Risk capital financing and the separation of ownership and control in business groups

Brioschi, Francesco; Buzzacchi, Luigi; Colombo, Massimo G.

doi:10.1016/0378-4266(89)90040-x

Cited by 103 publications

(66 citation statements)

References 7 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…It is well-known that cross-holdings inflate the value of the financial system, see Brioschi et al (1989), Fedenia et al (1994, and Elliott et al (2014). This, in particular, refers to the fact that the aggregated net worth of all banks will be larger than the value of total assets if cross-holdings are present.…”

Section: Cross-holdingsmentioning

confidence: 99%

“…This, in particular, refers to the fact that the aggregated net worth of all banks will be larger than the value of total assets if cross-holdings are present. As argued in Brioschi et al (1989), Fedenia et al (1994, and Elliott et al (2014), net worths need to be adjusted by an auxiliary factor that guarantees the conservation of value in the system. The market value of bank i should thus be computed as (1 − j∈N C i j )w i for w i ≥ 0.…”

Section: Cross-holdingsmentioning

confidence: 99%

“…As mentioned before, due to cross-holdings, the net worths of the banks differ from their market values, see Brioschi et al (1989), Fedenia et al (1994, and Elliott et al (2014). We will, however, focus on default count statistics which can be computed in terms of the vector of net worths.…”

Section: Total Net Worthmentioning

confidence: 99%

See 2 more Smart Citations

The joint impact of bankruptcy costs, fire sales and cross-holdings on systemic risk in financial networks

Weber

Weske

2017

Probab Uncertain Quant Risk

View full text Add to dashboard Cite

which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.Abstract The paper presents a comprehensive model of a banking system that integrates network effects, bankruptcy costs, fire sales, and cross-holdings. For the integrated financial market we prove the existence of a price-payment equilibrium and design an algorithm for the computation of the greatest and the least equilibrium. The number of defaults corresponding to the greatest price-payment equilibrium is analyzed in several comparative case studies. These illustrate the individual and joint impact of interbank liabilities, bankruptcy costs, fire sales and cross-holdings on systemic risk. We study policy implications and regulatory instruments, including central bank guarantees and quantitative easing, the significance of last wills of financial institutions, and capital requirements.

show abstract

Section: Cross-holdingsmentioning

confidence: 99%

Section: Cross-holdingsmentioning

confidence: 99%

See 1 more Smart Citation

The joint impact of bankruptcy costs, fire sales and cross-holdings on systemic risk in financial networks

Weber

Weske

2017

Probab Uncertain Quant Risk

View full text Add to dashboard Cite

show abstract

“…Notons A= [a ij ] la matrice de l'actionnariat direct, où a ij est le pourcentage d'actions que la société i détient directement dans la société j. Les participations intégrées, représentées par la matrice Y, se calculent de la façon suivante (Brioschi et al 1989 ;Baldone et al 1997 La matrice Y d'actionnariat intégré diffère de la matrice A des participations directes. Par exemple, la société 2 détient de façon intégrée 18 % de la société 5 (y 25 = 18 %) alors qu'elle n'en possède aucune participation directe (a 25 = 0 %).…”

Section: La Méthode Matricielle Pureunclassified

Les leviers de contrôle des actionnaires majoritaires

Biebuyck¹,

Chapelle²,

Szafarz³

2017

gouvernance

View full text Add to dashboard Cite

La littérature académique en gouvernance d’entreprise étudie en particulier la séparation entre propriété et contrôle au sein de l’actionnariat des entreprises privées. Cet article propose une synthèse critique et des illustrations internationales des résultats les plus récents en la matière. En particulier, il détaille les mécanismes permettant aux actionnaires dominants d’accroître leur contrôle d’une société, parmi lesquels : les structures pyramidales, les participations croisées et les actions à droits de vote multiples, qui offrent la possibilité de découpler le contrôle de la part effectivement détenue dans le capital de l’entreprise. Ces phénomènes, plus ou moins présents dans les différentes régions du monde, jouent un rôle fondamental puisqu’ils contribuent à l’accroissement des asymétries entre actionnaires d’une même entreprise et engendrent des opportunités de bénéfices privés en faveur de certains d’entre eux. Leur impact s’étend bien au-delà de la sphère de l’entreprise concernée et peut affecter le fonctionnement même des marchés financiers. La quantification du niveau de contrôle au sein d’un empire industriel peut être obtenue à l’aide de diverses méthodes. Les développements récents en la matière sont résumés et l’application à des cas internationaux réels est discutée.The academic literature on corporate governance has taken a particular interest in the separation of property and control within bodies of corporate shareholders. This article provides a critical synthesis and international examples of the most recent results in this area. More particularly, it outlines the mechanisms through which controlling shareholders increase their control over a corporation (including pyramid structures), cross-shareholding, and shares with multiple voting rights. All of these mechanisms potentially provide the means of divorcing control from the proportion of corporate capital stock effectively held. These phenomena, present to a lesser or greater degree across the planet, play a fundamental role as they increasingly skew the relationship among shareholders of the same corporation while also creating opportunities for private benefits for some. Their impact extends well beyond the sphere of the corporation itself and may even affect the operation of financial markets. There are several ways of quantifying the level of control within an industrial empire. Recent developments in this field are summarized, and their application to true international cases is discussed

show abstract

“…It is old because it draws on a well-established and time-honored strand of literature, that of input-1 Input-Output style algebra has been used for the analysis of cross-holdings in business groups in general. Brioschi et al (1989), for instance, use matrix algebra quite close to ours in order to determine the value of member firms of a group (see also Fedenia et al (1994)). More recently, Elliott et al (2013) note that the critical matrix for their analysis of financial contagion (what they call "dependency matrix") has a Leontief flavour.…”

Section: Among Others)mentioning

confidence: 99%

Input–output-based measures of systemic importance

Aldasoro

Angeloni

2014

Quantitative Finance

View full text Add to dashboard Cite

One of the remarkable consequences of the recent financial crisis has been the shift in emphasis, in economic analysis as well as policy practice, from the microprudential to the macro-prudential approach to banking regulation and supervision (Hanson et al. (2011)). The micro-prudential approach focuses on controlling the risk of individual banks, taking the rest of the system as given. Since banks are funded largely by deposits, an instrument protected in most countries by a collectively funded safety net, the micro-prudential regulator/supervisor needs to control that bank managers do not take advantage of such protection to assume an unduly high level of risk (moral hazard). However, in the presence of risk externalities, i.e. when risk-taking behavior of individual institutions affects other institutions and the system as a whole, another source of social inefficiency arises, requiring the prudential regulator/supervisor to take a macro-prudential approach. Banks need to be controlled not only in relation to their propensity to undertake high risk due to the protection they enjoy on their liability side, but also in relation to the risk they transmit to other banks with which they are connected by a reciprocal web of exposures. To guide policy it becomes necessary, in this context, to measure the systemic importance of individual banks, i.e. the degree to which they propagate systemic risk by exerting influence on the rest of the system. A large body of literature has developed to define and measure systemic risk and to analyze its implication for the conduct of prudential regulation and supervision (for a comprehensive overview see Bisias et al. (2012)). Broadly speaking, there are two classes of indicators of systemic importance proposed in the recent literature. The first and more widely used class of indicators relies, directly or indirectly, on asset prices distributions and correlations across institutions, assets and time. The second approach, with a rapidly rising literature is that of network analysis Our contribution here consists in proposing an alternative method for measuring the transmission of risk within banking systems, which logically belongs to the second class mentioned in the preceding paragraph, namely that based on balance sheet measures of interconnection. Our approach is new and old at the same time. It is new because, as such, it has never been used in the analysis of banking. It is old because it draws on a well-established and time-honored strand of literature, that of input-output analysis.Taking the balance sheet of the banking system as a point of departure, we derive expressions that closely resemble the traditional Leontief (1941) input-output model. The input-output model makes evident the fact that the production of any sector has two distinct effects on the remaining sectors: on the one hand by increasing production it will demand more inputs from other sectors ("upstream"), on the other it will be able to provide more output to the sectors that depend its production as in...

show abstract

Risk capital financing and the separation of ownership and control in business groups

Cited by 103 publications

References 7 publications

The joint impact of bankruptcy costs, fire sales and cross-holdings on systemic risk in financial networks

The joint impact of bankruptcy costs, fire sales and cross-holdings on systemic risk in financial networks

Les leviers de contrôle des actionnaires majoritaires

Input–output-based measures of systemic importance

Contact Info

Product

Resources

About