Stefano Caiazza

Financial Education and Investment Attitudes in High Schools: Evidence from a Randomized Experiment

We experimentally study the effect of financial education on investment attitudes in a large sample of high school students in Italy. Students in the treated classes were taught a course in finance and interviewed before and after the study, while controls were only interviewed. Our principal result is that the difference-in-difference estimates of the effect of the course are not statistically significant. However, the course in finance reduced the virtual demand for cash, and increased the level of financial literacy and the propensity to read (and the capacity to understand) economic articles in both treated and control classes compared with pre-treatment baseline levels. A breakdown of the cognitive process, which is statistically significant for the classes treated, suggests that error and ignorance reduction was sizable, and that the progress in financial literacy was stronger in subgroups which exhibited lower ex-ante knowledge levels.

Do domestic and cross-border M&As differ? Cross-country evidence from the banking sector

Are the drivers of domestic and cross-border M&As in the banking sector different? Despite the intense research on bank M&As in the last decade, the attention paid to this issue is surprisingly limited. We fill this gap studying the ex-ante determinants of national and international acquisitions in the banking sector in an unbalanced panel of nearly 1,000 banks from 50 world countries, from 1992 to 2007. Our results show that size and profitability have a stronger impact on the probability that a bank is a bidder in a cross-border deal than in a domestic deal. Consistent with the findings of the literature on the determinants of the internationalization of manufacturing firms, international expansion in the banking sector is therefore easier for countries with a number of large “national champions�?, that are more capable to overcome the fixed costs of internationalization and have a stronger incentive to diversify the idiosyncratic risks of their domestic activities.

What Do Foreigners Want? Evidence from Targets in Bank Cross-Border M&As

Given the recent traumatic events in the world’s banking industry it is important to understand what drives bankers to create larger and larger, often multinational, banking groups. In this paper we investigate whether the targets in cross-border bank MA this probability is based upon both bank specific and country specific characteristics. The sample also naturally includes banks that were not involved in any M&A deal, this set of banks acts as a control sample for the study. We then estimate a multinomial model that distinguishes between (i) targets in domestic operations, (ii) targets in cross-border operations and (iii) non-targets. The main message of the paper is that, with few exceptions, domestic and foreign investors target similar banks. In particular, contrary to what one might expect, bank size does not affect differently the probability of being a domestic or a cross-border target, but it has a positive and highly significant effect in both cases. What differs between national and international M&As are the characteristics of the countries where banks operate. On average, banking systems characterized by lower leverage, higher cost inefficiency and lower liquidity are more likely to be targets of cross-border acquisitions, while none of this characteristics affects the likelihood of being acquired domestically.

The Determinants of Abandoned M&As in the Banking Sector

The consolidation process that characterized the banking industry in the last decades has been widely analyzed, but very few studies have investigated what are the reasons why a number of announced deals were not concluded. We fill this gap in the literature analyzing the characteristics of abandoned M&A operations in a large sample that includes all the major domestic and cross-border deals in the banking sector announced worldwide between 1992 and 2010. The results show that hostile operations, deals of larger size and deals implying swaps of shares are less likely to be concluded. Controlling for size, cross-border operations are more likely to be successfully concluded, contrary to the expectation that the presence of strong cultural barriers and regulations, implicit and explicit, could determine a higher abandonment ratio. Finally, deals announced in countries with stronger supervisory authorities have a higher probability of failure.

'When a Scoffer is Punished, the Simple Becomes Wise' -- The Influence of Enforcement Actions on Bank Risk-Taking

Enforcement actions (or sanctions) pursue two complementary goals, namely to penalize guilty companies and to provide an example to other companies that bad behaviour will be penalized. Although the recent financial crisis showed that this topic is critical in banking, only a few papers (e.g. Delis, Staikouras and Tsoumas, 2015) have analyzed the consequence of sanctions, and no papers have investigated the cross-effects on non-sanctioned banks. Focusing on the Italian banking industry (i.e. as an ideal case study), we assume that non-sanctioned banks care about the enforcement actions taken against other similar banks. By adopting a two-step model based on a propensity score matching technique to calculate the probability of a bank to be subject to sanctions, we show that the stability of non-sanctioned banks increases as the probability of being sanctioned increases (and also as the Mahalanobis distance from the group of sanctioned bank is reduced).

Bank Stability and Enforcement Actions in Banking

This paper analyzes the causes and consequences of the enforcement actions (sanctions) imposed by supervisory authorities for banks. Focusing on a sample of Italian banks between 2005 and 2012, we found 302 sanctions regarding 3,588 persons (i.e. Board of directors, Top Managers, and Chief Executive Officers) were sanctioned in banks. We have three main results. First, enforcement actions are given to banks having high credit risk and poor Return on Assets (both one and two years in before the sanction). Second, sanctioned banks are unable to change their conduct in the first year following the enforcement sanction and the stability levels do not improve. Rather, it takes at least two years after an enforcement action so that banks are able to improve their stability. We also provide evidence that socio-eco-demographic differences in Italy have a substantial impact on the banks reaction after enforcement actions.

Extending Logistic Approach to Risk Modelling ThroughSemiparametric Mixing

The New Proposal of Basel Committee on banking regulation issued in January 2001 allows banks to use Internal Rating Systems to classify firms. Within this context, the main problem is to find a model that fits data as better as possible, providing at the same time good prediction and explicative capabilities. In this paper, our aim is to compare two kind of classification models applied to credit worthiness using weighted classification error as performance function: the standard logistic model and a mixed logistic model, adopting respectively a parametric and a semiparametric approach. As it is well known, the main problem of the former is related to the assumption of i.i.d. hypothesis, while it often turns out necessary to consider the possible presence of unobservable heterogeneity, that characterizes microeconomic data. To better consider this phenomenon we defined and applied a random effect logistic model, avoiding parametric assumptions upon the random effect distribution. This leads to a likelihood which is defined as the integral of the kernel density with respect to the mixing density which has no analytical solution. This problem can be obviated by approximating the integral with a finite sum of kernel densities, each one characterized by a different set of model parameters. This discrete nature helps us in detecting non-overlapping clusters characterized by homogeneous values of insolvency risk, and in classifying firms to one of these clusters by means of estimated posterior probabilities of component membership.