PurposeSome controversial cases of bail-in in the emerging countries have raised the question abo... more PurposeSome controversial cases of bail-in in the emerging countries have raised the question about whether for those countries to have in place a regulation for the bail-in is appropriate or not. To assess appropriateness, this paper investigates bail-in credibility among investors, as crucial condition for the credibility’s smooth implementation, by measuring the yield spread between bailinable and non-bailinable bonds.Design/methodology/approachThe authors compare the yield spread of banks located in emerging countries that have in place a framework for the bail-in to the comparable yield spread measured for banks located in emerging countries without such framework. The comparison permits to detect whether there is a significant difference between the two spreads, which would suggest that bail-in regulation has been deemed credible by market participants where enforced, or not, which in this case would signal a problem of credibility.FindingsThe authors' results point out a ...
The investment in illiquid financial products introduces multiple profiles of criticality related... more The investment in illiquid financial products introduces multiple profiles of criticality related to the perception of the effective profiles of risk and to the intermediaries’ distributive policies. However, the notion of illiquid product could be affected by some misunderstanding such as the tendency (which constitutes a simplification) to identify it to the trading venue, for which are illiquid only those products negotiated over the counter. In actual fact, it is necessary to estimate an instrument on the base of its characteristics, those of the issuer and the eventual market of negotiation. From a substantial point of view, this has some important implications regarding the regulatory profiles of investor’s protection. The Mifid in Europe set conduct rules to align the behavior of the intermediary regarding the objective to best serve the investor. The harmonization of the conduct rules passes from the implementation of level 3 measures. This paper examines the problem to the light of the implementation of level 3 measures in Italy.
The growth strategies of the listed exchanges affect the morphology of the securities industry as... more The growth strategies of the listed exchanges affect the morphology of the securities industry as they are focused on the consolidation of trading infrastructures and, on the other hand, on the diversification of the business model. New “conglomeral exchanges” are characterized by a far-reaching production function. Since they integrate product-service lines which are complementary, they potentially herald competitive distorsions limiting the investor’s freedom of choice and prejudicing the interest for the best result from the investment.
The provision of investment services (and the correlated ancillary services) and collective inves... more The provision of investment services (and the correlated ancillary services) and collective investment services forms part of the main functions carried out by the securities industry. From an industrial point of view, all the activities defining the securities industry represent subsequent stages of the production process of the industry. The financial exchange sensu stricto uses the orders originating from the investment decisions produced in the asset allocation stages as input for the production process and, in turn, is divided into the order capture, order execution and order processing stages. The presence of banking intermediaries characterizes all the stages of the production process of the securities industry. This, of course, has implications in terms of profitability of the banking groups and affects their competitive strategies.
Based on a sample of 59 European banks over the period 2006-11, we investigate the impact of the ... more Based on a sample of 59 European banks over the period 2006-11, we investigate the impact of the loan loss provisioning (LLP) together with a wide array of credit-risk exposure and performance variables on systematic risk measured by betas. We develop a model for assessing whether management behaviour, accounting policies, such as LLP, and the quality of loan portfolio play a significant role in explaining the banks’ systematic risk exposure. Our results suggest that financial performances do not have a direct significant relation with betas; rather measures of risk exposures (risk weighted assets on total assets) substantially affect systematic risk. During crisis systematic risk significantly responsive to provisions and their impacts on performances. Our study has several implications, in particular at light of changing European regulation on non-performing exposures reporting and forbearance practices alongside with regulators forcing banks to strengthen their capital base.
Based on a dataset of 31 Conventional and Islamic stock exchanges we compare financial performanc... more Based on a dataset of 31 Conventional and Islamic stock exchanges we compare financial performance across these two groups for 2007-2011 period. Our results suggest that CEs and IEs are differently exposed to institutional constraints and have different drivers of profitability. Islamic stock exchanges’ performances are essentially driven by traditional listing and trading services and are affected by institutional factors such as the degree of foreign trading openness of their economies and measures of society development. Furthermore, they ensure greater stability during crisis, although Shari’ah compliant investments don’t affect their revenue generation. Conventional stock exchanges have higher trading intensity, higher level of revenues’ diversification and high capital investments, as they operate with different business models. Our results could have relevant business and strategic implications for further convergence between the two groups. Moreover our analysis could be significant for firms wishing to list their shares into Shari’ah Compliant Stock Exchanges or into Conventional ones and traders choosing the most convenient trading venue.
What are exchanges actually worth is not a simple question, in particular at light of the consoli... more What are exchanges actually worth is not a simple question, in particular at light of the consolidation process involving major exchanges and giving rise to large multi-business groups. There is widespread consensus that exchanges primarily benefit of increases in turnover value as this would result in increasing revenues. We argue that this is a partial picture since it does not comprehensively take into account the risks that exchanges are exposed to. Building on this premises, we define the value maximisation problem for exchanges. Our aim is to bridge the gap in knowledge about value drivers of securities exchanges. In particular we develop a conceptual framework to analyze exchanges’ performances using a simple accounting approach describing the relationships between economic drivers affecting cost and revenues functions. This will allow us to develop a risk adjusted performance approach to tackle the value creation problem in the securities industry.
PurposeSome controversial cases of bail-in in the emerging countries have raised the question abo... more PurposeSome controversial cases of bail-in in the emerging countries have raised the question about whether for those countries to have in place a regulation for the bail-in is appropriate or not. To assess appropriateness, this paper investigates bail-in credibility among investors, as crucial condition for the credibility’s smooth implementation, by measuring the yield spread between bailinable and non-bailinable bonds.Design/methodology/approachThe authors compare the yield spread of banks located in emerging countries that have in place a framework for the bail-in to the comparable yield spread measured for banks located in emerging countries without such framework. The comparison permits to detect whether there is a significant difference between the two spreads, which would suggest that bail-in regulation has been deemed credible by market participants where enforced, or not, which in this case would signal a problem of credibility.FindingsThe authors' results point out a ...
The investment in illiquid financial products introduces multiple profiles of criticality related... more The investment in illiquid financial products introduces multiple profiles of criticality related to the perception of the effective profiles of risk and to the intermediaries’ distributive policies. However, the notion of illiquid product could be affected by some misunderstanding such as the tendency (which constitutes a simplification) to identify it to the trading venue, for which are illiquid only those products negotiated over the counter. In actual fact, it is necessary to estimate an instrument on the base of its characteristics, those of the issuer and the eventual market of negotiation. From a substantial point of view, this has some important implications regarding the regulatory profiles of investor’s protection. The Mifid in Europe set conduct rules to align the behavior of the intermediary regarding the objective to best serve the investor. The harmonization of the conduct rules passes from the implementation of level 3 measures. This paper examines the problem to the light of the implementation of level 3 measures in Italy.
The growth strategies of the listed exchanges affect the morphology of the securities industry as... more The growth strategies of the listed exchanges affect the morphology of the securities industry as they are focused on the consolidation of trading infrastructures and, on the other hand, on the diversification of the business model. New “conglomeral exchanges” are characterized by a far-reaching production function. Since they integrate product-service lines which are complementary, they potentially herald competitive distorsions limiting the investor’s freedom of choice and prejudicing the interest for the best result from the investment.
The provision of investment services (and the correlated ancillary services) and collective inves... more The provision of investment services (and the correlated ancillary services) and collective investment services forms part of the main functions carried out by the securities industry. From an industrial point of view, all the activities defining the securities industry represent subsequent stages of the production process of the industry. The financial exchange sensu stricto uses the orders originating from the investment decisions produced in the asset allocation stages as input for the production process and, in turn, is divided into the order capture, order execution and order processing stages. The presence of banking intermediaries characterizes all the stages of the production process of the securities industry. This, of course, has implications in terms of profitability of the banking groups and affects their competitive strategies.
Based on a sample of 59 European banks over the period 2006-11, we investigate the impact of the ... more Based on a sample of 59 European banks over the period 2006-11, we investigate the impact of the loan loss provisioning (LLP) together with a wide array of credit-risk exposure and performance variables on systematic risk measured by betas. We develop a model for assessing whether management behaviour, accounting policies, such as LLP, and the quality of loan portfolio play a significant role in explaining the banks’ systematic risk exposure. Our results suggest that financial performances do not have a direct significant relation with betas; rather measures of risk exposures (risk weighted assets on total assets) substantially affect systematic risk. During crisis systematic risk significantly responsive to provisions and their impacts on performances. Our study has several implications, in particular at light of changing European regulation on non-performing exposures reporting and forbearance practices alongside with regulators forcing banks to strengthen their capital base.
Based on a dataset of 31 Conventional and Islamic stock exchanges we compare financial performanc... more Based on a dataset of 31 Conventional and Islamic stock exchanges we compare financial performance across these two groups for 2007-2011 period. Our results suggest that CEs and IEs are differently exposed to institutional constraints and have different drivers of profitability. Islamic stock exchanges’ performances are essentially driven by traditional listing and trading services and are affected by institutional factors such as the degree of foreign trading openness of their economies and measures of society development. Furthermore, they ensure greater stability during crisis, although Shari’ah compliant investments don’t affect their revenue generation. Conventional stock exchanges have higher trading intensity, higher level of revenues’ diversification and high capital investments, as they operate with different business models. Our results could have relevant business and strategic implications for further convergence between the two groups. Moreover our analysis could be significant for firms wishing to list their shares into Shari’ah Compliant Stock Exchanges or into Conventional ones and traders choosing the most convenient trading venue.
What are exchanges actually worth is not a simple question, in particular at light of the consoli... more What are exchanges actually worth is not a simple question, in particular at light of the consolidation process involving major exchanges and giving rise to large multi-business groups. There is widespread consensus that exchanges primarily benefit of increases in turnover value as this would result in increasing revenues. We argue that this is a partial picture since it does not comprehensively take into account the risks that exchanges are exposed to. Building on this premises, we define the value maximisation problem for exchanges. Our aim is to bridge the gap in knowledge about value drivers of securities exchanges. In particular we develop a conceptual framework to analyze exchanges’ performances using a simple accounting approach describing the relationships between economic drivers affecting cost and revenues functions. This will allow us to develop a risk adjusted performance approach to tackle the value creation problem in the securities industry.
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