Construction of facilities under asymmetric information: do constitutional constraints matter?

This paper studies construction of facilities in a federal state under asymmetric information. A country consists of two regions, each ruled by a local authority. The federal government plans to construct a facility in one of the regions. The facility generates a local value in the host region and has spillover effects in the other region. The federal government does not observe the local value because it is the local authority's private information. 80 the federal governrnent designs an incentive-compatible mechanism, specifying if the facility should be constructed and a balanced scheme of interregional transfers to finance its cost. The federal governrnent is constitutionally constrained to respect a given leveI of each region's welfare. We show that depending upon the facility's local value and the spillover effect, the governrnent faces different incentive problems. Moreover, their existence depends crucially on how stringent constitutional constraints are. Therefore, the optimal mechanism will also depend upon these three features of the model.

Does liquidity constraints matter for Ricardian equivalence?

The paper analysis a general equilibrium model with two periods, several households and a government that has to finance some expenditures in the first period. Households may have some private information either about their type (adverse selection) or about some action levei chosen in the first period that affects the probability of certain states of nature in the second period (moral hazard). Trade of financiai assets are intermediated by a finite collection of banks. Banks objective functions are determined in equilibrium by shareholders. Due to private information it may be optimal for the banks to introduce constraints in the set of available portfolios for each household as wellas household specific asset prices. In particular, households may face distinct interest rates for holding the risk-free asset. The government finances its expenditures either by taxing households in the first period or by issuing bonds in the first period and taxing households in the second period. Taxes may be state-dependent. Suppose government policies are neutml: i) government policies do not affect the distribution of wealth across households; and ii) if the government decides to tax a household in the second period there is a portfolio available for the banks that generates the Mme payoff in each state of nature as the household taxes. Tben, Ricardian equivalence holds if and only if an appropriate boundary condition is satisfied. Moreover, at every free-entry equilibrium the boundary condition is satisfied and thus Ricardian equivalence holds. These results do not require any particular assumption on the banks' objective function. In particular, we do not assume banks to be risk neutral.

The effects of credit risk transfer on bank monitoring and firm financing

This paper examines the efects of the transfer of credit risk associated with bank loans. We are interested in (a) whether the transfer of credit risk has any impact on the intensity with which banks monitor their borrowers and (b) whether credit risk transfer infuences the amount of financing that is provided to firms in an economy. Our model first develops conditions under which bank finance is available to firrms, mainly in the spirit of Holmstrom/Tirole (1997). We then introduce projects with uncorrelated pay-offs and argue that one possible economic rationale for credit risk transfer is diversi¯cation. We analyze whether and how within this scenario the transfer of the credit risk of loans changes a bank's incentives to monitor its debtors. Finally we investigate whether and what kind of impact this may have on the amount of ¯nancing available to firms in an economy. Our results indicate that the monitoring incentives are being eroded indeed and that credit risk transfer can increase the overall amount of obtainable funds in an economy.

Information asymmetry and competition in credit markets: the pricing of overdraft loans in Brazil

This paper evaluates how information asymmetry affects the strength of competition in credit markets. A theory is presented in which adverse selection softens competition by decreasing the incentives creditors have for competing in the interest rate dimension. In equilibirum, although creditors compete, the outcome is similar to collusion. Three empirical implications arise. First, interest rate should respond asymmetrically to changes in the cost of funds: increases in cost of funds should, on average, have a larger effect on interest rates than decreases. Second, aggressiveness in pricing should be associated with a worseing in the bank level default rates. Third, bank level default rates should be endogenous. We then verify the validity of these three empirical implications using Brazilian data on consumer overdraft loans. The results in this paper rationalize seemingly abnormallly high interest rates in unsecured loans.

Bank relationships: effect on the availability and marginal cost of credit for firms in Argentina

The paper provides evidence on what affects at the margin the cost and availability of bank credit for firms in Argentina. We study in particular how banks use different pieces of private and public information to screen firms and overcome informational asymmetries in the credit market. Some private information is transferable, like balance sheet data. Private information generated in relationships is not. To capture the closeness of bank relationships, we resort to the concentration of bank credit and the number of credit lines in a bank. We also consider public information available in the Central de Deudores. The cost of credit is measured using overdrafts, the most expensive line of credit, at the bank that charges the highest rate for overdrafts. We find that the cost of credit is smaller for a firm with a close relationship to the marginal bank. Firms with large assets, a high sales/assets ratio, and a low debt/assets ratio pay a lower interest rate at the margin. A good credit history (no debt arrears and no bounced checks) and collateral also reduce the marginal interest rate. The availability of credit is measured by unused credit lines as a proportion of total liabilities with the main bank. The availability of credit depends positively on a close relationship with the main bank. Large assets, a high return over assets, a high sales/assets ratio, a low debt/assets ratio, a good credit history, and collateral lead to higher credit availability. Our measure of unused credit lines is less ambiguous than traditional measures like leverage, which may indicate financial distress rather than availability of credit.

Equilibria in exchange economies with financial constraints : beyond the Cass trick

We consider an exchange economy under incomplete financiaI markets with purely financiaI securities and finitely many agents. When portfolios are not constrained, Cass [4], Duffie [7] and Florenzano-Gourdel [12] proved that arbitrage-free security prices fully characterize equilibrium security prices. This result is based on a trick initiated by Cass [4] in which one unconstrained agent behaves as if he were in complete markets. This approach is unsatisfactory since it is asymmetric and no more valid when every agent is subject to frictions. We propose a new and symmetric approach to prove that arbitrage-free security prices still fully characterize equilibrium security prices in the more realistic situation where the financiaI market is constrained by convex restrictions, provided that financiaI markets are collectively frictionless.

Endogenous borrowing constraints and default when markets are incomplete

Incomplete markets and non-default borrowing constraints increase the volatility of pricing kernels and are helpful when addressing assetpricing puzzles. However, ruling out default when markets are in complete is suboptimal. This paper endogenizes borrowing constraints as an intertemporal incentive structure to default. It modeIs an infinitehorizon economy, where agents are allowed not to pay their liabilities and face borrowing constraints that depend on the individual history of default. Those constraints trade off the economy's risk-sharing possibilities and incentives to prevent default. The equilibrium presents stationary properties, such as an invariant distribution for the assets' solvency rate.

Firm financial constraints and the impact of monetary policy: evidence from financial conglomerates

Building on recent evidence on the functioning of internal capital markets in financial conglomerates, this paper conducts a novel test of the balance sheet channel of monetary policy. It does so by comparing monetary policy responses of small banks that are affiliated with the same bank holding company, and this arguably face similar constraints in accessing internal/external sources of funds, but that operate in different geographical regions, and thus face different pools of borrowers. Because these subsidiaries typically concentrate their lending with small local businesses, we can use cross-sectional differences in state-level economic indicators at the time of changes of monetary policy to study whether or not the strength of borrowers' balance sheets influences the response of bank lending. We find evidence that the negative response of bank loan growth to a monetary contraction is significantly stronger when borrowers have 'weak balance sheets. Our evidence suggests that the monetary authority should consider the amplification effects that financial constraints play following changes in basic interest rates and the role of financial conglomerates in the transmission of monetary policy.

A onda de abertura de capital de bancos no Brasil

Esse estudo investiga a onda de IPOs de bancos brasileiros de 2005 a 2007. Verificou-se que os bancos que fizeram IPO apresentam características ex-ante diferentes de bancos de mesmo porte e tipo de atuação que permaneceram com capital fechado, como maior rentabilidade, maior parcela de seus ativos aplicados em operações de crédito, menor proporção de créditos não performados e mais restrição de capital. Esses resultados mostram que a onda de abertura de capital de bancos não pode ser explicada pela teoria comportamental, e são resultado das oportunidades de crescimento distintas desses bancos em relação a seus concorrentes. Dessa forma, a liquidez de mercado deve ser entendida como condição necessária, mas não suficiente, para explicar os IPOs desses bancos. A evidência encontrada sobre o efeito da abertura de capital no desempenho operacional desses bancos sugere um aumento na proporção créditos-ativos, associado a um aumento na proporção de créditos de pior qualidade, mesmo controlado pelo boom de crédito ocorrido nesse período. Também se percebe uma melhora na eficiência administrativa, o que pode indicar economias de escala nos bancos que realizaram IPO.

Wrong-way risk in stock swaps : measuring counterparty credit risk and CVA

Uma forma interessante para uma companhia que pretende assumir uma posição comprada em suas próprias ações ou lançar futuramente um programa de recompra de ações, mas sem precisar dispor de caixa ou ter que contratar um empréstimo, ou então se protegendo de uma eventual alta no preço das ações, é através da contratação de um swap de ações. Neste swap, a companhia fica ativa na variação de sua própria ação enquanto paga uma taxa de juros pré ou pós-fixada. Contudo, este tipo de swap apresenta risco wrong-way, ou seja, existe uma dependência positiva entre a ação subjacente do swap e a probabilidade de default da companhia, o que precisa ser considerado por um banco ao precificar este tipo de swap. Neste trabalho propomos um modelo para incorporar a dependência entre probabilidades de default e a exposição à contraparte no cálculo do CVA para este tipo de swap. Utilizamos um processo de Cox para modelar o instante de ocorrência de default, dado que a intensidade estocástica de default segue um modelo do tipo CIR, e assumindo que o fator aleatório presente na ação subjacente e que o fator aleatório presente na intensidade de default são dados conjuntamente por uma distribuição normal padrão bivariada. Analisamos o impacto no CVA da incorporação do riscowrong-way para este tipo de swap com diferentes contrapartes, e para diferentes prazos de vencimento e níveis de correlação.

Informational synergies in consumer credit

Lenders can tap into multiple sources of private information to assess consumer credit risk but little is known about the informational synergies between these sources. Using unique panel data on checking accounts and credit card accounts from the same customers during 2007-2014, we find that activity measures from both account types contain information beyond credit scores and other controls. Checking accounts display warning indications earlier and more accurately than credit card accounts. We also investigate the consistency of information, the reasons for defaults, and selection effects. The evidence highlights sizeable informational synergies that lenders can use to manage credit relationships.

Proposta de um modelo de apoio a processos de consultoria para a melhoria de operações de pequenas empresas

Com o substancial avanço da competitividade, crescem os interesses pela discussão de mecanismos potencializadores de implantação de novas tecnologias de gestão das operações das empresas, percebidas como um lastro de sustentação das organizações, necessário num mundo globalizado, no qual o poder de influência dos consumidores tem ganhado inegável relevância. Entretanto, a realidade tem revelado dificuldades de inclusão dessas abordagens em algumas empresas brasileiras, sobretudo naquelas de menor porte. Uma das barreiras são, indiscutivelmente, as limitações de recursos, aliadas às poucas alternativas de crédito de baixo custo disponibilizadas no mercado nacional para este segmento de empresas. Diante deste cenário, consultores independentes têm o enorme desafio de internalizar nestas organizações modelos de gestão mais coerentes com a dinâmica da economia atual, tendo como obstáculos adicionais as resistências culturais naturais à incorporação de algumas filosofias de administração modernas como o Lean e a Teoria das Restrições, questionadoras de conceitos tradicionais e detentoras de visões singulares, mas igualmente potencializadoras de resultados efetivos, a um baixo custo. Este trabalho objetivou, por um lado avaliar o contexto no qual os pequenos negócios estão inseridos, e, por outro, propor um modelo de apoio para consultoria voltado para este segmento de empresas, no qual os consultores assumem preponderantemente papeis de educador e coach, de maneira a elevar as chances não somente da implantação de técnicas mais modernas de gestão de operação, mas também de sua incorporação definitiva nestas organizações.