Margherita Saraceno

Securities Class Actions: A Helping Hand for Bank Regulators in Trouble?

By comparing the behavior of those US banks which faced Securities Class Actions (SCAs) in the 2000-2008 period with a control group of non-sued banks, we investigate the regulatory effects of this collective litigation procedure. The paper improves upon previous research by accounting for the endogenous nature of SCAs with respect to bank performance. This issue is addressed using an instrumental variable related to court severity. Two-Stage Least Squares estimates provide evidence that SCAs can stimulate more cautious attitudes towards risk, prompting the accumulation of reserves and recapitalization. We also find they are likely to enhance bank efficiency. However, our results also suggest that SCAs significantly increase dividend payouts while inducing a contraction of bank assets. SCAs are also likely to represent a warning signal of insolvency, as it emerges from the higher probability of being sued in case of high incidence of non-performing loans. We add an extension to the main analysis considering the probability of bank failures as a function of SCA occurrence. Results indicate that the latter is not likely to accelerate the former.

Vulnerability to Money Laundering and Crime Deterrence: Evidence from Italy

This paper examines the economys vulnerability to money laundering in a given region. Assuming that criminals are rational investors who take into account risks and returns of both legal and illegal investments, we define vulnerability as a function of well-identified drivers. Proxies of these variables are used to empirically investigate the relationship between the institutional/economic characteristics of Italian provinces and their vulnerability to money laundering in the 2008-2013 period. We focus on the impact of the reporting of suspicious transactions to the Financial Intelligence Unit, by using instrumental variables to address endogeneity in the relationship between the number of reports made and our measure of vulnerability. Results highlight positive effects of the institutional policies adopted to fight money laundering, especially as far as the reporting of suspicious transactions is concerned. Further dimensions of local vulnerability are outlined: time-invariant heterogeneity across provinces, showing that certain areas are more systematically vulnerable because of persistent local features that cannot be individually identified; and idiosyncratic vulnerability, which pinpoints the fact that some provinces have been periodically subject to abnormally intense money-laundering activity.

Can Shareholder Litigation Discipline CEO Bonuses in the Financial Sector? The Role of Securities Class Actions

The dynamics of executive compensation represents a critical issue, especially in the financial industry. There is evidence that even during the recent financial crisis CEOs were rewarded with disproportionate bonuses, a phenomenon that stands in vivid contrast with the wave of securities litigation that took place in that period as a consequence of managerial misbehaviour. This paper empirically investigates the relationship between securities class actions and the growth of CEO bonuses for financial intermediaries included in the S&P500 index in the period 1999-2010. We use an instrumental variable related to court behaviour in order to address problems arising from the endogenous nature of securities class actions with respect to CEO compensation. The analysis shows that the former are likely to moderate the dynamics of the latter, although the effect does not seem to persist through time.

Migration Policy: An Assessment on the North Africa Emergency Provisions

Abstract Emergency rules temporarily modifying migration regulation can be seen as natural experiments that can be exploited to assess the effectiveness of migration policies. In 2011, the Italian Government released the North Africa Emergency Provisions (ENA) temporarily relaxing immigration policies for refugees who fled to Italy as a consequence of the Arab Spring and the Libyan civil war. To take advantage of this experimental opportunity, we run difference-in-differences regressions on an original dataset to estimate the effects of the ENA provisions on the probability of obtaining a residence permit. The dataset includes micro-data self-collected from an important charity in Milan (Casa della Carita) which regularly provides migrants with legal assistance so as to help them to comply with immigration rules. Estimates show that such provisions actually increased the number of residence permits released to migrants entitled to the ENA benefits. On the other hand, migrants who were not entitled to these provisions suffered from exacerbated difficulties in complying with standard regulation.

Migration Policy: When an Emergency Rule Becomes the Rule: Evidence from Italy

Anecdotal evidence exists that migrants experience difficulties in complying with Italian immigration rules (i.e. permit of stay applications and renewals) because of an intricate and inconstant legal framework. As a consequence, migrants often need legal assistance in order to regularize their status. In 2011, in order to manage the exceptional flows of refugees escaping from countries involved in the Arab Spring and the Libyan civil war, the Italian Government released the North Africa Emergency Provisions (ENA) which temporarily relaxed immigration policies for some categories of migrants. By using data from an important charity in Milan (Casa della Carita) which provides legal assistance to migrants we perform diff-in-diffs estimations in order to investigate the impact of this emergency rule on the probability of legal status regularization. Results show that the emergency situation actually increased the number of successful applications in favor of immigrants who were entitled to the ENA provisions, while dramatically boosting the denial rate for all the other immigrants. This suggests that some migrants (those not benefiting from the ENA) suffered a sort of displacement due to the enactment of the emergency rules.

Posted Workers: Complements or Substitutes for Local Employment? Empirical Evidence from the EU

This paper investigates the effects of the intra-European posting of workers on domestic labour markets in the years 2007-2009. Instrumental variables related to migrant labour and neighbouring countries’ populations are used to address the endogeneity between posting and labour market features. Contrary to conventional wisdom, we find that an intensification of posting inflows is not likely to displace domestic workers. Instead, an increase in posting from abroad may rise both domestic labour costs and productivity. Results point toward the complementarity between domestic and posted workers, so that posting can actually improve labour efficiency and put upward pressure on labour costs.