"Whatever it takes": an empirical assessment of the value of policy actions in banking

What types of policy intervention had a greater impact during the financial crisis? By using a detailed dataset of worldwide policy, we answer this question focusing on Globally-Systemically Important banks (G-SIBs), looking both to stock returns and Credit Default Swap (CDS) spreads reactions. As robustness checks, we also analyze a control sample of 31 large Non-Financial Companies (NFCs). Overall, we show that different policy interventions from governments and central banks have produced diverse market reactions: investors generally appreciate monetary policy interventions for G-SIBs (but not for NFCs) and do not welcome bank failures and bailouts (for both G-SIBs and NCFs)

Are contingent convertibles going-concern capital?

Contingent convertibles (CoCos) are intended to either convert to new equity or be written down prior to failure while a bank is a going concern. Yet, in the first actual test case, CoCos never converted before its bank failed. We develop a model that predicts that CoCos lead to less (more) extreme stock returns and have yields greater than (similar to) standard subordinated debt yields if investors do (do not) expect them to convert or be written down prior to failure. These predictions are tested using data on CoCos issued by European banks during 2011 to 2017. We find evidence that equity conversion CoCos reduce stock return variance and several other measures of downside risk, consistent with the perception that they are going-concern capital. However, we also provide event study evidence that recent regulatory actions reduced the CoCo – subordinated debt yield spread, which indicates a diminished investor belief that CoCos are going-concern capital

The unintended consequences of the launch of the single supervisory mechanism in Europe

The launch of the Single Supervisory Mechanism (SSM) was an historic event. Beginning in Nov. 2014, the most significant banks came under the direct supervision of the European Central Bank, while national supervisory authorities maintained direct supervision of the remaining banks. Thus, supervision is conducted on two levels, which could cause inconsistency problems. Did the behavior of the significant banks differ from that of the less significant banks during the SSM launch? We find that the significant banks reduced their lending activity more than the less significant banks did in order to shrink their balance sheets and increase their capitalization

Nilpotent Gelfand pairs and spherical transforms of Schwartz functions III. Isomorphisms between Schwartz spaces under Vinberg's condition

Let (N,K) be a nilpotent Gelfand pair, i.e., N is a nilpotent Lie group, K a compact group of automorphisms of N, and the algebra D(N)^K of left-invariant and K-invariant differential operators on N is commutative. In these hypotheses, N is necessarily of step at most two. We say that (N,K) satisfies Vinbergs condition if K acts irreducibly on $n/[n,n]$, where n= Lie(N). Fixing a system D of d formally self-adjoint generators of D(N)^K, the Gelfand spectrum of the commutative convolution algebra L^1(N)^K can be canonically identified with a closed subset S_D of R^d. We prove that, on a nilpotent Gelfand pair satisfying Vinbergs condition, the spherical transform establishes an isomorphism from the space of $K$-invariant Schwartz functions on N and the space of restrictions to S_D of Schwartz functions in R^d

A Note on T-dualities in the Pure Spinor Heterotic String

In this note we study the preservation of the classical pure spinor BRST constraints under super T-duality transformations. We also determine the invariance of the one-loop conformal invariance and of the local gauge and Lorentz anomalies under the super T-dualities.Comment: References adde

Surprised or not surprised? The investors' reaction to the comprehensive assessment preceding the launch of the banking union

Did the Comprehensive Assessment (CA), preceding the Single Supervisory Mechanism (SSM) launch in Europe, achieve its aims of producing new valuable information for the market? We show that the CA achieved the goal of increasing transparency: investors were able to detect weak banks at the announce- ment of the procedure (23rd October 2013), but gained full information on the amount of the capital shortfall only at the disclosure of the results (26th October 2014). Furthermore, at the official launch of the SSM (4th November 2014), banks under direct European Central Bank (ECB) supervision registered a more negative market reaction with respect to banks maintaining their national supervisors. Using a regression model including possible confounders and allowing for treatment effect heterogeneity, this negative reaction is confirmed. These findings suggest that, at least in the short run, investors penalized banks subject to direct ECB supervision, probably because of the fear of regulatory inconsistencies

Identifying Earnings Management: The Case of Small-Cap Corporations in the United States

The purpose of this study is to identify the characteristics of large cap companies that have been sanctioned by the United States Securities and Exchange Commission (SEC) for earnings management, and to test those characteristics on small cap companies to determine whether they can be used to detect earnings management in the small cap space. Thirteen non-accrual financial characteristics identified by previous researchers are tested, including both financial ratios and account levels. Univariate and multivariate analysis are used in the determination of the applicability of large company indicators of earnings management to small cap companies

The fate of Li and Be in stars and in the laboratory

We connect the observed under-abundances of Li and Be in dwarfs, with recent results on nuclear cross sections at low energies: for collisions of protons with atomic or molecular targets, the measured cross sections seem too high with respect to extrapolations for bare nuclei. Phenomenologically, these anomalous nuclear interactions can be described in terms of an effective screening potential $U_{lab}$ in the range of few hundred eV: in the presence of the electron cloud, nuclei become more transparent to each other as if the effective collision energy is aumented by $U_{lab}$. This implies that fusion cross sections are enlarged and at the same time elastic cross sections are lowered. If something similar occurs in stellar plasma, the nuclear burning temperatures are lowered, whereas diffusion processes are enhanced. We find that the observed Li and Be abundances in the Hyades and in the Sun can be reproduced for effective screening potentials of the plasma in the range of 600-700 eV, close to that found by experiments in the lab.Comment: 21 pages plus 11 figures, uuencoded postscript file

Hour-glass magnetic excitations induced by nanoscopic phase separation in cobalt oxides La2−x_{2-x}Srx_xCoO4_4

The magnetic excitations in the cuprate superconductors might be essential for an understanding of high-temperature superconductivity. In these cuprate superconductors the magnetic excitation spectrum resembles an hour-glass and certain resonant magnetic excitations within are believed to be connected to the pairing mechanism which is corroborated by the observation of a universal linear scaling of superconducting gap and magnetic resonance energy. So far, charge stripes are widely believed to be involved in the physics of hour-glass spectra. Here we study an isostructural cobaltate that also exhibits an hour-glass magnetic spectrum. Instead of the expected charge stripe order we observe nano phase separation and unravel a microscopically split origin of hour-glass spectra on the nano scale pointing to a connection between the magnetic resonance peak and the spin gap originating in islands of the antiferromagnetic parent insulator. Our findings open new ways to theories of magnetic excitations and superconductivity in cuprate superconductors.Comment: Nature Communications 5, 5731 (2014