With this book, we aim to enrich the banking and finance literature, providing insight into new research topics which are being undertaken in the aftermath of the financial crisis. In this sense, the main purpose of the researches included in this volume is to span all the major research fields in finance and banking.
This book is divided into different chapters that cover a selection of some of the most recent research studies on banking and finance. These studies are carried out by a selection of academics from a range of prestigious European universities and research institutions. All these investigations have benefited from being discussed during the 2015 Wolpertinger Conference organized by the European Association of University Teachers of Banking and Finance, held in September 2015.
Nowadays, the finance literature is specially focused on the implications of post- banking crisis developments. However, after the financial crisis, the current research lines in banking and finance are quite broad. In this volume we have aimed to reflect some of these lines, including outstanding papers dealing with interesting issues. According to our selected title the research topics covered in this volume can be structured into different blocks:
- Bank fundingBanks needs to finance their activity, and the cost of funding affects a range of economic variables with important implications for both monetary and financial stability. Several aspects of bank funding are covered in this volume. In particular we look at how issuers are matched with reputable underwriters in debt markets and whether earnings management are likely to affect banks’ cost of funding. Furthermore, bank enterprise lending is studied using bank-specific, macroeconomics and structural variables
- Financial instrumentsThe greater use of financial instruments and the development of sophisticated financial techniques during the pre-crisis period are also covered in this volume. In this sense, together with IPOs financial instruments like sukuks and corporate bonds are studied from different perspectives. Beside this, microfinance investment vehicles (MIVs), listed on the market and identified as “impact investments-oriented”, are also examined analyzing if they are compliant with the recent definition of social impact investment suggested by OECD.The relationship between new financial instruments and the importance of the funding gap is also addressed. The situation in which companies, because of market imperfections, do not get the amount of capital that they would get in an efficient market has important implications for their financial stability.
- Decision-Making in the Banking IndustryAcknowledging that intertemporal people decisions are not rational and that irrationality interferes with long-range financial decision-making; our study possesses an examination about the role of episodic prospection in long-range financial decisions.Furthermore, the rationality behind the different characteristics of dividend policies is also investigated using as sample data the policies of listed companies in the main European markets during the last 15 years.
The second chapter, “Does earnings management affect banks’ cost of funding? An empirical investigation across an European sample”, by Federico Beltrame, Daniele Previtali and Alex Slip investigates how loan loss provisions are used discretionally to smooth earnings, manage capital requirements, and increase the stock market valuation. As managers’ discretionary behavior might have a negative effect, they study its impact on the cost of funding. Their findings suggest that the discretionary usage of provisioning affects the cost of funding, due to the increase of the overall risk of the bank.
Chapter 3, “Volatility linkages and co-movements between international stocks and the sukuk market” by Alberto Dreassi, Stefano Miani, Andrea Paltrinieri and Alex Sclip examines the volatility behavior and the co-movements between sukuk and international stock indexes. They provide evidence of lower correlations between sukuk and US and EU stock markets as well as strong volatility linkages between sukuk and regional market indexes during financial crisis. These higher volatility linkages and dynamic correlations during financial crises show that sukuks are hybrid instruments positioned between bonds and equity.
In Chap. 4, “Bank-specific, macroeconomic or structural variables: which explains bank enterprise lending? The evidence from transition countries” by Ewa Miklaszewska and Krzysztof Kil analyze trends in lending policies in Central and Eastern Europe (CEE). They argue in favor of a greater importance for the macroeconomic environment, an increasing scale, and the universal profile of banks in the structure of banks’ loan portfolios.
Chapter 5, “The reputable underwriting matching in corporate bond issuances: Evidence for non-financial bonds”, by the editors Santiago Carbó-Valverde, Pedro J. Cuadros-Solas and Francisco Rodríguez-Fernández provides an insight into the role of the underwriter’s reputation in debt markets, analyzing the bonds features by underwriter reputation. We present an overview of the corporate bonds markets in Europe during 2007–2013 which argues in favour of the existence of differences in bond terms (bond size, maturity, callability and collateralization) by underwriters’ reputation. Our findings confirm that firms and underwriters are not randomly matched in debt markets; underwriters’ reputation plays a role in the bond design.
In Chap. 6, “New financing instruments to bridge the funding gap: The lesson from Italy”, by Elisa Giaretta and Giusy Chesini analyzes the funding gap evaluating mini-bonds and companies’ networks as two alternative funding instruments to bank debt. Using the data of Italian companies they suggest that mini-bonds’ issuers present better financial structures compared with networked companies to the detriment of the cost of financing on companies’ revenues.
The next chapter, “Microfinance investment vehicles: How far are they from OECD social impact investment definition?” by Mario La Torre and Helen Chiappini studies Microfinance impact investments from the OECD social impact investment definition. Applying a content analysis they are able to demonstrate that there is still much to do in order to “mind the gap” between MIVs management approach and the OECD definition.
Chapter 8, “Intellectual capital disclosure and IPO results: Is it a matter of classification?” by Cristiana Cardi, Camilla Mazzoli and Sabrina Severini, analyzes the effects produced by Intellectual Capital (IC) disclosure on the IPO results. Applying two different IC classifications they argue that the effects of IC disclosure on the IPO results are comprehensively consistent across the different IC classifications, although some differences emerge. This study makes clear, for listing firms, the great benefits deriving from the proper disclosure of their non-financial assets, to investors.
Chapter 9, “The drivers of dividend policies in Europe”, also by Giusy Chesini and Elisa Giaretta, study which dividend policies theories drive the distribution of dividends for listed companies traded on the main European markets. Many drivers of companies’ dividend policies are still present while the agency cost theory does not explain European dividend policy. In this chapter, they provide evidence that pecking order theory, signaling theory and bird-in-the-hand theory complementarily explain dividends’ payments.
The final chapter, “Long-range financial decision-making: the role of episodic prospection”, by Gianni Brighetti, Caterina Lucarelli, Nicoletta Marinelli and Giulia Giansiracusa, analyzes time-inconsistent preferences when making intertemporal choices for monetary rewards. The authors argue that temporal discounting is sensitive to the type of prospection involved. Their results suggest that episodic prospection might attenuate intertemporal choice inefficiencies, when in the form of hyperbolic discounting. This was found to be particularly true if the solicited scenario referred to a primary need (a first priority).