Risk-adjusted performance measures at bank holding companies with section 20 subsidiaries

This paper examines risk-adjusted performance measures in banking, which are used as a guide for efficient asset allocation, performance evaluation, and capital structure decisions in complex, multidivisional financial institutions. Traditional measures of performance are contrasted with the portfolio-based risk-adjusted measures using a unique detailed micro data set for a sample of domestic bank holding companies (BHCs) that engaged in both commercial banking and investment banking activities between 1990 and 1999. This paper finds evidence that traditional stand-alone performance measures can lead to results substantially different from those of the portfolio models. This study also examines BHCs’ optimal portfolios consisting of traditional and nontraditional banking activities derived from the efficient frontiers. These results show that there are gains from diversification as indicated by the composition of optimal portfolios.Bank holding companies ; Risk management

Banks in the securities business: market-based risk implications of section 20 subsidiaries

This paper explores whether there was an economically significant differential in market-based risk between bank holding companies (BHCs) with Section 20 subsidiaries – subsidiaries that were authorized by the Federal Reserve to conduct bank-ineligible securities activities – and BHCs without such subsidiaries. Using market returns over a period of time in which BHCs expanded into securities activities, from 1985 through 1999, this study finds evidence that BHCs that participated in investment banking exhibited significantly lower total and unsystematic risk, suggesting that banks’ participation in the securities business resulted in diversification gains. However, BHCs with Section 20 subsidiaries exhibited higher systematic risk.Securities ; Risk ; Bank holding companies

The Use of Accounting Screens for Separating Winners from Losers Among the S&P 500 Stocks

This study uses accounting screens based on the Piotroski’s (2000) F-score and the derived MagicP formulae and finds that it is an effective investment strategy, which results in risk-adjusted outperformance of stocks with high book-to-market (BM) ratios over a market weighted benchmark portfolio and its subset of growth stocks. Unlike other studies that utilized similar tests on smaller firms, we examine the performance of large value stocks within the S&P 500 between 2007 and 2014 and find evidence of the value premium. The results were robust to the time period; in fact, the highest-ranked value stocks suffered less severely during the period of market correction

Women in Business: Influences on the Undergraduate Major Choices

This study employs a survey of undergraduate business school freshmen to examine factors that influence their decision to study business and whether these factors differ by gender. Specifically, the study examines internal factors, such as students’ perceived aptitudes and interests in the subject; external factors, such as compensation and job availability; and social/interpersonal influences, such as input of teachers, school counselors, parents, and friends. This paper follows up on the authors’ earlier work, which found that despite an increase in the number of male students enrolled in business programs across the nation during the period between 2003 and 2011, female representation declined—an enrollment trend with significant consequences for colleges of business, industry, and the national economy. This study is an attempt to understand this trend by identifying those factors that may influence women to choose business as an undergraduate major

Board Gender Diversity and Bank Performance

This research examines the relationship between board gender diversity and firm performance and risk of financial institutions in the US between 2007 and 2015. The study also examines the effect of the Dodd- Frank Act of 2010 on improving the diversity and inclusion efforts of this is industry. The study shows that board diversity as measured by the percent of women on the board of directors is associated with better corporate performance. While gender diversity appears to improve performance, it does not affect bank risk, which reinforces the notion that diverse banks are not assuming greater financial risk to generate higher returns