In 2001, the Securities and Exchange Commission (SEC) required market centers to publish monthly execution-quality reports in an effort to spur competition for order flow between markets. Using samples of stocks trading on several markets, we investigate whether past execution quality affects order-routing decisions and whether the new disclosure requirements influence this relationship. We fin...

We model two dimensions of bank globalization – bank nationality (a bank from the firm’s host nation, its home nation, or a third nation) and bank reach (a global, regional, or local bank) using a two-stage nested multinomial logit model. Our data set includes over 2,000 foreign affiliates of multinational corporations operating in 20 European nations. We find that these firms frequently use ho...

Using parametric and nonparametric procedures, we identify the apparent source of cost inefficiency in banking. Unexplained inefficiencies of 20 to 25% from earlier studies are reduced to 1 to 5% when, in addition to commonly specified cost function influences, variables reflecting the external business environment and common industry indicators of "productivity" are added. While these same pro...

The paper analyzes the information and agency cost effects of bank equity stakes in a universal banking system where banks can also be shareholders in borrowing firms. We test the agency and signaling hypotheses explaining the bank motivations for holding equity of borrowing firms in the Spanish market and we analyze the share abnormal returns around the announcements of bank equity holdings. T...

This paper discusses the incentive conflicts that arise in banking supervision in the EU in a principal-agent framework, where the regulator is the agent and the taxpayers is the principal. The regulatory agent in addition to maintaining financial stability (the objective of the principal) may pursue private interests. Incomplete information, insufficient accountability of the agent and lack of...

Does the pre-deal geographic overlap of the subsidiaries and branches of two banks affect the probability that they merge and post-merger value creation and synergies? We compile comprehensive information on U.S. bank acquisitions from 1986 through 2014, construct several measures of network overlap, and design and implement a new identification strategy. We find that greater pre-deal network o...

This paper presents a monetary-theoretic model to study the implications of networks’ collection of personal identifying data and data security on each other’s incidence and costs of identity theft. To facilitate trade, agents join clubs (networks) that compile and secure data. Too much data collection and too little security arise in equilibrium with noncooperative networks compared with the e...

Theory predicts that information sharing among lenders attenuates adverse selection and moral hazard, and can therefore increase lending and reduce default rates. To test these predictions, we construct a new international data set on private credit bureaus and public credit registers. We find that bank lending is higher and proxies for default rates are lower in countries where lenders share i...

We adopt a systemic risk indicator measured by the price of insurance against systemic financial distress and assess individual banks’ marginal contributions to the systemic risk. The methodology is applied to the 19 bank holding companies covered by the US Supervisory Capital Assessment Program (SCAP), with the systemic risk indicator peaking around 1.1 trillion USD in March 2009. Our systemic...

In an effort to bolster soundness standards in banking, the 2006 international regulatory agreement of Basel II requires globally active banks to include operational risk in estimating regulatory and economic capital to be held against major types of risk. This paper discusses practical issues faced by a bank in designing and implementing an operational risk capital model. Focusing on the use o...