The importance of being systemically important financial institutions

Bongini, Paola; Nieri, Laura; Pelagatti, Matteo

doi:10.1016/j.jbankfin.2014.07.006

Cited by 85 publications

(48 citation statements)

References 32 publications

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“…For these institutions regulatory costs are closely related to systemic effects. The inclusion in this list is seen negatively by shareholders (see Bongini et al, 2015) and banks can be removed only when they do not pose a global systemic threat.…”

Section: Do Bank Boards See Systematic Tail Risk As Fully Unrelated Tmentioning

confidence: 99%

“…For instance, we find that the sensitivity of CEO forced turnover to systematic tail risk is significantly larger after a bank is included in the list of global systemically important financial institutions by the Financial Stability Board. For these institutions, regulatory costs are linked to the systemic effects they produce (see Bongini et al, 2015) and the removal from the list only occurs when they no longer pose a global systemic threat. All in all, our tests indicate that the specificities of banks play a crucial role in the way bank boards see the exposure to systematic tail risk.…”

Section: Introductionmentioning

confidence: 99%

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CEO turnover in large banks: Does tail risk matter?

Srivastav

Keasey

Mollah

et al. 2017

Journal of Accounting and Economics

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Using a unique international dataset, we show that the CEOs of large banks exhibit an increased probability of forced turnover when their organizations are more exposed to idiosyncratic tail risks. The importance of idiosyncratic tail risk in CEO dismissals is strengthened when there is more competition in the banking industry and when stakeholders have more to lose in the case of distress. Overall, we document that the exposure to idiosyncratic tail risk offers valuable signals to bank boards on the quality of the choices made by CEOs and these signals are different from those provided by accounting and market measures of bank performance and by idiosyncratic volatility. In contrast, systematic tail risk is usually filtered out from the firing decision, only becoming important for forced CEO turnovers in the presence of a major variation in the costs that the exposure to this risk generates for shareholders and the organization.  We thank John Core (the editor) and Robert Bushman (the reviewer) for their many insightful comments and suggestions.

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Section: Do Bank Boards See Systematic Tail Risk As Fully Unrelated Tmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

CEO turnover in large banks: Does tail risk matter?

Srivastav

Keasey

Mollah

et al. 2017

Journal of Accounting and Economics

View full text Add to dashboard Cite

show abstract

“…Similar to Bongini et al (2015), we identify three hypotheses which are graphically presented in Fig. 1.…”

Section: Effects Of Regulatory Reforms Hypothesesmentioning

confidence: 99%

“…They find that the largest implications for returns stem from the Dodd-Frank reform enacted in the U.S. and in particular from the Volcker rule. Bongini et al (2015) conduct a case study to investigate the effects associated with the publication of a list of systemically important financial institutions (SIFI) and new regulation for too-big-to-fail (TBTF) banks. They find that only the returns of institutions which are poorly capitalized respond significantly negatively to the announcements.…”

Section: Introductionmentioning

confidence: 99%

Is Financial Regulation Good or Bad for Real Estate Companies? – An Event Study

Hoesli

Milcheva

Moss

2017

J Real Estate Finan Econ

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This study investigates how three regulatory reforms undertaken in the aftermath of the global financial crisis have affected returns of real estate companies. The three reforms are aimed at regulating different segments of the market -Basel III targets banks, and could restrict the availability of bank debt to the sector; the Alternative Investment Fund Management Directive (AIFMD) targets funds, which could increase compliance costs and reduce the potential investor pool; the European Market Infrastructure Regulation (EMIR) is aimed at derivative trading and could impact the cost of debt capital. We employ an event study methodology using daily stock returns of real estate companies and identify the regulatory events through news published in major international financial newspapers and news agencies. Our results show different responses across the three regulations. For Basel III we find support for the regulatory burden hypothesis of the bank lending channel for small real estate firms and firms with low debt-to-equity ratios as they cannot diversify their funding sources.The direct regulatory effect as tested using AIFMD announcements supports the profitbased reaction hypothesis for large firms. We also show that the news have asymmetric effects with tighter regulation news more frequently leading to significant responses in average abnormal returns (AARs) than loosening regulation news.

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“…For a critical review of the literature on the G-SIBs see Iwanicz-Drodowska (2014) and Barth et al (2013). Bongini et al (2015) discuss the financial impact of the SIFIs selection. To the best of our knowledge our paper is the first one in which a permutation test approach is applied to this issue.…”

Section: Introduction and Objectivesmentioning

confidence: 99%