We analyze holdings of public bonds by over 20,000 banks in 191 countries, and the role of these bonds in 20 sovereign defaults over 1998-2012. Banks hold many public bonds (on average 9% of their assets), particularly in less financially-developed countries. During sovereign defaults, banks increase their exposure to public bonds, especially large banks and when expected bond returns are high.
At the bank level, bond holdings correlate negatively with subsequent lending during sovereign defaults. This correlation is mostly due to bonds acquired in pre-default years. These findings shed light on alternative
theories of the sovereign default-banking crisis nexus.
Banks are special, and so is the corporate governance of banks and other financial institutions as compared with the general corporate governance of non-banks. Empirical evidence, mostly gathered after the financial crisis, confirms this. Banks...Read more
Stricter enforcement of manager post-employment restrictions that strengthen trade secrets protections also limits managers’ ability to accept better employment opportunities. We find that heightened managerial career concerns due to these...Read more
We examine the link between CEO overconfidence and speed of adjustment (SOA) of cash holdings for listed US firms. We find a negative effect of overconfident CEOs on the SOA. Further, CEO overconfidence increases the asymmetry in the SOA between...Read more
Surveying institutional investors on portfolio firms’ climate risk disclosures, we find that many think climate risk reporting to be as important as traditional financial reporting and that it should be mandatory and more standardized. We find...Read more