Anne Villamil (Henry B. Tippie College of Business, the University of Iowa)
Title: Bank Intermediation and Consumer Bankruptcy
Abstract:
How does bankruptcy protection affects household balance sheet adjustments and aggregate consumption when credit tightens? We analyze the aggregate dynamics in household deleveraging and consumption in model in which households can default on unsecured credit. There is trade-off between a beneficial insurance and negative creditworthiness effects. When credit tightens, we find that: (i) Consumers decrease new borrowing and may default on existing credit, resulting in deleveraging and a drop in aggregate consumption with important selection effects due to changes in the composition of borrowers. (ii) Consumption and welfare reductions are especially harsh for poor households. (iii) Bankruptcy costs lead to a drop in aggregate consumption on impact, and exclusion from the credit market reduces the ability to smooth implying a slower recovery. The 2005 BAPCPA reform made filing for bankruptcy more difficult, and we find that it worsened the negative effects of credit tightening on aggregate consumption and welfare.
Date: Thursday 23rd January, 13:00 - 14:00
Event Location: Upper Hall, Peterhouse College, Cambridge
Alberto Manconi (Bocconi School of Management)
Title: Are star lawyers also better lawyers?
Abstract:
We study the performance of dominant law firms (“stars”) in litigation brought against publicly traded corporations. We use insurance coverage as a benchmark for expected settlement amounts, to separate to what extent (a) stars reach more favorable settlements on any lawsuit (a performance or treatment effect) or (b) stars are retained in lawsuits where a favorable settlement is ex ante more likely (a selection effect). Our findings indicate the latter, and that star firms have an economically small impact on settlement amounts. This result is not explained by measurement error or over-/under-insurance. The extent to which stars are associated with improvements in corporate governance also appears limited. The stars’ large market share and the high fees they earn may be justified by their ability to reduce uncertainty about the lawsuit outcome or by frictions, such as aggressive marketing and limited client sophistication and bargaining power, which limits the stars’ clients’ ability to turn to other law firms.
Date: Thursday 6th February, 13:00 - 14:00
Event Location: Upper Hall, Peterhouse College, Cambridge
Ernst Maug (University of Mannheim, Business School)
Title: When Shareholders Disagree: Trading after Shareholder Meetings
Abstract:
This paper analyzes how trading after shareholder meetings changes the composition of the shareholder base. Using data on daily trades we find that mutual funds reduce their holdings if their votes are opposed to the voting outcome. Trading volume is high even when stock prices do not change, peaks at the meeting date, and remains high up to four weeks after shareholder meetings. These findings are difficult to reconcile with models in which shareholders trade because of differences in information. Fund characteristics that proxy for heterogeneous preferences are relevant for funds’ trading decisions, but do not explain our results. We explore a model of trading based on differences of opinion, which offers sharp predictions on the relationship between volume and volatility, find strong support for its predictions in the data, and little to support models in which voting aggregates information. We conclude that shareholders disagree when they vote at meetings. Hence, trading after-meetings creates a shareholder base with more homogeneous beliefs. We argue that these findings have important implications for corporate governance.
Date: Thursday 20th February, 12:30 - 13:30
Event Location: KH107, Keynes House, Cambridge Judge Business School
Gyöngyi Lóránth (University of Vienna)
Title: Financing and Resolving Banking Groups (joint with Albert Banal-Estanol and Julian Kolm)
Abstract:
Banking groups create financing synergies by transferring financing capacity across subsidiaries. Single-point-of-entry (SPOE) resolution imposes a single balance sheet on the banking group. This allows the regulator to shift
resources across banking units upon resolution, thus permitting the ex-post efficient continuation of units that are hit by negative liquidity shocks. However, SPOE resolution can also prevent the ex-ante efficient formation of banking groups because outside investors take the ex-post transfers into account. Multiple-point-of-entry (MPOE) resolution separates banking units and maintains limited liability within the group. Separate resolution can commit the regulator to shut down units, which reduces the ex-post required financing capacity and may ease the ex-ante financing constraints. In addition, SPOE resolution may not allow the group to exploit all financing synergies because it may prevent the choice of capital structure that minimizes the costs of incentive provision. Making the choice between SPOE and MPOE resolution bank specific increases efficiency relative to the adoption of a uniform resolution regime for all banks. Resolution improves outcomes relative to friction-less private financial restructuring.
Date: Thursday 5th March, 12:30 - 13:30
Event Location: KH107, Keynes House, Cambridge Judge Business School
Nadya Malenko
Title: Not Disclosed.
Abstract: Abstract Unavailable.
Date: Thursday 30th April, 2020, 13:00 - 14:00
Event location: Online
Merih Sevilir (Kelley School of Business, Indiana University)
This seminar was due to take place on Thursday the 30th of April at 13;00 but was cancelled. No further information is available.
Helene Rey (London Business School)
Title: Financial Cycles with Heterogeneous Intermediaries
Abstract: This paper develops a dynamic macroeconomic model with heterogeneous financial intermediaries and endogenous entry. It features time-varying endogenous macroeconomic risk that arises from the risk-shifting behaviour of the cross-section of financial intermediaries. We show that when interest rates are high, a decrease in interest rates stimulates investment and increases financial stability. In contrast, when interest rates are low, further stimulus can increase aggregate risk while inducing a fall in the risk premium. In this case, there is a trade-off between stimulating the economy and financial stability.
Date: Thursday 14th May, 13:00 - 14:00
Event Location: Online
Georgy Chabakauri (Associate professor of Finance at the LSE)
Georgy Chabakauri holds PhD in Finance from the London Business School and PhD in Mathematics from Moscow State University. His research interests include asset pricing, macro-finance, and asymmetric information.
Title: Multi-Asset Noisy Rational Expectations Equilibrium with Contingent Claims
Abstract:
We study a noisy rational expectations equilibrium in a multi-asset economy populated by informed and uninformed investors and noise traders. The assets can include state contingent claims such as Arrow-Debreu securities, assets with only positive payoffs, options or other derivative securities. The probabilities of states depend on an aggregate shock, which is observed only by the informed investor. We derive a three-factor CAPM with asymmetric information, establish conditions under which asset prices reveal information about the shock, and show that information asymmetry amplifies the effects of payoff skewness on asset returns. We also find that volatility derivatives make incomplete markets effectively complete, and their prices quantify market illiquidity and shadow value of information to uninformed investors.
Date: Thursday 28th May, 13:00 - 14:00
Event Location: Online
Albert J. Menkveld (VU University Amsterdam)
Title: Large Orders in Small Markets: Execution with Endogenous Liquidity Supply
Abstract:
We model the execution of large uninformed sell orders in the presence of strategic competitive market makers. We solve for the unique symmetric equilibrium of the model in closed-form. Our equilibrium findings provide a rationale for the empirically observed patterns of (i) short orders exhibiting higher intensity of execution and (ii) price pressure potentially subsiding before execution is completed. The model further generates a liquidity surface where the total price impact depends both on the size and duration of the order. Lastly, our analysis demonstrates that large orders unequivocally benefit market makers, while smaller investors stand to benefit only if the order trades with a sufficiently high intensity.
Date: Thursday 11th June, 13:00 - 14:00
Event Location: Online
Chiaki Hara (Kyoto University)
Title: Comparative Ambiguity Aversion for Smooth Utility Functions
Abstract:
When a twice differentiable utility function represents an ambiguity-averse preference relation over the set of acts on monetary consequences, we define a measure of ambiguity aversion. The measure is determined by the Hessian of the utility function and the subjective probability derived from it, and allows us to compare two decision makers' measure of ambiguity aversion even when they have different risk attitudes and utility functions of forms that have been characterized by different axioms in the literature. Implications on the numerical analysis on portfolio
Date: Thursday, 15th October, 13:00 to 14:00
Event Location: Online
Piet Eichholtz (Maastricht University) and Erkan Yönder (Concordia University)
Title: Optimism in the Executive Team: Corporate Asset Transactions and Stock Performance
Abstract:
The literature regarding the effects of managerial optimism concentrates on CEOs, all but neglecting the broader executive team. We evaluate the interplay of the optimism levels of the CEOs and CFOs of listed real estate investment trusts, and study the commercial real estate transactions made by the firms led by these teams. We find that firms led by optimistic executive teams pay 2.7% more than their peers for their private asset acquisitions if the cash ratio increase by one percentage point. These firms also exhibit inferior stock performance following their asset acquisitions. Conversely, diverse opinions in the boardroom prevent firms from overpaying on their asset transactions, improving their stock performance relative to optimistic teams. Our findings suggest that diversity in terms of executive optimism is a soft governance mechanism with salience to firm performance.
Date: Thursday 29th October, 13:00 - 14:00
Event Location: Online
Yunzhi Hu (Kenan Flagler)
Title: Intermediary Financing without Commitment
Abstract:
Intermediaries can reduce agency frictions in the credit market through monitoring. To be a credible monitor, an intermediary needs to retain a fraction of its loans; we study the credit market dynamics when it cannot commit to doing so. We compare the role of certification – monitoring to increase repayment – with the role of intermediation – channeling funds from depositors to the borrower. With commitment to retentions, certification and intermediation
are equivalent. Without commitment, they lead to very different dynamics in loan sales and monitoring. A certifying bank sells its loans and reduces monitoring over time. By contrast, an intermediating bank issues short-term deposits to internalize the monitoring externalities and retain its loans. While the borrowing capacity is higher under intermediation, an entrepreneur may prefer to borrow from a certifying-only intermediary.
Date: Thursday 12th November, 13:00 - 14:00
Event Location: Online
Karsten Müller (Princeton University)
Title: Credit Allocation and Macroeconomic Fluctuations
Written by Karsten Müller and Emil Verner
Abstract:
We study the relationship between credit expansions, macroeconomic fluctuations, and financial crises using a novel database on the sectoral distribution of private credit. Constructed from more than 600 sources, these data allow us to map the sectoral allocation of credit across 116 countries starting in 1940 while matching data on total credit from existing sources. Equipped with this new resource, we document a striking shift in the composition of credit away from primary and manufacturing sectors toward households, construction, real estate, and other non-tradable sectors over the past five decades. Motivated by several salient case studies, including the Eurozone and Japanese banking crises, we then ask whether the allocation of firm credit across different industries plays a role in macroeconomic fluctuations. We find stark differences between different varieties of corporate credit expansions. In particular, we show that lending to the construction, real estate, and non-tradable sectors are associated with a boom-bust pattern in output and elevated financial crisis risk, similar to household credit booms. In contrast, there is no such pattern for tradable-sector credit expansions, which are often followed by stronger output growth. These patterns reject models in which debt plays a uniform role and instead support the idea that pre-determined differences across sectors shape interactions between finance and the real economy.
Date: Thursday 26th November, 13:00 - 14:00
Event Location: Online