Search Results
Conference Paper
The asset flexibility option and the value of deposit insurance
Journal Article
Settlement delays and stock prices
An analysis of whether investors consider the length of the settlement delay between the time a stock trade is executed and the security is delivered. By modeling stock returns and conducting regression tests, the author concludes that stock prices do reflect the effects of the settlement delay.
Working Paper
Capital forbearance and thrifts: an ex post examination of regulatory gambling
This paper estimates the losses embedded in the capital positions of the 996 FSLIC-insured savings and loan institutions that did not meet capital standards at the end of the 1970s. We compare the estimated cost of resolving the insolvencies of these institutions at the end of the 1970s with the actual failure-resolution costs for those that were closed by July 3 1, 1992, and the projected resolution costs for the remaining thrifts that are likely to be closed. Our results show that even when one considers only the direct costs associated with delayed closure of economically failed thrifts, ...
Working Paper
Analyzing imputed financial data: a new approach to cluster analysis
The authors introduce a novel statistical modeling technique to cluster analysis and apply it to financial data. Their two main goals are to handle missing data and to find homogeneous groups within the data. Their approach is flexible and handles large and complex data structures with missing observations and with quantitative and qualitative measurements. The authors achieve this result by mapping the data to a new structure that is free of distributional assumptions in choosing homogeneous groups of observations. Their new method also provides insight into the number of different ...
Working Paper
Understanding 401(k) plans
Questions about the future of the Social Security system continue to surface. As a result, interest in employer-sponsored retirement plans and other retirement investment options increases. But the restrictions and rules associated with various defined benefit plans such as 401(k), 403 (b), and 457 plans can be confusing, and these plans have risks of their own. The authors explore these plans and explain the need to view retirement savings as only one part of a portfolio.
Working Paper
Market imperfections
Market imperfections affect virtually every transaction in some way, generating costs that interfere with trades that rational individuals make, or would make, in the absence of the imperfection. Understanding these costs gives us insight regarding the total costs of transactions, where to place them, or whether to make them at all. Market imperfections also generate profit opportunities for entrepreneurs who can reduce or eliminate them. Institutions or individuals who can lower costs tracing to imperfections have a competitive advantage and can earn economic rents until competing firms ...
Journal Article
Standardizing world securities clearance systems
A discussion of how the dramatic increase in the volume of international securities trading has strained the present system of settling trades. Included are nine recommendations made by the Group of Thirty to reduce the risk and cost of trading in financial markets worldwide and the difficulties that would accompany implementation of a new system.
Working Paper
On flexibility, capital structure, and investment decisions for the insured bank
Most models of deposit insurance assume that the volatility of a bank's assets is exogenously provided. Although this framework allows the impact of volatility on bankruptcy costs and deposit insurance subsidies to be explored, it is static and does not incorporate the fact that equityholders can respond to market events by adjusting previous investment and leverage decisions. This paper presents a dynamic model of a bank that allows for such behavior. The flexibility of being able to respond dynamically to market information has value to equityholders. The impact and value of this ...
Working Paper
Troubled savings and loan institutions: voluntary restructuring under insolvency
Regulatory agencies are unwilling or unable to close thrift institutions immediately upon insolvency. Instead, they have progressively reduced the thrift capital requirement, refrained from enforcing that requirement, and allowed thrifts to hold more nonmortgage loans in the hope that the industry would recover. According to this study, only 13 percent of the largest 300 firms eventually recovered between the end of 1979 and the end of 1989. When the thrift crisis surfaced in the early 1980s, the firms that ultimately recovered operated in a fashion similar to those that eventually failed. ...
Working Paper
A discrete choice model of dividend reinvestment plans: classification and prediction
We study 852 companies with dividend reinvestment plans in 1999 matched by total assets to 852 companies without such plans. We use discrete choice methods to predict the classification of these companies. We interpret the misclassified companies as being likely to switch their plan status. That is, if a firm's financial data suggest that a company should have had a dividend reinvestment plan in 1999 but did not, then we expect that it would be more likely to institute a plan than the other companies in the sample. Conversely, if it did have a plan but the financial data suggest that it ...