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Academic Publications
A list of articles published
by members of the Dallas Fed Research staff.
2006
| 2005 | 2004
| 2003 | 2002
| 2001 | 2000
2003 Academic Publications
Increasing Market Discipline
on Banks: Subordinated Debt and Bank Loan Sales
Research in Finance,
2003
Andrew H. Chen, Kenneth J. Robinson and Thomas F. Siems
While subordinated debt can
be used to increase market discipline on banks by playing
a corporate governance role in the presence of a federal
safety net that encourages risk taking, it also has
implications for banks’ loan sales. Using two
measures of banks’ loan sales activity, we find
greater proportions of subordinated debt increase the
likelihood that banks engage in loan sales activity,
and are associated with greater proportions of loan
sales. Our results have implications about banks’
lending efficiency as well as their transparency and
disclosure policies that could play a role in the transmission
mechanism of monetary policy.
Is the Community Reinvestment
Act in Need of Further Reform? Evidence from Equity
Markets during the 1995 Reform Process
Journal of Financial Services
Research, February 2003
David P. Ely and Kenneth J. Robinson
In May 1995 the Federal Banking
Agencies adopted major reforms to the implementation
of the Community Reinvestment Act (CRA) to make the
examination process more objective and performance-based,
promote consistency, and reduce regulatory burden. This
study presents tests of excess stock returns around
key events in the reform process and examines whether
the patterns of returns were affected by financial institution
type and size. While we find that portfolios of banks
and thrifts recorded statistically significant excess
returns for certain events, the cumulative response
was mostly statistically insignificant. A policy implication
of our findings is that the potential for further improvement
in the administration of CRA requirements still existed
following the 1995 reform efforts.
Privatization,
Competition, and Supercompetition in the Mexican Commercial
Banking System [off-site PDF]
Journal of Banking & Finance,
February 2003
William C. Gruben and Robert P. McComb
Much literature before and
after the privatization of Mexico's commercial banking
system in 1991–1992 argued that the system was collusive
and noncompetitive and would likely continue to be for
years. Banks would collude to underloan so that—at
least in comparison with what would happen in a competitive
system—they could overcharge. Because a parallel
literature on lending after bank privatization suggests
that the problem is often not too little, but too much,
we resolved to test for competitive behavior in the Mexican
banking system. Using an empirical approach developed
by Shaffer (Econom. Lett. 29 (1989) 321, J. Money Credit
Bank. 25 (1993) 49, Federal Reserve Bank of Philadelphia,
Working paper no. 93-28R), we find a structural break
in the middle of the privatization period that signals
the start of an episode of what Shaffer calls "supercompetitive"
behavior. In such a supercompetition, banks run at levels
of output where marginal cost exceeds marginal revenue.
This behavior is consistent with a struggle in which banks
take losses now because they think the market share they
get in the bargain offers a positive present value of
expected future return. The behavior can also be consistent
with just the sort of banking crises that ensued in Mexico.
Early Warning Models in Real
Time
Journal of Banking and Finance,
October 2003
Jeffery W. Gunther and Robert R. Moore
Using a unique set of banking
data containing both originally reported and subsequently
revised financial variables, we find adverse revisions
to accounting statements are associated with downgrades
in supervisory ratings. To assess the financial significance
of the revisions, we compare the ability of the original
and revised data to map into exam ratings. The relationship
between accounting data and exam results is significantly
stronger for revised data than for real-time data. Our
findings document significant differences between real-time
and revised banking data, highlight the auditing role
of bank exams, and provide a more realistic assessment
of early warning model accuracy.
Loss Underreporting and the
Auditing Role of Bank Exams
Journal of Financial Intermediation,
April 2003
Jeffery W. Gunther and Robert R. Moore
Using a unique set of banking
data containing both originally reported and subsequently
revised financial variables, we study accounting restatements.
Our results indicate the worse a bank's financial condition,
the more likely it is for originally reported data to
understate financial losses. Also, we find supervisory
exams have an important role in uncovering financial
problems and prompting accounting restatements to correct
loss underreporting. While revisions are directly related
to financial difficulties, exam-based restatements are
evident at even the earliest states of deterioration,
indicating substantial accounting misstatements—at
both banks and other types of companies—can occur
well outside severe business circumstances.
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