Anna Grazia Quaranta

The perspective of a bank in granting credits: an optimization model

In this work, a model for legal financiers’ strategies is presented, taking into account that the aim of a bank is to minimize the default probability of the funded company, constrained with reaching a certain profit level. To obtain our purpose, a stochastic dynamics optimization model is constructed and solved in closed form and a Monte Carlo simulation involving empirical data is also implemented. The financial strategies are thus obtained.

Effects of Regulatory and Market Constraints on the Capital Structure and Share Value of REITs: Evidence from the Italian Market

In contrast to the US experience, most international (European) real estate investments trusts (REITs) are subject to prudential regulation. This paper investigates the effects of prudential regulation on capital structures and consequently, the REIT share values of major legal and market constraints (i.e. leverage limitations, market discount on net asset value (NAV), tax controls) that affect non-US REITs. Italian market data are used for an empirical analysis. Our hypothesis is that in a constrained environment, the effects on share price significantly depend on the adopted valuation perspective, i.e. if shares are valued by following a NAV or a financial approach. The logic for this hypothesis is that the two valuation methodologies perceive leverage and implied financial risk differently. In particular, we argue that NAV valuation techniques incentivise REITs to maximize leverage regardless of the financial theory which indicates a contrasting impact of debt on the market value of shares. Differences in financial risk perception could also partially explain market price discounts on NAVs.The empirical results seem to support these expectations. Almost all Italian REITs tend to increase debt ratios over time. NAV discounts are significantly related to leverage. The discount effect is largely attributable to NAV increases that result from rising debt levels. On the contrary, share market prices tend to be independent from leverage. The latter result may indicate that the classic capital theory applies and current debt ratios do not imply bankruptcy risk. The results have significant policy implications in terms of an optimal regulatory design.

A multidimensional approach to measuring bank branch efficiency

Abstract Bank branch efficiency measurements range from simple ratio and standard regression analyses to more complex frontier approaches, each with specific strengths and weaknesses. However, in isolation, the indexes that these approaches generate fail to capture the multidimensional nature of bank branch efficiency. This paper develops a three-step procedure that enables combining the strengths of the existing approaches. We begin by taking the widest number of efficiency indexes proposed in literature (step 1), reduce the redundant information through a collinearity analysis (step 2), and categorize bank branches into efficiency classes through a clustering procedure (step 3). We test our approach on 23 branches of an Italian regional bank. The results show that this three-step approach is able to provide a multidimensional view of efficiency based on indexes employing a wide range of theoretical and methodological approaches with different ways of conceiving (intermediation vs. production) and measuring (stock, vs. flow, or physical measures) bank outputs and inputs, different definitions of efficiency (technical and cost efficiency), and different measurement approaches (ratios, standard regression analysis and frontier functions). The resulting efficiency ranking is consistent with those that univariate indexes generate and provides a balanced evaluation of branch efficiency when such indexes produce contradictory indications.

Country Reputation, Brand Reputation and Company Reputation: Their Importance in Business-to-Business Industries

Literature and research studies on country of origin (COO) have mainly focused on its effect in business to consumer (B2C) markets. Among the few scholars who have analysed industrial sectors (B2B), some believe that COO has similar importance and the same function in B2B markets as in B2C markets. In contrast, others argue that industrial customers are less influenced by this phenomenon. To contribute to this debate, we selected a group of Italian companies in different industries operating in at least one foreign market. We administered electronic questionnaires, collecting data and information on the internationalization of these enterprises, the COO effect and its relevance, namely, the elements that most influence the COO effect. The data also enabled us to examine the importance of company and brand reputation in the internationalization of B2B industries.

Impairment of intangible assets and disclosure by Italian banks

Purpose - The purpose of this paper is to examine the methods used to perform impairment test for intangible assets from a business combination and the information provided by the consolidated financial statements of a Group of Italian banks in the period 2009-2014. The purpose is to verify if, as assumed in literature, there is a positive link between profitability and the tendency of manager’s to post the impairment losses of intangible assets promptly and accurately. Design/methodology/approach - The existence of a link between profitability and the quality of disclosure was verified by constructing correlation indices, and then ascertaining not only the reliability but also the strength and direction of the statistical connection between the above two aspects. A multivariate linear regression reconfirmed the results obtained by the previous bivariate analysis. Findings - The results confirm the basic assumption, showing that the link between the aspects considered is statistically significant and positive in all the years in question. Originality/value - This study fills a gap, given that no papers were found in literature specifically pertaining to banks and other financial institutions. Moreover, the decision to focus the study on Italian banks seems to be particularly appropriate for a number of different reasons: before the financial crisis, Italian banks made numerous acquisitions, posting high amounts for intangible assets; the financial crisis made the stock market prices plummet, thus making it necessary to write-off intangible assets from business combinations; and even before the ESMA, the Bank of Italy intervened on several occasions on the question of reporting, urging Italian banks to comply with disclosure requirements and impairment criteria.

A Survey on Italian Banks' Financial Statements: Impairment Test for Intangible Assets and Disclosure

This paper examines the methods used to perform impairment test for intangible assets from a business combination and the information provided by the consolidated financial statements of a Group of Italian banks for the period 2009-2014. Literature on this theme makes it fair to assume that there is a positive link between profitability and the tendency of the management to recognise impairment losses of intangible assets that are consistent in terms of timeliness and magnitude; despite this, the high risk of opportunistic behaviour to delay/avoid write-off, in any case remains. The existence of an actual link between profitability (IPR) and the quality of the disclosure (GA) was therefore verified, ascertaining not only the reliability, but also the strength and direction of the statistical connection between the above two aspects. The results of the study confirm the basic assumption.

Lineamenti dell’evoluzione del settore manifatturiero. Le Marche quale laboratorio

L’economia italiana dal 2007 ha subito una profonda turbolenza recessiva. In un sistema economico popolato da piccole e medie imprese, il piu delle volte il dato nazionale nasconde la reale entita delle modifiche strutturali dei settori produttivi e delle realta territoriali. L’economia marchigiana, caratterizzata da un’alta densita imprenditoriale, e un microcosmo nel quale le modifiche strutturali del comparto manifatturiero possono essere adeguatamente analizzate. Lo strumento di indagine proposto e quello di un campione chiuso di imprese, osservato dal 1994 al 2010. Dalla ricerca emergono alcuni fatti stilizzati quali il processo di concentrazione basato sulle medie imprese, un’alta propensione all’esportazione ed una crescente patrimonializzazione. A questi aspetti si accompagnano una riduzione dell’efficienza operativa, un alto indebitamento a breve termine ed un’inerzia all’espansione dimensionale.

Pre-Trade Transparency on the Italian Stock Exchange: A Trade Size Model on Panel Data

The purpose of this study was to analyze the effects that have been caused by changes in pre-trade transparency upon the behavior of stock traders. We used a trade size model and tested it before, during and after the period when the Italian Stock Exchange introduced a 20-level order book with disaggregated orders. Tick by tick data of the whole set of stocks (up to 277) listed on the Italian Stock Exchange were studied through fixed-effects panel models, within intra day (every 30 minutes and 150 minutes) and daily time frames. Our results indicate that order flows, bidask spreads, levels of risk and some information events differentially affect trade sizes when investors receive better information prior to negotiation. Both (intra day) informed and uninformed traders operating in a more transparent market became more reticent, with reduced trades sizes and higher orders’ cancellations. Moreover, it appears that the higher degree of order book disclosure permits traders to downsize their level of risk aversion; i.e. it reduces the ’uncertainty’ that would otherwise result in disrupted trading activity under conditions of information opacity.