Elena Beccalli

Cross-Country Comparisons of Efficiency: Evidence from the UK and Italian Investment Firms

This paper compares and reconciles two new methods for cross-country comparisons of the cost efficiency of UK and Italian investment firms over the period 1995-1998. It employs four different specifications of the stochastic frontier methodology, using a translog cost function in order to measure X-efficiency. The traditional common frontier reveals that Italian investment firms are nearly as efficient as UK firms. To overcome traditional limitations, two methods are used in this paper. They provide consistent results. The first method shows differences between the efficiency of the two countries by incorporating environmental variables into the cross-country common frontier. The second method shows differences in the efficiency of the domestic versus foreign investment firms in the two countries, by testing the ability to monitor and control on a cross-border basis. Finally, to identify investment firms that are both cost and profit efficient, we undertake a profitability test.

Are European Banks Too Big? Evidence on Economies of Scale

In light of the policy debate on too-big-to-fail we investigate evidence of economies of scale for 103 European listed banks over 2000–2011. Using the Stochastic Frontier Approach, the results show that economies of scale are widespread across different size classes of banks and are especially large for the biggest banks. At the country level, banks operating in the smallest financial systems and the countries most affected by the financial crises realize the lowest scale economies (including diseconomies) due to the reduction in production capacity. As for the determinants of scale economies, these mainly emanate from banks oriented toward investment banking, with higher liquidity, lower Tier 1 capital, those that contributed less to systemic risk during the crises, and those with too-big-to-fail status.

IT and European Bank Performance

Introduction: Banks and Investment in IT New Strategic and Structural Tendencies in European Banking Evaluating the Performance of Investments in IT: Reflections on the Productivity Paradox The Evaluation of the Performance of IT Investments: An Empirical Analysis of the European Banking Industry Technical Change in the European Banking Industry: Methodological Problems and Empirical Results Possible Explanations of the Productivity Paradox in the European Banking Industry Conclusion

Earnings Management, Forecast Guidance and the Banking Crisis

This paper studies earnings management (EM) and forecast guidance (FG) activities of European banks between 2004 and 2008. Using 22,564 analyst forecasts for 55 banks, we find that the proportion of banks hitting or beating analyst consensus fell from 68.22% pre-crisis to 28.13% during the crisis. Banks enjoy higher cumulative adjusted returns (CARs) when they hit analyst consensus only in the crisis. EM is evident pre- but not during the crisis – it has no CAR effects. FG increases the probability of hitting benchmark earnings and during the crisis yields higher CARs. EM and FG act as complements in the crisis period.

Retail Credit Risk Management

List of Tables List of Figures Notes on Contributors PART 1 REGULATORY FRAMEWORK Introduction Anolli, M., Beccalli, E. PART 2 RISK TAKING: MEASUREMENT, PRICING AND MANAGEMENT The Ever-evolving Basel Accord Guadalupi, D. Private Individuals: Credit Risk Modeling Giannasca, C., Giordani, T. SMEs: Credit Risk Modeling Giovannini, E. The Critical Model Parameter: LGD Alghisi Manganello, E., Leucari, V. Model Validation Arfe, A., Gianturco, P. Risk Adjusted Performance Measures Anolli, M. PART 3 PORTFOLIO CREDIT RISK: MEASUREMENT AND MANAGEMENT Portfolio Credit Risk Modeling Bocchi, L., Bellini, T. Stress Testing, Capital Planning, and Risk Integration Bellini, T, Bocchi, L. Portfolio Management Giordani, T., Giannasca, C. PART 4 OPERATIONAL IMPLICATION IT Systems for Credit Risk Management Traversini, R., Marmonti, A. A New Retail Credit Risk Management Approach to Cope with the Crisis Merlin, F.

Economies of Scope in the EU Banking Industry

This paper documents the presence on average of cost economies of scope in the European banking industry, that is, banks minimize total costs, given a certain level of outputs, producing a differentiated mix of outputs. Our results are particularly important in the light of the 2014 structural reform proposal on the EU banking industry which aims to separate the traditional commercial banking from investment activity. The loss of efficiency for banks might have consequences for customers who could suffer an increase in the costs of financial services to try to compensate banks for their loss of efficiency. Bank regulations would be myopic if they focus on investor protections whilst neglecting bank efficiency.

Banking in Italy

This chapter begins with a brief historical perspective on the evolution of the Italian banking sector and then considers the most recent developments in the structure and performance features of the industry. It also covers key issues and concerns that have intensified in Italy particularly in the aftermath of the global financial crisis of 2007-08, including the deterioration in credit quality and the debated reforms affecting cooperative banks.

Bank Risk and Analysts’ Forecasts

The financial crisis has highlighted, inter alia, that the financial community as a whole suffered from important limitations and distortions in the perception of risk faced by banks. The distortion materialized in a marked underestimation of risk by the major players in the system: top management, board of directors, rating agencies, regulatory and supervisory authorities, and so on.

What are the Determinants of Mergers and Acquisitions in Banking

This study investigates the determinants of the likelihood of being involved in mergers and acquisitions (M&As) in banking. Given that the M&A market has been especially active in banking, the main aim here is to test whether it is possible to predict ex ante potential acquirers and targets on the basis of a set of bank specific and regulatory/institutional characteristics. We suggest that significant implications follow. Professional investors in the secondary markets would have at their disposal a method of identifying firms more likely to be targets and acquirers, and hence to select the stocks to be included in their portfolios. Managers in the banking industry would have a way to identify the probability of running into an M&A operation, and therefore to put in place mechanisms to favour or to block it.

Possible Explanations of the Productivity and Profitability Paradox in the European Banking Industry

The strengthening of IT resources is associated with cost savings over the medium-to-long term (as is evident from the estimates relating to technical change) and, to a certain extent — just in respect of investments in hardware and software — over the short term as well. Nevertheless, it seems that a series of factors act as an obstacle to the transformation of technological innovation into profitability and, above all, into improvements in the various components of revenues.