Abstract:
We explore how state Universal Demand statutes (UD) that decrease litigation risks in the adopting states, affect Bank Holding Companies (BCHs)’ risk profile.
Using a difference-in-differences analysis, we show that the UD laws curtail BHCs’ market risk and tail risk exposures.
We document that banks attain such an effect by lowering their credit supply, particularly to relatively risky borrowers.
We also show, as a further lending mechanism, that BHCs have improved their monitoring capabilities by applying stricter contract terms for syndicate loans to risky borrowers.
Short Bio:
Marta Degl’Innocenti is Associate Professor of Finance at the Department of Economics, Management and Quantitative Methods, University of Milan and fellow of the Higher Education Academy (UK).
Before joining the Department in November 2020, she was Associate Professor of Finance and Director of the MSc in International Banking and Financial Studies at the Southampton Business School at the University of Southampton, UK.
Her main research interests are structure, lending and performance in banking, empirical corporate finance and corporate governance, and board composition.
She is also interested in mutual fund management.
She has published in a range of leading international journals such as the Journal of Corporate Finance, the Journal of Banking and Finance, and the European Journal of Operational Research and Research Policy.