FINANCIAL INTERMEDIATION & RISK MANAGEMENT

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1 FINANCIAL INTERMEDIATION & RISK MANAGEMENT MAXIM ZAGONOV Toulouse Business School, France

2 MOTIVATION Financial institutions intermediation function - pivotal role to the economic stability & growth - financial markets integration and shocks contagion - history of banking crises due to poor risk management Rising regulatory concerns about bank risks - need to identify standardised determinants of bank risks and assess their applicability across markets - zero interest rate policy in major market & interest rate risk

3 CONTRIBUTIONS Empirically assess the key determinants of bank risk taking from 3 perspectives: Balance sheet structure and asset-liability management practices Regulatory framework & provisions Accounting and audit quality... and employing an international dataset

4 Balance sheet structure and assetliability management practices Securitization and Bank Intermediation Function Presented at: Australasian Banking & Finance conference, 2010 Midwest Finance Association conference, 2011 Southwestern Finance Association conference, 2011 (best paper award) Revisiting Interest Rate Risk of Financial Intermediaries (with A. Keswani and I. Marsh, Cass Business School) Presented at: Financial Management Association conference, 2009

5 Revisiting Interest Rate Risk of Financial Intermediaries Analyse the exposure of FIs to developments in term structures of interest rates over using an international sample of 13 countries What s new? - Multiple countries - Multiple interest rate proxies - Multiple econometric techniques Comprehensive inference

6 Securitization and Bank Intermediation Function Empirically examine the impact of asset securitization on banks risk exposure What s new? - Most recent & comprehensive dataset of US Bank Holding Companies to date - First study to explicitly relate the level of bank securitization activities to interest rate exposure - Separate treatment of securitized asset by maturity & risk characteristics

7 Regulatory framework & provisions Bank Regulation and Interest Rate Risk: An International Perspective (with A. Keswani and I. Marsh, Cass Business School) Presented at: Eastern Finance Association conference, 2010 Financial Management Association annual conference, 2010 (best paper award runner up) Financial Management Association European conference, 2010

8 Bank Regulation and Interest Rate Risk: An International Perspective Analyse the key determinants of banks interest rate risk exposures over & extensive sample of institutions What s new? - Consider both company & market specific variables - Examine the direct influence of national bank regulation on banks interest rate risk - Assess the applicability of company specific determinants under diverse regulatory provisions

9 Accounting and audit quality Audit Quality and Bank Risk under Heterogeneous Regulations (with A. Provasoli and L. Pozza, Bocconi University) Presented at: European Accounting Association conference, 2011 American Accounting Association conference, 2011

10 Audit Quality and Bank Risk under Heterogeneous Regulations Empirically examine the role of auditing in monitoring and shaping the financial intermediaries risk exposures What s new? - Most comprehensive international dataset of banks to date (including G 10 countries) - First study to explicitly relate the quality of banks auditors to their risk exposures...robust to heterogeneous cross-country regulatory provisions & IFRS introduction

11 FURTHER INTERESTS Corporate finance and market efficiency - Event studies in economics and finance: The UK equity market around the ex-split date (with E. Kalotychou and S. Staikouras, Cass Business School). Journal of International Financial Markets, Institutions and Money, 2009 Alternative investments & risk management - Real estate investment trusts and their risks: The impact of term structure surprises on REIT returns (with S. Stevenson and A. Akimov, University of Reading). Working paper series, 2011