Search results for "Financial distress"
showing 10 items of 11 documents
Bank fragility and contagion: Evidence from the bank CDS market
2016
Understanding how contagion works among financial institutions is a top priority for regulators and policy makers who aim to foster financial stability and to prevent financial crises. Using bank credit default swap (CDS) data, we provide a framework for the evaluation of contagion among banks in different countries and regions during a period of prolonged financial distress. We measure contagion in terms of return spillovers, following a Generalized VAR (GVAR) approach. In addition, we propose an innovative framework to distinguish between two types of contagion: systematic (linked to global factors), and idiosyncratic (linked to bank specific factors). We find evidence of both types of co…
How does fiscal policy react to wealth composition and asset prices?
2012
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Revisiting bank failure in the United States: a fuzzy-set analysis
2020
Past financial crises have illustrated the importance of recognising the combinations of factors that can cause financial distress in the banking industry. Accordingly, this study uses fuzzy-set qualitative comparative analysis (fsQCA) to identify the combinations of factors that lead to bank failure. The data consist of 30 annual financial ratio series for 156 U.S. banks over a 15-year period (2001–2015). Identifying combinations of conditions that can produce bank failure is crucial to help regulators and bank managers. The fsQCA presented in this paper sheds light on the relationships between combinations of conditions and bank failure, providing a solution comprising two sufficient and …
The euro area sovereign debt crisis: Can contagion spread from the periphery to the core?
2014
Abstract We examine the determinants of joint default risk of euro area countries during 2007–2011. To accomplish this, we recover joint default probabilities from individual CDS contracts. In contrast to earlier theoretical studies, we find that financial linkages are an active contagion transmission channel only in the case of the troubled periphery euro area economies. During the current sovereign debt crisis, real economy linkages play a more important role in transmitting shocks from the euro area periphery towards its core. Countries that have stronger trade interconnections with troubled economies tend to have a higher expected joint default risk.
Macro-uncertainty and financial stress spillovers in the Eurozone
2020
Abstract This paper studies macro-uncertainty and financial distress spillovers within the Eurozone. We propose a novel methodology to derive the indices of spillovers, by using a Global Vector autoregressive model fitted to data sampled at mixed-frequencies. We find that macro-uncertainty and financial stress are relatively disconnected in the Eurozone. We also show that connectedness between core and periphery Eurozone countries mainly operates through financial stress and it decreases since the outbreak of the Eurozone sovereign debt crisis (with an increasing role played by peripheral countries). As a result, investors and policymakers should monitor separately macro-uncertainty and fin…
Financial Fragility and Distress Propagation in a Network of Regions
2012
Building on previous works on business fluctuations, we model the propagation of financial distress in a network of regions, each populated by heterogeneous interacting firms and banks. In order to diversify risk, firm sell goods outside their own region and borrow from banks located there. However, this results in ties across regions which propagate financial distress across regional borders. We investigate how the average level of economic integration affects the probability of both individual and systemic failures. We find that the benefit of greater diversification is eventually offset by the effect of financial acceleration and contagion. In particular, beyond a certain level of integr…
The Impact of Bank Concentration on Financial Distress: The Case of the European Banking System
2009
This paper examines the impact of bank concentrationon bank financial distress using a balanced panel of commercial banks in the EU‐25 over a sample period running from 2003 to 2007. Financial distress is proxied by the observations falling below a given threshold of the empirical distribution of a risk‐adjusted indicator of bank performance: the Shareholder Value Ratio. We employ a panel probit regression estimated by GMM in order to obtain consistent and efficient estimates, following the suggestion made by Bertschek and Lechner (1998). After controlling for a number of environment variables, we conclude that our findings suggest a positive effect of bank concentration on financial distre…
A dynamic performance management approach to frame corruption in public procurement: a case study
2021
Purpose The purpose of this paper is to frame the causal relationships between corruption in public procurement and performance of local governments. Design/methodology/approach An outcome-based dynamic performance management approach is adopted to explore a representative case study of a small Italian municipality. The model is based on three sources: qualitative primary data generated by face-to-face convergent interviews; secondary data retrieved from documents describing legal cases linked to procurement and open-access repositories; and an extensive literature review. Findings Emphasizing the role of community civic morality systemically may help to understand some counterintuitive re…
The Importance of Alliances in Firm Capital Structure Decisions: Evidence from Biotechnology Firms
2015
Building on finance research, we argue that the ex post hazards arising from alliance formation depend upon the firm's financial condition. Financial distress jeopardizes the continuity of an alliance and the value of the investments involved. Thus, firms should reduce leverage to signal continued commitment and to induce investments from alliance partners. Accordingly, we find that a firm's current alliance propensity predicts its subsequent capital structure decisions and that this relationship is most pronounced in the presence of other exchange hazards. Our paper contributes to alliance research and to the growing literature discussing the strategic consequences of capital structure. Co…
Financial distress and real economic activity in Lithuania: a Granger causality test based on mixed-frequency VAR
2020
In this paper, we extend the monthly financial stress index for Lithuania, computed by the European Central Bank, to a daily frequency and we also include banking sector stress among its constituents, beyond bond, equity and foreign exchange markets. We investigate the causal relationship between the daily financial stress index and monthly industrial production growth, using a Granger causality test applied to a mixed-frequency VAR. Our results suggest evidence of Granger causality from financial stress to industrial production growth once the index is enriched by daily observations from the financial markets. Our findings, based on impulse response analysis, confirm the negative effect of…