Do Banks Issue Equity When They Are Poorly Capitalized?

Dinger, Valeriya; Vallascas, Francesco

doi:10.1017/s0022109016000545

Cited by 26 publications

(15 citation statements)

References 55 publications

(85 reference statements)

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“…Using the same natural experiment, Schepens (2016) confirms that this tax change affects banks similarly. Finally, Dinger and Vallascas (2016) show that decisions to issue equity at banks are determined by the same factors as for nonfinancials.…”

Section: Introductionmentioning

confidence: 96%

What Explains the Difference in Leverage between Banks and Nonbanks?

Berg¹,

Gider²

2017

J. Financ. Quant. Anal.

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Banks have much more leverage than nonbanks. In this article, we use a joint sample of banks and nonbanks between 1965 and 2013 to analyze the determinants of this leverage difference. We find that a single factor, asset risk, is able to explain up to 90% of this difference. Banks’ assets consist of a diversified portfolio of nonbank debt. Therefore, banks have much lower asset risk than do nonbanks. Because asset risk is a major determinant of capital structure choice, this factor is able to explain a large fraction of the difference between bank and nonbank leverage.

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Section: Introductionmentioning

confidence: 96%

What Explains the Difference in Leverage between Banks and Nonbanks?

Berg¹,

Gider²

2017

J. Financ. Quant. Anal.

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“…the announcement effect differs from that of other firms, as shown by Cornett and Tehranian (1994), Cornett et al (1998), and Dinger and Vallascas (2016).…”

Section: However Seos Completed By Banks Present Peculiar Characterimentioning

confidence: 85%

First-move advantage in seasoned equity offerings: Evidence from European banks

Botta

2019

Global Finance Journal

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The financial crisis that started in 2008 has generated significant losses for European banks, forcing them to undertake a series of seasoned equity offerings (SEOs) to reinforce their balance sheets in order to comply with regulatory capital requirements. As a results, they have produced repeated SEO waves in a relatively short time frame, when capital supply was limited due to the economic and financial context. We investigate the conditions at which European banks have been able to raise new equity capital by means of rights issues during the global financial crisis, demonstrating the existence of a first-move advantage: within a SEO wave, banks that acted first were able to complete the capital increase at more favorable conditions than their peers that acted later. We also show that first-movers experienced higher valuation ratios at the final cumrights date compared to latecomers. As a result, first-movers obtained a double advantage: they could offer a lower discount on a price that embedded an higher valuation ratio.

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“…Empirical analysis should be performed in order to decide which of the two effects in the opposite directions dominates risk-taking (for more details on this, see e.g. Kirti 2017, Dinger -Vallascas 2016.…”

Section: Theoretical Overview: Unfavourable Effects Of the Large Nonpmentioning

confidence: 99%

Portfolio Cleaning of Problem Project Loans in Hungary – Experiences Related to the Systemic Risk Buffer, as a Targeted Macroprudential Instrument

Fáykiss¹,

Rariga²,

Márton³

2019

Financial and Economic Review

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After the crisis, more than 50 per cent of project exposures related to real estate financing became problem exposures at the largest Hungarian banking groups. With a view to managing macroprudential risks, the Magyar Nemzeti Bank introduced a systemic risk buffer, the rate of which has been calibrated in proportion to the individual contribution to systemic risk. In this paper, based on the data available in the project exposure database at contractual granularity, we analyse certain characteristics of these transactions in the third quarter of 2015, immediately prior the announcement of the capital buffer requirement, as well as the adjustment by the institutions until the end of the first quarter of 2017, i.e. the start date of the mandatory recognition of the capital buffer. We found that banks typically cleaned the larger problem exposures, and there is no indication that institutions gave preference in the cleaning process to problem exposures that defaulted more recently. In fact, when examining the institutions preliminarily affected by the announcement about the intended capital buffer quite the opposite was seen. The analysis also revealed that cleaning was stronger at those institutions which, based on the 2015 Q3 data, would have been preliminarily affected by the systemic risk buffer.

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Do Banks Issue Equity When They Are Poorly Capitalized?

Cited by 26 publications

References 55 publications

What Explains the Difference in Leverage between Banks and Nonbanks?

What Explains the Difference in Leverage between Banks and Nonbanks?

First-move advantage in seasoned equity offerings: Evidence from European banks

Portfolio Cleaning of Problem Project Loans in Hungary – Experiences Related to the Systemic Risk Buffer, as a Targeted Macroprudential Instrument

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