Abstract:
We exploit announcements related to Targeted Long-Term Refinancing Operations (TLTRO) to examine the valuation effects of optional bank funding sources earmarked for lending to the real economy.
Although the aggregate price reaction is statistically insignificant, it is more positive for banks headquartered in countries with poor economic fundamentals and banks with large derivative holdings, in line with theories connecting bank funding liquidity with sovereign risk and asset encumbrance.
In addition, short sellers reduce their net positions after the announcements of the TLTRO waves, suggesting that institutional investors perceive the TLTRO to be value increasing.
Finally, an examination of the predictive power of the price reaction around
TLTRO announcements on future TLTRO usage, as well as retail investor attention
and confounding events, confirms that the TLTRO announcements drive our results.
Placebo tests and other robustness checks also validate our findings.
Short bio:
Giovanni Cardillo is assistant professor in Economics of Financial Intermediation at the University of Bologna.
He is also a scientific consultant for ABIFormazione.
His interests of research are related to several areas of banking and finance: the impact of government monitoring on banks, the impact of IFRS on European capital markets, implications of financial networks for systemic risk, the impact of monetary policies, the evaluation of the effects of corporate governance mechanisms on bank performance and policies, and sustainable finance.
He has published in leading international finance journals, such as Journal of Corporate Finance and Journal of Financial Stability.
He holds a Ph.D. from the University of Bologna. In the past, he also served as Research fellow at Aston University (England) and at the University of Nottingham (England), and as Teaching Associate at the University of Amsterdam (Netherlands).
He was one of the founders of the South Guys ltd., supported by the European Commission.