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| Author | : Hui (Hillary) Wang |
| Publisher | : |
| Total Pages | : |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
| Author | : Robert Deacle |
| Publisher | : |
| Total Pages | : 189 |
| Release | : 2011 |
| Genre | : |
| ISBN | : |
This dissertation examines several aspects of U.S. financial institutions' real estate-related activity. The first two essays examine the impact of Federal Home Loan Bank (FHLB) membership and funding on bank and thrift holding company (BHC and THC) risk and returns. The first essay uses risk measures derived from BHC and THC stock prices, while the second essay uses risk measures based upon BHC and THC bond prices. The third essay studies the impact of BHC investment in real estate on risk and returns using measures based on stock prices. In the first essay, BHC and THC stock portfolios are formed along several dimensions. Bivariate generalized autoregressive conditional heteroskedasticity (GARCH) models are estimated to produce measures of total risk, market risk, and interest rate risk for the time period from the beginning of 2001 through 2009. Two sets of results related to FHLB activity are obtained. First, FHLB membership is found to be associated with lower total risk and market risk while having no association with interest rate risk. Second, and similarly, greater reliance on FHLB advances is associated with lower total risk and market risk but is not associated with interest rate risk. These results are consistent with the view that the risks created by government backing of the FHLB system and some of the system's policies are mitigated by FHLB policies and products that reduce risk. In addition, THC stocks are found to have lower total and market risk than the portfolio of BHC stocks. The second essay investigates the relationship of both FHLB membership and funding with BHC and THC risk by using the cost of uninsured debt as a measure of risk. These relationships are analyzed in a simultaneous equation regression framework using data from the start of the third quarter of 2002 through the end of the first quarter of 2009. The cost of uninsured debt is proxied by yield spreads calculated from trading data on holding company (HC) bonds. Several interesting results are obtained. Reliance on advances is found to have a negative effect on the cost of debt throughout the sample period (the third quarter of 2002 through the first quarter of 2009). Cost of debt has a significant effect on the level of advances only during the recent financial crisis (the third quarter of 2007 through the first quarter of 2009), when the effect is negative. The negative association between cost of debt and the level of advances suggests that BHCs and THCs, on the whole, do not use FHLB advances to make unusually risky loans and supports the argument that FHLB policies and services have some risk-reducing effects. FHLB membership, independent of advances, is found to have no influence on HC cost of debt. Additional analysis indicates that THC status is associated with higher cost of debt than BHC status. The third essay examines the influence of real estate investment by BHCs from the third quarter of 1990 through the fourth quarter of 2010 on their risks and returns. Portfolios are formed of BHC stocks according to BHCs' ratio of real estate investment to total assets and according to the type of regulation - lenient or strict - under which they invest in real estate. Tests of differences in median portfolio returns between these portfolios are performed. In addition, the effects of real estate investment on risk and return are estimated using univariate GARCH models of portfolio returns. The main results are as follows: 1) BHCs that invest in real estate have greater total risk and lower risk-adjusted returns than those that do not; 2) greater real estate investment is associated with lower returns and greater market risk for some types of BHCs while it is not associated with significant differences in total risk or risk-adjusted returns; and 3) BHCs that invest in real estate under relatively lenient rules have lower returns, greater total risk, and lower risk-adjusted returns than those that invest in real estate under relatively strict rules. The results indicate that benefits from real estate investment by banks - such as diversification of cash flows, economies of scale and scope, and increased charter value - are outweighed by greater variability of returns and lower returns due to BHCs' lack of expertise in the field. The findings also provide evidence that rules granting banks greater freedom to invest in real estate result in increased risk but not increased returns.
| Author | : Waldo Ojeda |
| Publisher | : |
| Total Pages | : 66 |
| Release | : 2018 |
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| ISBN | : |
This dissertation is comprised of two essays in a topic at the intersection of Financial Economics and Industrial Organization. Both analyze the effect of common ownership in the U.S. corporate loan market. In recent years, firms and banks increasingly have institutional investors as shareholders in common. These shareholders receive profits from the interest rates set by the bank, and they also benefit from the firm's profits. I study how such common ownership affects loans, particularly as measured by size and price. In my first chapter, I illustrate through a simple model the implications of firm and bank common ownership on loans. I then provide new evidence on the rise and extent of common ownership between firms and banks. I outline three trends in institutional investors' holdings of public companies, and I describe how these trends drive firm and bank common ownership. First, the overall holdings of institutional investors have grown ten-fold in the past 20 years in terms of market value. The average fraction of a public company owned by these investors nearly doubled (to almost 60 percent) over the same time period. The second trend is the increasing fraction of firms and banks that are owned by common owners and also have a loan relationship. The percentage of firm shares held by institutional investors that also hold bank shares at the time of loan origination has doubled to nearly 40 percent between 1990 and 2012. Similarly, the percentage of bank shares held by institutional investors that also hold firm shares doubled to nearly 30 percent over the same time span. Third, I find that common owners are persistent in their holdings. Around 90 percent of investors the drive common ownership between firms and banks remain as investors in the subsequent year, both in terms of the number of investors and in terms of the percentage of shares held by these recurring investors. In my second chapter, I empirically show that when a firm and a bank have common ownership, the firm obtains larger loans from the bank at a lower interest rate. I use the growth of index funds as a source of exogenous variation to estimate a plausibly causal link between common ownership and loan terms not confounded by unobserved factors such as strategic investments by active institutional investors. I find that a one standard deviation increase in common ownership leads to a five basis point interest rate decrease and a three percent loan size increase. I show that these loan terms do not go to underperforming firms but to firms that are less likely to receive a credit rating downgrade. I also find that this improvement in loan terms is more pronounced for smaller and unrated firms. This suggests that the benefits of common ownership may result from decreased information frictions and decreased monitoring frictions for the lender if the lender's shareholders also have access to firm returns and firm information.
| Author | : Theodor Baums |
| Publisher | : Walter de Gruyter |
| Total Pages | : 732 |
| Release | : 1994 |
| Genre | : Business & Economics |
| ISBN | : 9783110136432 |
The volume contains 23 articles by international experts, both scholars and practioners dealing with the development of institutional investors (such as banks, insurances, investment companies, pension funds etc.), their investment and voting policies, the impact on managements of the companies concerned and related issues. The consequences of the international development on capital markets as well as policy implications for the respective national legislations are treated.
| Author | : Jian Huang |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
| Author | : Jian Huang |
| Publisher | : |
| Total Pages | : 89 |
| Release | : 2010 |
| Genre | : Financial institutions |
| ISBN | : |
| Author | : Ligang Zhong |
| Publisher | : |
| Total Pages | : 436 |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
In this dissertation, I investigate the impact of institutional investors on security prices and corporate policies, and offer a new perspective on the vital role that institutional investors play in the modern capital market. Specifically, on the impact on security price movements, I design a new measure of stock-level sentiment based on mutual fund publically disclosed portfolio information and provide a new dimension to better predict stock returns. A trading strategy based on the new sentiment metrics can generate an annualized alpha of 21.27%. The abnormal returns cannot be explained by the time-varying expected returns and transaction costs, and can be best explained by mutual fund overreactions. Hence, my findings can be interpreted as a new anomaly in a new era-when institutional investors are the marginal traders. On the impact on corporate policy side, I document two pieces of new empirical evidence on the importance of long-term institutional holdings: the entrenchment effect of long-term institutional holdings in the context of corporate financing decisions and the active monitoring role of long-term institutional investors in the context of international firms' accounting qualities. Combined with previous studies which favour a long-term institutional investor, the evidence on the cost side of long-term holding I document here can serve as the first call for an optimal investment horizon for firms operating in the U.S.
| Author | : Hoang Huy Nguyen |
| Publisher | : |
| Total Pages | : 111 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
This dissertation consists of two essays investigating the trading by institutions and its impact on the stock market. In the first essay, I investigate why changes in institutional breadth predict return. I first show that changes in breadth are positively associated with abnormal returns over the following four quarters. I then demonstrate that this return predictability can be attributed to the information about the firms' future operating performance. When I examine different types of institutions independently, I find that the predictive power varies across the population of institutions. More specifically, institutions that follow active management style are better able to predict future returns than the passive institutions, and their predictive power appears to be associated with information about future earnings growth. These findings are consistent with the information hypothesis that changes in breadth of institutional ownership can predict return because they contain information about the fundamental value of firms. In the second essay, I examine institutional herding behavior and its impact on stock prices. I document that herds by institutions usually last for more than one quarter and that herds occur more frequently for small and medium size stocks. I find that after herds end, there are reversals in stocks returns for up to four quarters. The magnitude of reversals is positively related to the duration of herding, and negatively related to the price impact of current herding activity. This pattern in returns prevails for all sub-periods examined and is concentrated in small and medium size stocks. My findings suggest that institutional herding may destabilize stock prices.
| Author | : Board of Governors of the Federal Reserve System |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2002 |
| Genre | : Banks and Banking |
| ISBN | : 9780894991967 |
Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.
| Author | : Rasha Ashraf |
| Publisher | : |
| Total Pages | : |
| Release | : 2007 |
| Genre | : Antitakeover strategies |
| ISBN | : |
The first essay analyzes mutual funds' proxy voting records on shareholder proposals. The results indicate that mutual funds support shareholder proposals and vote against management for proposals that are likely to increase shareholders' wealth and rights, in firms with weaker external monitoring mechanisms, in firms with entrenched management, and when funds have longer investment horizon. Mutual funds mostly take management sides on executive compensation related proposals, when they have higher ownership concentration, and when they belong to bigger fund families. The results further indicate that there is a positive reputational effect for the funds undertaking a monitoring role. Moreover, mutual funds reduce holdings when they disapprove of managements' policy, but before doing so they take on an activist role by supporting shareholder proposals. The second essay investigates institutional investors' trading behavior of acquiring firm stocks surrounding merger activities. We label investment companies and independent investment advisors as active institutions and banks, nonbank trusts and insurance companies as passive institutions. We find active institutions increase holdings of acquiring firm stocks for mergers with higher wealth implications. However, active institutions overreact to stock mergers at the announcement, which they appear to correct at the resolution quarter of the merger. The trading behavior of passive institutions suggests that these institutions disregard the market response of merger announcement in trading acquiring firm stocks at the announcement quarter. The passive institutions gradually update their beliefs and trade on the basis of merger wealth effect at the resolution quarter. The third essay examines relation between executive compensation structure with the existing level and changes of takeover defense mechanisms of firms. According to "managerial entrenchment hypothesis," higher managerial power from adoption of takeover defense mechanisms would lead to generating higher rents for executives. "Efficient contracting hypothesis" argue that higher anti-takeover provisions would contribute in achieving efficient contracting by deferring compensation into the future due to the low possibility of hostile takeover. The results support managerial entrenchment hypothesis with regard to existing level of takeover defense mechanisms. With regard to changes in anti-takeover provisions, the existing level of managerial power influence the future pay structure.
