Supply chain dynamics after the Covid-19 pandemic and stock market performance: Evidence from the US

Supply chain risk is a strategic issue for managing multinational companies, and Covid-19 has shown the relevance of this type of risk for the firm's survival probability. The market may perceive the choice of replacing some of the main customers or suppliers as an increase or a decrease of the risk based on the features of the new supply chain members, and markets tend to penalize companies that increase their exposure to unaffordable events. During the pandemic, many supply chains suffered from glitches and companies were obliged to redefine their network by selecting their new strategic customers and/or suppliers. The paper evaluates the supply chain composition strategies of a set of multinational companies based in the US during the last decade. It highlights the differences in supply chain management behavior before and during the pandemic. Data collected allow testing the impact on the stock market performance of modifying the supply chain network by adding new members that may have a different level of risk. Results show that the market reaction to supply chain updates changed after the Covid-19, and nowadays there is greater attention on the credit risk of the new companies entering the supply chain

Cross-border banking and foreign branch regulation in Europe

Purpose This paper aims to examine the relevance of cross-border activity in the European banking sector, evaluating the role of differences in regulation to explain the level of interest in entering foreign markets. Design/methodology/approach The sample considers all banks in the European Union (EU 28) existing at year-end 2017, and information about the ultimate owners’ nationality to classify local and foreign banks is collected. The analysis provides a mapping of regulatory restrictions for foreign banks and evaluates how they impact the role of foreign players in the deposit and lending markets. Findings Results show that the lower are the capital adequacy requirements, the higher are the amounts of loans and deposits offered by non-European Economic Area banks and, additionally, the higher the probability of having a foreign bank operating in the country. Originality/value This paper provides new evidence on regulatory arbitrage opportunities in the EU and outlines differences among EU countries not previously studied

Investigation of fluidized bed behaviour using electrical capacitance tomography

The temporal and cross‐sectional distributions of particles in a 127 mm diameter fluidized bed have been obtained using a new generation, high‐speed electrical capacitance tomography. Two planes of eight electrodes were used and mounted at 160 mm and 660 mm from the gas distributor which was a 3 mm thick porous plastic plate (maximum pore size of 50 μm‐70 μm). 3 mm diameter, nearly‐spherical polyethylene granules made up the bed. Experiments at sampling frequencies of 200‐2000 cross‐sections per second and gas superficial velocities from just below the minimum fluidization to 83% above minimum fluidization velocities were used. The time series of the cross‐sectional average void fractions have been examined both directly and in amplitude and frequency space. The last two used probability density functions and power spectral densities. The information gathered shows that the fluidized bed was operating in the slugging mode, which is not surprising given the size of the particles. It has been found that an increase in the excess gas velocity above the minimum fluidization velocity resulted in an increase in the mean void fraction, an increase in the length and velocity of the slug bubbles as well as the bed height, and a slight decrease in the slug frequency. The results are presented in a level of detail suitable for comparison with later numerical simulation

Measuring customers’ portfolio concentration for rating agencies: evidence from Fitch, Moody’s and S&P

Purpose – The aim of the paper is to study the degree of independence of customers’ portfolio concentration measure from the pricing policy adopted by rating agencies. Design/methodology/approach – The paper tests different measures of customers value (revenues or profits and customer lifetime value) and different concentration measure (top customer or Herfindahl-Hirschman index) on the customers’ portfolio of rating agencies in the time period 1999-2008. Simulating different pricing models, the paper tests the sensitivity of these measures to discounted fees applied to best customers and identifies measures that are more and less sensitive to the discount applied. Findings – Concentration measures that consider all the customers’ portfolios and look at both cost and revenues related to the service on a multi-period time horizon (CLV) are less sensitive to the discount policy respect to the others. Research limitations/implications – Results point out some opportunities related to apply more complete approaches defined by marketing science on the financial service industry in order to construct better measures for the economic independence. The paper works only with publicly available data and more details about the fee applied to each customer could increase the significance of the results achieved. Practical implications – The paper contributes to the current debate on the economic independence of rating agencies stressing the opportunity of rethinking the measures on economic independence that are currently considered by supervisory authorities. Social implications – The paper is the first empirical application of standard marketing concepts of customers’ concentration measure to the rating industry. Originality/value – The paper studies the pricing policies adopted by ratings agencies

Crowdfunding REITs: a new asset class for the real estate industry?

Purpose The paper aims to study the performance of crowdfunding REITs with respect to traditional REITs in order to evaluate the differences in the risk–return profile and their usefulness for a diversification strategy within the indirect real estate investments. Design/methodology/approach The paper considers the crowdfunding REITs introduced after the JOBS act in the United States and evaluates their performance and risk during the time period 2016–2018. Performance achieved by crowdfunding REITs is compared with other types of REITs in order to evaluate their usefulness for constructing an optimal portfolio strategy based on a standard mean variance approach. Findings Results show that the performance of crowdfunding REITs is more stable over time with respect to other REITs and the lack of correlation with traditional REITs may be exploited for constructing a more efficient diversified portfolio of indirect real estate investments. Practical implications Crowdfunding REITs have different performance with respect to standard REITs and, especially individual investors, may benefit from including this new investment opportunity in their portfolio. Originality/value The paper is the first study on the performance of the crowdfunding REITs that is evaluating their usefulness for a diversification strategy within the real estate sector

Rating groups vs rating of group members: evidence from the Italian financial market

The standardized method set out in the New Basel Accord requires the different evaluation of similar counterparties belonging to groups with a different rating. Based on the “criteria” adopted by the rating agencies, there are no independent estimates of group ratings, with respect to the rating of the individual group entities, and, in many cases, the agencies choose not to notify the market of their judgement of the group. This paper examines the ratings of groups and individual group entities, with a view to assessing the effects of change to the group structure on the rating. The analysis focuses on the financial sector and is limited to the Italian market, which has been characterized in recent years by a strong trend towards concentration. The results achieved by analysing the rating processes by the principal international agencies (Fitch, Moody’s and Standard and Poor’s) show that the ratings of the groups, or of the individual group entities, adjusted on the basis of their characteristics, are not at all affected by the occurrence of significant corporate events regarding the group’s structure

The impact of discount rate choice in estimating the workout LGD

The workout approach to estimating the loss given default compares the actual value of the recovery flows with the exposure at default to measure the efficacy of the recovery process. One of the main problems related to this approach is the selection of the proper discount rate for evaluating the portfolio. In the literature, there are different solutions proposed, but there is no evidence on the impact of the choice of one of these alternatives on the LGD measurement. This paper looks at a proprietary database for the timeframe 1985-2005, evaluates the impact of the discount rate on the LGD value and studies the main determinants of LGDs computed using different approaches. Even if the explanatory variables are the same, LGDs defined using different discount rates show differences in the percentile distribution that could significantly affect the capital requirements of a financial intermediary

Concentration in lending: commercial vs financial credits

The concentration risk measuring approaches differ based on the attention paid to the individual counterparts (single name approach) and/or the role attributed to the sectoral/geographic portfolio distribution. The specific characteristics of a financing contract may affect the level of effectiveness of the two approaches for assessing the portfolio concentration risk. In fact, the differences between commercial credit and financial credit are deemed relevant in the literature in order to justify the presence of structural differences in the customer portfolio of intermediaries specialized in one or the other credit typologies. All of those differences could influence significantly the estimates of risk exposure and the choice of the correct methodology could influence the amount of capital necessary to offer credit. The analysis of one of the most relevant markets for factoring lending (Italy) highlights significant differences in the portfolio of intermediaries specialized in the traditional credit offer with respect to factoring companies. In fact, the credit portfolio of the latter appears to be structurally more concentrated, particularly when using the single name assessment approach. With respect to bank credit in commercial lending, the greater concentration of the customer portfolio has no repercussions on the risk of the transaction and the behavior of major creditworthy customers seems to be not so relevant

Are Real Estate Banks More Affected by Real Estate Market Dynamics?

The literature primarily focuses on the effect of changes on property prices in terms of macrovariables and monetary aggregates. Only a few studies have taken into account bank characteristics when considering the effects of real estate market trends on bank lending policies and performance, and there is no study that controls for the type of bank or loan purpose. The paper studies the linkage between property market trends and bank risk exposure. We test for any significant difference of real estate banks with respect to other banks and the different roles of the real estate market trend in explaining changes in bank risk exposure. The empirical evidence demonstrates that real estate banks are not always riskier than other banks, and specialized banks are less sensitive to real estate market trends than other banks