- 08 Jun 2020
- Working Paper Summaries
Loan Types and the Bank Lending Channel
Practitioners commonly refer to four distinct loan types: asset-based loans, cash flow loans, trade financing, and leasing. It is important to account for these differences in loan type in order to analyze the economic significance of credit market disruptions.
- 05 Nov 2019
- Working Paper Summaries
The Economic Effects of Private Equity Buyouts
Private equity buyouts are a major financial enterprise that critics see as dominated by rent-seeking activities with little in the way of societal benefits. This study of 6,000 US buyouts between 1980 and 2013 finds that the real side effects of buyouts on target firms and their workers vary greatly by deal type and market conditions.
- 08 May 2019
- Working Paper Summaries
Bank Boards: What Has Changed Since the Financial Crisis?
Since the 2008 financial crisis, bank boards have not improved their cultural or gender diversity compared to other companies, nor are they better qualified than before the crisis. Outside directorships of bank directors and the extent of CEOs also being Chairman also remains the same. However, there is some evidence of better risk oversight both from managers and the board.
- 03 Apr 2019
- Book
Fintech's Game-Changing Opportunities for Small Business
In the new book Fintech, Small Business, & the American Dream, Karen Mills describes how technology is opening up new capital for entrepreneurs. Around the corner: The transformative benefits of AI and big data. Open for comment; Comment(s) posted.
- 20 Dec 2018
- Cold Call Podcast
Using Fintech to Disrupt Eastern Bank from Within
When Eastern Bank decided to battle a threat from new competitors, it hired a fintech executive to set up Eastern Labs and start innovating. Karen Mills discusses her case study on what happened next. Open for comment; Comment(s) posted.
- 15 Nov 2018
- Working Paper Summaries
Do Fire Sales Create Externalities?
This paper contributes to our understanding of the role of large institutional investors in securities markets, providing evidence that the structure of the mutual fund industry increases the risks of costly "fire sales."
- 11 Sep 2018
- Working Paper Summaries
IQ from IP: Simplifying Search in Portfolio Choice
Mutual fund managers solve their complex “search problem” for superior investable returns by tracking—and trading—on very particular sets of firms and insiders. These sets are chosen strategically and remain very persistent over time, as does the outperformance these insiders’ trades afford to the given fund managers.
- 12 Oct 2017
- Working Paper Summaries
The Decline of Big-Bank Lending to Small Business: Dynamic Impacts on Local Credit and Labor Markets
Between 2008 and 2014, the Top 4 banks sharply decreased their lending to small business. This paper examines the lasting economic consequences of this contraction, finding that a credit supply shock from a subset of lenders can have surprisingly long-lived effects on real activity.
- 26 Jun 2017
- Working Paper Summaries
Inventory Management for Mobile Money Agents in the Developing World
Mobile money agents in the developing world face a key inventory management challenge: How much cash and e-float should be held to minimize both stockouts and excess working capital? The authors develop two inventory models and show substantial inventory cost reduction with a large dataset of East African mobile money transactions.
- 01 Jun 2017
- Cold Call Podcast
Building India’s First $100 Billion Company
Startups welcome growth but are often strangled by it. In this podcast, Sunil Gupta discusses how entrepreneur Vijay Shekhar Sharma is meeting this challenge with his mobile payments company Paytm. Open for comment; Comment(s) posted.
- 08 May 2017
- Working Paper Summaries
Monetary Policy and Global Banking
Global banks commonly move funds across markets to respond to differential monetary policy changes. This paper finds that cross-currency flows affect the cost of foreign exchange hedging, ultimately affecting credit supply in different currencies. The traditional view of how global banks respond to local shocks is weakened and, for major currencies, breaks down.
- 02 May 2017
- Working Paper Summaries
The Cross Section of Bank Value
How do commercial banks create value? This paper represents the first attempt to empirically identify the primary determinants of cross-sectional variation in bank value. Among the findings: A bank's ability to produce deposits is by far the most important determinant in explaining cross-sectional variation in bank value.
- 30 Nov 2016
- Working Paper Summaries
The Stock Market and Bank Risk-Taking
It is clear that risk-taking by financial institutions is one of the main causes of financial crises and severe recessions. Yet we know relatively little about what gives rise to such risk-taking in the first place. This paper presents evidence that a focus on short-term stock prices induces publicly-traded banks to increase risk relative to privately-held banks. The findings provide support for the view that compensation schemes should require management to hold stock for longer periods to mitigate their incentives to pump up short-term earnings and the short-term stock price.
- 02 Aug 2016
- Working Paper Summaries
Financial Regulation in a Quantitative Model of the Modern Banking System
This study at the intersection of macroeconomics and banking explores the optimal regulation of banks. Studying and quantifying the effects of capital requirements in a model that features regulated (commercial) and unregulated (shadow) banks, the authors find that a higher capital requirement makes regulated banks safer, but does not affect the riskiness of shadow banks. The net benefit of such a policy would depend on the level of fragility of the unregulated banks.
- 15 Feb 2016
- Working Paper Summaries
Replicating Private Equity with Value Investing, Homemade Leverage, and Hold-to-Maturity Accounting
This paper studies the asset selection of private equity investors and the risk and return properties of passive portfolios with similarly selected investments in publicly traded securities. Results indicate that sophisticated institutional investors appear to significantly overpay for the portfolio management services associated with private equity investments.
- 12 Nov 2015
- Working Paper Summaries
Catering to Investors Through Product Complexity
This paper investigates the rationale for issuing complex securities to retail investors.
- 02 Oct 2015
- Working Paper Summaries
Gradualism in Monetary-Policy: A Time Consistency Problem?
Jeremy C. Stein and Adi Sunderam develop a model of monetary policy in which the observed degree of policy inertia is not optimal from an ex ante perspective, but rather reflects a fundamental time consistency problem.
- 02 Sep 2015
- Research & Ideas
Explaining China's Crash
After a decade of massive growth, China’s stock market began a precipitous summer slide that that hasn't slowed yet. Dante Roscini explains what's deflating markets worldwide. Open for comment; Comment(s) posted.
- 13 Aug 2012
- Research & Ideas
When Good Incentives Lead to Bad Decisions
New research by Associate Professor Shawn A. Cole, Martin Kanz, and Leora Klapper explores how various compensation incentives affect lending decisions among bank loan officers. They find that incentives have the power to change not only how we make decisions, but how we perceive reality. Closed for comment; 10 Comment(s) posted.
Making Economics More Useful: How Technological Eclecticism Could Help
This paper shows how tools, such as simulations used to design new technologies, can facilitate collaborative economic policy judgments. The paper forms part of a broader, ongoing study of knowledge in practical fields such as engineering, medicine, and business.