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Working Paper
Why do U.S. cross-listings matter?
This paper investigates the underlying determinants of home bias using a comprehensive sample of U.S. investor holdings of foreign stocks. We document that U.S. cross-listings are economically important, as U.S. ownership in a foreign firm roughly doubles upon cross-listing in the United States. We explore the cross-sectional variation in this "cross-listing effect" and show that increases in U.S. investment are largest in firms from weak accounting backgrounds and in firms that are otherwise informationally opaque, indicating that U.S. investors value the improvements in disclosure ...
Working Paper
The stability of interest rate processes
This paper presents a careful reexamination of Chan, Karolyi, Longstaff, and Sanders (CKLS 1992). By redefining the possible regime shift period in line with evidence from known policy changes and past empirical research, we find evidence that contradicts the major results in their paper. The widely cited conclusion of their paper is that the elasticity of interest rate volatility is 1.5. CKLS also concluded that there was no structural shift in the interest rate process after October 1979. When the structural shift period is defined to be temporary and coincident with the Federal Reserve ...
Working Paper
To what extent will the banking industry be globalized? a study of bank nationality and reach in 20 European nations
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 host nation banks for cash management services, and that bank reach may be strongly influenced by this choice of bank nationality. Our results suggest limits to the degree of future bank globalization.
Working Paper
Loans to Japanese borrowers
Though the Japanese banking system has been the focus of numerous empirical studies, there is scant empirical evidence on the characteristics of loan contracts between Japanese firms and their banks. This paper incorporates relatively new contract-specific data on bank loans to large borrowers to help fill this gap. Specifically, we examine how loans to Japanese companies compare with loans to similar non-Japanese companies and how loans to Japanese borrowers vary according to the nationality of the bank making the loan. We then gauge the value of bank loans to Japanese borrowers by ...
Working Paper
On the sequencing of projects, reputation building, and relationship finance
We study the decision an entrepreneur faces in financing multiple projects and show that relationship financing will arise endogenously in an environment where strategic defaults are likely, even when firms have access to arm's-length financing. Relationship financing allows an entrepreneur to build a private reputation for repayment that reduces the cost of financing. However, in an environment where the risk of strategic default is low, the benefits from reputation building are outweighed by holdup rents extractable by the incumbent lender. Entrepreneurs then choose to finance projects from ...
Working Paper
To what extent will the banking industry be globalized? a study of bank nationality and reach in 20 European nations
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 host nation banks for cash management services, and that bank reach may be strongly influenced by this choice of bank nationality. Our results suggest limits to the degree of future bank globalization.
Conference Paper
Loans to Japanese borrowers
Working Paper
Firms and their distressed banks: lessons from the Norwegian banking crisis (1988-1991)
We use the near-collapse of the Norwegian banking system during the period 1988-91 to measure the impact of bank distress announcements on the stock prices of firms maintaining a relationship with a distressed bank. We find that although banks experienced large and permanent downward revisions in their equity value during the event period, firms maintaining relationships with these banks faced only small and temporary changes, on average, in stock price. In other words, the aggregate impact of bank distress on listed firms in Norway appears small. Our results stand in contrast to studies that ...
Journal Article
Global integration in the banking industry
Lowered regulatory barriers and advances in technology have reduced the cost of supplying banking services across borders. At the same time, growth in activity by multinational corporations has increased the demand for international financial services. As a result, many observers believe that global integration is under way in the banking industry, that banks are expanding their reach across borders, and that many banking markets will therefore develop large foreign components. The authors report on a study conducted by them, along with Qinglei Dai and Steven Ongena, that examined the ...