Securities class actions, corporate governance and managerial agency problems
This paper provides support for the proposition that securities class actions help solve agency problems. Two key findings support this conclusion. First, firms that are more likely to suffer from agency problems are more likely to face class actions. Risky firms, large firms, young firms, low market-to-book firms and non-dividend paying firms as of the end of 1990 were more likely to face a class action filing during the January 1991 to March 1998 period. Second, the probability of CEO turnover increases dramatically after class action filings. The increase can not be explained by omitted ...
Board connections, conflicts, and bank lending behavior
The real effects of U.S. banking deregulation
Diversification, size, and risk at bank holding companies
This paper shows that large BHCs are better diversified than small BHCs based on market measures of diversification. We find, however, that better diversification does not translate into reductions in overall risk. The risk reducing potential of diversification at large BHCs is offset by their lower capital ratios, larger C&I loan portfolios, and greater use of derivatives. Our results suggest that asset growth should enhance diversification but that the effects on risk will depend on the extent to which growth is accompanied by changes in portfolio attributes. Using data from 1980 to 1993, ...
The political economy of deregulation: evidence from the relaxation of bank branching restrictions in the United States
This paper provides a positive political economy analysis of deregulation, focusing on the recent removal of barriers to bank branching. Intra- and inter- state branching restrictions had been in place in most states for more than a century but have largely disappeared during the last 25 years. Branching restrictions primarily benefit small and inefficient banks against competition from large and efficient banks. Competing financial institutions not subject to the branching laws also benefit from restrictions on their rivals. Consumer and small businesses, however, tend to be harmed by ...
Borrower risk and the price and nonprice terms of bank loans
Banks are in the business of lending to risky and hard-to-value businesses. This paper show that both the price and non-price terms of bank loans reflect observable components of borrower risk. As expected, riskier borrowers -- smaller borrowers, borrowers with less cash, and borrowers that are harder for outside investors to value -- pay more for their loans. In addition, the non-price terms of loans are systematically related to pricing; small loans, loans that are secured, and loans with relatively short maturity carry higher interest rates than other loans, even after controlling for ...
The finance-growth nexus: evidence from bank branch deregulation
This paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the United States over the past 25 years. We find that the rates of real, per-capita growth in income and output increase significantly following intrastate branch reform. We also argue that the observed changes in growth reflect causality flowing from financial sector reform to improved growth performance. This argument is supported by evidence from the process of branching deregulation, from the timing of such policy changes, and from bank lending ...