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About this book

This book explores the evolution of the banking sector and the financing tools it fosters, addressing the impact of new regulations and the ensuing opportunities for financial institutions, firms, and individuals. Written in two parts, the project includes papers presented at the 2019 Annual Conference of the Wolpertinger Club - The European Association of University Teachers in Banking and Finance.

The first part addresses the impact of policy changes on banks and financial institutions, particularly the impact of recent changes in European policy. The authors explore how policy has been, and is, communicated and how it shapes new incentives and challenges for the banking sector and institutional and individual investors. The book touches upon the debate on the 'bail-in' vs 'bail-out' options and reviews new opportunities for investors on covered and subordinated bond markets in Europe, covering the new regulatory structure provided by the European authorities. The second part explores new financing tools besides the traditional banking sector available to firms and individuals, examining financing options for firms and individuals, and describing the role that alternative capital-market tools such as mini bonds and crowdfunding are playing within the landscape of SME financing. Arguing that financing decisions can ultimately affect the survival rate of startups, this edited collection will be valuable to those researching both finance and business, but particularly to those studying banking, financial institutions and entrepreneurial finance.

Table of Contents


Chapter 1. Introduction by the Editors

This book presents original contributions discussed at the 2019 Wolpertinger Conference, the annual meeting of the European Association of University Teachers in Banking and Finance, held in Venice, Italy. The conference centred around the future of credit for small and medium enterprises (SMEs) and socially sustainable investing, touching upon the role and the evolution of the banking sector and the financing tools it fosters. The chapters contributed to this book confirm that the academic debate regarding financial markets and institutions is not at all out of step with the issues that businesses and firms are facing, thus reaffirming the central role that the academic research can play in understanding real-world phenomena.
Caterina Cruciani, Gloria Gardenal, Elisa Cavezzali

Financial Institutions and the Evolution of European Market and Policy Framework


Chapter 2. ECB and FED Governors’ Speeches: A Topic Modeling Analysis (2007–2019)

In the last years of the twentieth century central banks started strengthening their communication strategy, making it easier to analyze the evolution of central banks’ functions and role over time and space. In this chapter we employ a topic modeling approach to investigate the differences in the topics contained in European Central Bank (ECB) and Federal Reserve (FED) Governors’ speeches over the time period 2007–2019. We find that both ECB and FED speeches are strongly related to monetary policy, even if the largest number of FED Governors’ speeches is related to the promotion of financial stability, especially with respect to the time period 2008–2010. Additionally, in the United States, the topic of consumer protection is also detected.
Marika Carboni, Vincenzo Farina, Daniele A. Previati

Chapter 3. Analyzing Policy Options in the Resolution of Systemically Important Banks: Comparing the “Bailout” and “Bail-In” Tool in Selected Case Studies

The global financial crisis brought an unprecedented increase in public spending, which helped to stabilize the banking sector, but in many countries changed the market structure, incentives to take risks, cost of capital and competitive conditions. The post-crisis new resolution framework was motivated by the need to limit and control public spending, but its implementation showed a mixed picture. Thus, the aim of this chapter was to compare different restructuring and resolution programs for large banks, based on selected case studies. For the bailout tool, Deutsche Bank, the ING Group and the Royal Bank of Scotland (RBS) are compared. Then, selected resolution cases led by the Single Resolution Board (SRB) and the National Resolution Authorities (NRA) are compared, with an aim to analyze how successful was the restructuring of large banks under the bailout and bail-in regimes.
Ewa Miklaszewska, Jan Pys

Chapter 4. Recent Innovation in the Regulation of Covered Bonds in Europe: Who Will Benefit from the New Legislative Framework?

Covered bonds are debt instruments issued by financial institutions that represent the link between the funding strategies of banks and the capability of originating high-quality assets, which in turn enable cost-efficiently funded lending to the real economy. To date, the regulation of covered bonds has taken place at the national level, resulting in different national approaches regarding key technical issues. The EU (European Union) Parliament and the Council of the European Union have recently harmonised national rules on their issuance by providing common definitions, characteristics and regulations with a view to the use of a European trademark. In this chapter, we intend to explore the new European characteristics of these financial instruments and the possibilities for banks and investors to take advantage of the new regulations.
Giusy Chesini, Elisa Giaretta

Chapter 5. Subordinated Debt and Banking Regulation: An Overview

The recent literature has started focusing on the evolving role of subordinated debt and its investors within the EU resolution framework. The market monitoring function employed by its investors and its crucial role in complying with the minimum amount of own funds and eligible liabilities (MREL) make the subordinated debt an interesting case of study under the Bank Recovery and Resolution Directive (BRRD). This chapter provides an overview of the literature about subordinated debt and discusses its evolution within banking regulation with a focus on the BRRD. We deepen the streams of literature able to ground both theoretically and empirically future research on the role of subordinated bondholders under recovery and resolution rules.
Giulio Velliscig, Josanco Floreani, Maurizio Polato

Chapter 6. The Impact of Monetary Policy on Bank Profitability

This chapter analyzes the effect of the monetary policy on both net interest margin and bank profitability using a panel data from 31 OECD countries over the period 2000–2017. The main results show that expansionary monetary policy measures adopted in numerous economies had a negative impact on net interest margins and, therefore, on bank profitability. The relationship between interest rates and the slope of the yield curve with both the net interest margin and profitability is non-linear, more specifically concave. This suggests that the negative impact of low interest rates and the flat yield curve is greater the lower and flattened they are, respectively. Therefore, a potential normalization of monetary policy would have highly beneficial effects on restoring margins and profitability.
Paula Cruz-García

Frontiers in Financing: Instruments for Firms and Individuals


Chapter 7. The Value Drivers of the Italian Asset Management Industry: An Inquiry on the Systematic Risk Drivers

After the escalation of the global financial crisis and the consequent turmoil of the whole banking system, the asset management industry in the EU has undergone a significant growth in the last decade, distinguishing itself as the most vibrant segment within the financial intermediation field. Based on a sample of 44 Italian asset management firms from 2006 to 2016, this paper provides an empirical investigation of the major systematic risk drivers which have featured Italian asset managers across the financial crisis. Our results show that operating efficiency represents a crucial factor for the pricing of the systematic risk exposure of asset managers, having a positive impact on market beta.
Andrea Ferrarin, Josanco Floreani, Maurizio Polato

Chapter 8. Signaling Success Factors in Alternative Entrepreneurial Finance

This paper focuses on the role of signaling in equity crowdfunding by examining the determinants of funding success in the Italian context. By using a unique dataset of 191 successful and unsuccessful campaigns, launched between January 2014 and November 2018 on the leading Italian equity crowdfunding platforms, we analyze the signaling role played toward external investors by the disclosure of financial information, the share of equity retained by founders and by the size of their social networks. Our results show that the disclosure of financial information, the share of equity retained by entrepreneurs and the their social capital have a positive and significant impact on funding success and are interpreted as quality signals of crowdfunding campaigns by external investors.
Francesca Battaglia, Francesco Busato, Maria Manganiello

Chapter 9. Business Models in the Lending-Based Crowdfunding Industry

In recent years, lending-based crowdfunding (LBCF) has been analysed from different perspectives but there has been little discussion about the strategies and business models adopted by LBCF companies. The aim of this study is to define a more correct classification of LBCF companies, based on their business models. We find that the existing classification can be improved by simultaneously considering strategic choices concerning target customers (borrowers and lenders), intermediation model and additional risk management services provided by platforms. We analyse an original worldwide sample of 30 LBCF companies and use a clustering algorithm to group them on the basis of financial and commercial fundamentals to identify four business models denoted by strategies, financial services, risk positions and customer target.
Stefano Cosma, Francesco Pattarin, Daniela Pennetta

Chapter 10. The Italian Minibonds Experience in Triveneto

This paper focuses on a relatively new form of corporate debt financing available to Italian SMEs called “minibonds”. Minibonds may be described as fixed-income securities with a medium–long term expiration date, issued by listed or non-listed SMEs aimed at supporting growth projects, future developments or refinancing operations. This paper focuses on the North-East area of Italy and looks at the difference between listed and non-listed issues of minibonds. This paper explores whether this choice is structurally determined and how recent normative developments may affect it and the overall demand for minibonds by investors. Moreover, we explore the literature trying to identify criteria for the determination of potential emitters and show that existing criteria likely underestimate the true potential supply and are largely ignored by firms.
Nicola Carta, Caterina Cruciani

Chapter 11. Start-Ups Beyond the Crisis: A Survival Analysis

The aim of this paper is to investigate the role of the initial capital structure in the success and duration of entrant manufacturing start-ups. We select all the Italian manufacturing companies incorporated in the database Aida Bureau van Dijk in 2009; we include financial variables such as leverage (measured as debt-to-asset ratio) and study their impact on firm survival. We use duration analysis as the estimation technique and focus on the time span 2009–2016. Our analysis confirms that the relation between initial leverage and firm hazard is positive and significant also for the Italian manufacturing companies. We also find a weak evidence of a positive relation between the quintiles of the leverage distribution and the hazard ratio but this relation requires further investigation.
Giulia Baschieri, Giorgio S. Bertinetti, Gloria Gardenal


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