Search Results
Working Paper
Nice to be on the A-list
This study uses Japanese data to address an important shortcoming of most of the existing literature on credit availability by including a set of unlisted firms (which are the firms most likely to be bank dependent) in the analysis, and by investigating differences between the treatment of listed and unlisted firms by their lenders. While we find evidence consistent with evergreening behavior by banks toward listed firms, whereby banks continue to lend to weak firms so they can continue making interest payments on existing loans and put off bankruptcy, the more striking result is that banks ...
Journal Article
Implications of the globalization of the banking sector: the Latin American experience
Foreign entry into domestic banking markets remains a contentious issue. Whether privatizing a state bank in Brazil or selling a failed bank in Japan, the proposed sale of a large domestic financial institution, possibly to a foreign acquirer, frequently results in a major controversy. Many Asian countries have yet to experience major foreign penetration of domestic banking markets, while Latin American countries have privatized many of their banks and have encouraged foreign banks to enter their domestic markets. ; Because many Latin American countries opened their markets during the 1990s, ...
Working Paper
Relationship Lending: That Ship Has Not Sailed for Community Banks
This study provides direct evidence of the value to banks arising from relationship lending by estimating the market premium placed on banking organizations’ small business loan portfolios. Using data from the small business loan survey contained in the June bank Call Reports, we find that small commercial and industrial (C&I) loans add value to community banks both in absolute terms and relative to the value contributed by larger C&I loans. The value‐enhancing effect of small business loans is observed primarily at small community banks, and it was present during the Great Recession as ...
Working Paper
Does the Federal Reserve possess an exploitable informational advantage?
This paper provides evidence that the Federal Reserve has an informational advantage over the public that can be exploited to improve activist monetary policy. The informational advantage derives from the Fed?s role as a bank supervisor, and it is shown to be of sufficient duration to be effective in guiding activist monetary policy, even in simple rational expectations models. The informational superiority does not result from the Fed having earlier access to publicly released data about the financial condition of banks. Instead, this informational advantage is generated by confidential ...
Working Paper
Troubled banks, impaired foreign direct investment: the role of relative access to credit
The relative wealth hypothesis of Froot and Stein (1991), motivated by the aggregate correlation between real exchange rates and foreign direct investment (FDI) observed in the 1980s, cannot explain one of the major shifts in FDI in the 1990s: the continued decline in Japanese FDI during a period of stable stock prices and a rapidly appreciating yen. However, when the relative wealth hypothesis is supplemented with the relative access to credit hypothesis proposed in this study, we are able to show that unequal access to credit by Japanese firms can explain the FDI puzzle in the 1990s. We ...
Conference Paper
The effects of interstate branching on small business lending.
Working Paper
Is bank supervision central to central banking?
Recently, several central banks have lost their bank supervisory responsibilities, in part because it has not been shown that supervisory authority improves the conduct of monetary policy. This paper finds that confidential bank supervisory information could help the Board staff more accurately forecast important macroeconomic variables and is used by FOMC members to guide monetary policy. These findings suggest that the complementarity between supervisory responsibilities and monetary policy should be an important consideration when evaluating the structure of the central bank.
Working Paper
The poor performance of foreign bank subsidiaries: were the problems acquired or created?
We examine foreign acquisitions of United States banks around the time of the ownership change to determine whether the observed poor performance of foreign subsidiaries is the result of changes in business strategy or the preexisting characteristics of the target bank. We find that many of the problems were already present at the time of acquisition. However, changes in business strategy by the foreign owners were generally not successful in raising the banks's performance level to that of its domestic peers.
Journal Article
The stock market and economic activity