Banks’ capital, regulation and the financial crisis

Teixeira, João C. A.; Silva, Francisco J. F.; Fernandes, Ana V.; Alves, Ana C.G.

doi:10.1016/j.najef.2014.01.002

Cited by 40 publications

(21 citation statements)

References 44 publications

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“…Chen et al (2014) study the stock market integration between frontier and leading markets during the periods of pre-and post-global financial crisis. Črnigoj and Verbič (2014), Teixeira et al (2014), Yamamoto (2014) and Wan and Jin (2014) …”

Section: Monetary Policy Announcementsmentioning

confidence: 99%

Investor response to public news, sentiment and institutional trading in emerging markets: A review

Brzeszczyński

Gajdka

Kutan

2015

International Review of Economics & Finance

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This paper reviews the literature on investor reaction and sentiment with respect to public information arrival in emerging markets and discusses the implications of the findings for the validity of theoretical models emphasizing public information arrival as the main mover of asset prices. We cover three types of public information news: monetary policy announcements, the International Monetary Fund (IMF) related news and other public and political news. In addition, we review the literature on sentiment and institutional trading in emerging markets. We summarize general findings and suggest some directions for further research.

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Section: Monetary Policy Announcementsmentioning

confidence: 99%

Investor response to public news, sentiment and institutional trading in emerging markets: A review

Brzeszczyński

Gajdka

Kutan

2015

International Review of Economics & Finance

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“…These reductions had stronger effects on larger banks. More recently, Gropp and Heider () and Teixeira et al () provided evidence that banks that pay more often dividends tend to show more financial robustness and fewer problems in obtaining external financing.…”

Section: Related Literaturementioning

confidence: 99%

“…First, on the set of bank‐specific determinants, the effect of the dividend policy is still unexplored. A recent study by Ashraf and Zheng () recognizes that the dividend policy may even be more important for banks than for nonfinancial firms, as dividends may increase banks' external ratings (Bolding & Legget, ), may signal future growth opportunities (Abreu & Gulamhussen, ), or may reveal banks' financial robustness (Teixeira, Silva, Fernandes, & Alves, ). In this context, it is particularly important to understand how banks' dividend policy influences future profitability.…”

Section: Introductionmentioning

confidence: 99%

Banks' profitability, institutions, and regulation in the context of the financial crisis

et al. 2019

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This paper empirically examines how banks' dividend policy, the institutional environment, and banking regulation affects banks' profitability using panel data of a sample of 567 banks, mainly from Organisation for Economic Cooperation and Development countries, for 2004–2015. It further examines whether the effect of the institutional environment and banking regulation varies for crisis and noncrisis years. The estimation results reveal that banks' dividend policy influences positively banks' profitability, whereas higher levels of the institutional environment or stricter banking regulation reduces banks' profitability. The negative effect of the institutional environment and banking regulation was of lower magnitude during the global financial crisis, followed by the Eurozone crisis, and for less‐developed countries and larger banks.

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“…Peura and Keppo (2005) call this excess capital "hedging" against breaches of minimum capital, and estimate some average percentage values for excess capital of between 2.4% and 3.5% above the regulatory minimum. Studies by Teixeira, Silva, Fernandes, andAlves (2014), andVanHoose (2007), showed that banks maintain excess capital in order to avoid emergency recapitalization costs. Flannery and Rangan (2008), in a study regarding big banks in the United States in the 90s, provided evidence of post-recession capital growth, with banks accumulating, on average, 75% of capital above the regulatory minimum, in a rational reply on the part of the banking market to the measure of withdrawing implicit government guarantees.…”

Section: Bibliographic Reviewmentioning

confidence: 99%

Contingent Convertibles and their Impacts on the Optimization of the Capital Structure of Brazilian Banks Under Basel III

Goes

Sheng

Schiozer

2016

Rev. contab. finanç.

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Banks around the world maintain excess regulatory capital, whether to minimize capitalization costs or to mitigate risks of financial difficulties. However, it was only after the financial crisis of 2008 that the quality of capital gained greater importance among international regulators, through the Third Basel Accord (Basel III), which suggested a capital structure formed of the new equity and debt hybrid instruments, that is, Contingent Convertibles (CoCos), which have the main goal of recapitalizing banks automatically when they show signs of financial difficulties. Using the continuous-time structural model developed by Koziol and Lawrenz (2012), with December 2013 as a reference, this paper analyzes the capital structure of the 10 biggest Brazilian banks in terms of total assets, comparing their current structures -with only subordinated debts -with the structure proposed in Basel III, composed solely of contingent convertibles, with a view to verifying the influence of CoCos in banks' risks and evaluating the effectiveness of this Basel III recommendation. Through the evidence obtained using the model mentioned, this paper's main contribution is in demonstrating that the use of CoCos would optimize the capital structure of banks under the restrictions of Basel III, considering these are effective. If not, the automatic recapitalization of these instruments could be used for shareholders' own benefit, thus increasing the likelihood of banks experiencing financial difficulties, which could cause a new financial crisis, like that which occurred in 2008.

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Banks’ capital, regulation and the financial crisis

Cited by 40 publications

References 44 publications

Investor response to public news, sentiment and institutional trading in emerging markets: A review

Investor response to public news, sentiment and institutional trading in emerging markets: A review

Banks' profitability, institutions, and regulation in the context of the financial crisis

Contingent Convertibles and their Impacts on the Optimization of the Capital Structure of Brazilian Banks Under Basel III

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