Nasser Arshadi

An empirical investigation of new bank performance

Abstract Of the past studies exploring the establishment of new banks, most have been concerned with the impact of new bank entry on the performance of existing banks. Unfortunately, very little is known about the performance of new banks per se. The relatively little empirical research is surprising given the importance of these vital institutions to the local communities they serve. The present study empirically investigates the performance behavior of newly chartered banks. Since bank performance is a multidimensional concept that cannot be fully captured by a single variable, canonical correlation analysis (CCA) is used for the analysis. With CCA, various measures of performance can be simultaneously related to a set of external and internal variables which influence performance. The results show that several endogenous factors were among the most important determinants of new bank success. Specifically, the banks cost structure, size, and the composition of the loan portfolio were critical influences.

A Multinomial Logit Analysis of Problem Loan Resolution Choices in Banking

This paper presents a conceptual framework of problem loan resolution choices that is a function of the combined borrower and lender decisions. A bank will choose a workout option if its expected value is greater than the outcome under a no-workout plan. For the borrower, if the reputational penalty due to a default is less than the opportunity cost of the best new alternative, the borrower will have an incentive to default. If the reverse holds then the borrower will be better-off with a loan workout. Using a unique data set composed of borrower, lender and economic factors we empirically examine the problem loan resolution choices. The, results provide support for our conceptual framework that problem loan choices are based on combined borrower/lender variables. Copyright 1995 by Ohio State University Press.

Regulatory Deterrence and Registered Insider Trading: The Case of Tender Offers

Empirical studies of insider trading regulation suggest that regulators have been ineffective in deterring illegal insider trading in the 1960s and 1970s. This paper investigates the impact of the passage of the Insider Trading Sanctions Act of 1984 (ITSA), which dramatically increased the potential penalties associated with insider trading. We examine both the incidence and the profitability of the transactions of registered insiders in firms which were the targets of tender offers. Our results indicate that the adoption of more stringent regulations and more active enforcement reduced both the volume and the profitability of trading by registered insiders of target firms in the weeks preceding tender offers.

The wealth effects of the risk-based capital requirement in banking: The evidence from the capital market

Abstract The imposition of risk-based capital requirements has been advocated by some regulatory authorities as a means of mitigating the incentive problems created by fixed-premium deposit insurance. However, their imposition also constitutes a requirement to maintain an exogenously influenced capital structure, which may adversely affect the values of the firms involved. This paper examines the wealth effects of the announcement of the Basle Committees intention to impose, across international boundaries, a pre-determined minimum level of risk-adjusted capital. We find that, in general, the equity values of a sample of large, publicly traded banks decrease at the time of the announcement. Further, those banks with capital levels which are deficient relative to the mandated levels suffer the largest relative losses.

Changing the academic culture: Valuing patents and commercialization toward tenure and career advancement

There is national and international recognition of the importance of innovation, technology transfer, and entrepreneurship for sustained economic revival. With the decline of industrial research laboratories in the United States, research universities are being asked to play a central role in our knowledge-centered economy by the technology transfer of their discoveries, innovations, and inventions. In response to this challenge, innovation ecologies at and around universities are starting to change. However, the change has been slow and limited. The authors believe this can be attributed partially to a lack of change in incentives for the central stakeholder, the faculty member. The authors have taken the position that universities should expand their criteria to treat patents, licensing, and commercialization activity by faculty as an important consideration for merit, tenure, and career advancement, along with publishing, teaching, and service. This position is placed in a historical context with a look at the history of tenure in the United States, patents, and licensing at universities, the current status of university tenure and career advancement processes, and models for the future.

The law and finance of corporate insider trading : theory and evidence

Markets, Firms and Publicly Held Corporations. Securities Regulations, Market Efficiency, and the Role of the SEC. The Law of Insider Trading. The Empirical Literature on Insider Trading - an Overview. Insiders and Outsiders - an Empirical Analysis of Price and Volume Runups Preceding Tender Offer Announcements. Public Policy towards Insider Trading - a Proposal for Decriminalization.

Insider Trading Liability and Enforcement Strategy

Illegal insider trading volume and profitability have increased while the regulatory environment has become more restrictive. This paper explains this puzzling evidence by evaluating the effectiveness of legal theories of insider trading liability and government enforcement. Registered insiders are forbidden from trading on material non-public information based on the disclose-or-abstain theory or the misappropriation theory. Temporary insiders have liabilities similar to registered insiders. In takeover cases, this status is accorded to those connected to both the target and bidding firms. This paper concludes that insider trading regulation has been reasonably effective in deterring illegal trading by registered and temporary insiders. It has, however, failed to deter illegal outside-insider trading.

Incentive problems in bank insider borrowing

Although bank insider abuses have been one of the most frequently cited causes of recent bank problems, the existing literature is surprisingly sparse in this area. The purpose of this article is to examine one element of insider abuse—the case of bank insider borrowing. In the context of the theory of financial intermediation, we propose a hypothesis that excessive insider borrowing creates substantial incentive problems and leads the bank to inferior performance. Our empirical analysis provides results consistent with this hypothesis. The policy implication of this article is that the regulatory agencies and especially the FDIC should carefully monitor banks with excessive insider borrowing to prevent an arbitrage against the insurance fund.

The distributional impact of foreign deposits on federal deposit insurance premia

Abstract Rapid growth of deposits in U.S. foreign bank branches and current U.S. government policies have combined to create a new inequality in the deposit insurance system. Our research shows that smaller banks are substantially subsidizing the insurance costs of the larger, multinational institutions. When insurance premiums are viewed in the context of an implicit tax, it is highly regressive with the wealth transfer growing over time. Recent reform proposals do not fully address important international influences and therefore underestimate the scope of the problem.

IT IS INSIDER TRADING, BUT THE OFFENDERS ARE REALLY OUTSIDERS

ABSTRACT This paper examines insider trading, one form of white collar crime that has received virtually no attention from criminology. The development of laws and administrative policies designed to deter insider trading in the U.S. is chronicled and categorized as five distinct regulatory periods. This paper assesses the rationale of these policies, identifies the persons at whom they are aimed, and evaluates their overall success. A distinction between offender decision making by “inside-insiders” and “outside-insiders” is utilized to show the displacement effect of these anti-insider policies. Based on empirical evidence that existing efforts have failed to stop insider trading a recommendation is made for greater research attention to insider trading and reconsideration of existing SEC regulations.