What Can Volatility Smiles Tell Us About the Too Big to Fail Problem?

Abstract

We exploit the information content of option prices to construct a novel measure of bank tail risk. We document a persistent increase in tail risk for the U.S. banking industry following the global financial crisis, except for banks designated as systemically important by the Dodd–Frank Act. We show that this post-crisis difference in tail risk for large and small banks is consistent with the too-big-to-fail (TBTF) status of large banks being reinforced by the Dodd–Frank designation: Naming the banks whose failure could threaten the financial stability of the U.S. gave investors a list of banks the government deemed as TBTF.

Digital Media's Impact on Corporate Innovation in China's Innovation-Driven Strategy

“…Based on a review of the literature, previous research has focused on examining the impact of traditional print media on corporate innovation, resulting in contrasting views between the market pressure hypothesis and the effective supervision hypothesis [12,13]. However, the emergence of digital media as a source of information has disrupted the traditional landscape, with more diverse channels of information dissemination altering the ways information is acquired and interacted with [14]. Digital media are information carriers that record, process, and disseminate processes in binary form [15].…”