Do banks' environmental policies influence customer deposits?

Sustainable development and financial institutions: Do banks' environmental policies influence customer deposits?

On the Asymmetries of Sovereign Credit Rating Announcements and Financial Market Development in the European Region

Pay Me Later is Not Always Positively Associated with Bank Risk Reduction—From the Perspective of Long-Term Compensation and Black Box Effect

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