We study the effects of structural changes in banking markets on the supply of credit to small businesses. Specifically, we examine whether bank mergers and acquisitions (M&As) and entry have "external" effects on small business loans by other banks in the same local markets. The results suggest modest positive external effects from these dynamic changes in competition, except that large banks ...

This paper extends the stationary-leverage-ratio model to incorporate a time-dependent target leverage ratio. The theoretical hypothesis of the existence of a time-dependent target leverage ratio reflects the movement of a firm’s initial target ratio toward a long-term target ratio over time. Using some simple scenarios about the time-dependence of the target leverage ratio, the numerical resul...

Banking sector openness may directly increase growth by improving the quality of financial services and increasing funds available, or indirectly by improving the efficiency of financial intermediaries, both of which may reduce the cost of financing, in turn, increase capital accumulation and economic growth. The objective of the paper is to empirically reinvestigate these direct and indirect l...

In a model of oligopolistic competition in the banking sector, we analyse how the monetary policy rule chosen by the Central Bank can in ̄uence the incentive of banks to set high interest rates on loans over the business cycle. We exploit the basic model to investigate the potential impact of EMU implementation on collusion among banks. In particular, we consider the possible e€ects of the Europ...

Article history: Received 16 November 2010 Accepted 9 April 2013 Available online 20 April 2013 This paper assesses conflicts of interest between banks and their client firms via the merger transaction by examining the wealth gain of merger acquirers who were listed on the Tokyo Stock Exchange in 1990–2004. The paper reports two main findings. First, acquiring firms did not gain from their acqu...

In standardWalrasian macro-finance models, pecuniary externalities such as fire sales lead to overinvestment in illiquid assets or underprovision of liquidity. We investigate whether imperfect competition (Cournot) improves welfare through internalizing the externality and find that this is far from guaranteed. In a standard model of liquidity shocks, when liquidity is sufficiently scarce, Cour...

The Mexican banking crisis of 1994]1995 has widely been interpreted as the victim of the balance-of-payments crisis, rather than its cause. After all, Mexican banks had been enjoying high capitalization ratios, deemed to be more than sufficient to deal with the increased risk of non-performing loans. This paper, however, suggests that to a large extent Mexican accounting practices } rather than...

This study by adopting rolling regression techniques investigate whether bank and life insurance equity returns sensitivity to long term unanticipated interest rate changes has been changed since the Bank of England was granted operational independence in May 1997. Our results indicate that there may well have been changes in the way banks and life insurance companies manage interest rate risk....

The joint existence of a lender of last resort and of a stock market is usually considered the sign of a developed financial infrastructure. This paper analyzes whether a securities market may play a role similar to that of a lender of last resort by being of assistance to a bank, which faces possible liquidity shortages. We examine which of these two institutions best prevents a bank’s liquidi...

This paper proposes that bank runs are unique equilibrium outcomes instead of self-fulfilling prophecies. By assuming that depositors make their withdrawal decisions sequentially, the model provides an equilibrium-selection mechanism in the economy. A bank run would occur if and only if depositors perceive a low return on bank assets. Furthermore, a panic situation arises only when the market i...