Système financier international

Le système financier international est l'architecture normative et institutionnelle qui structure les échanges appartenance à la finance internationale. Ce système facilite la rencontre entre l'offre et la demande de capitaux (fonds prêtables), d'actifs financiers ou encore de devises. Le système monétaire international est la composante monétaire du système financier international, qui règle les échanges de devises. Historique Processus de mondialisation financière La mondialisation financière désigne l'internationalisation croissante de la finance et l'unification progressive des marchés financiers sur la planète. Elle est permise par l'extension internationale d'entreprises qualifiées de multinationales, qui peuvent ainsi emprunter des fonds où elles le souhaitent. Le processus de mondialisation financière est fondé sur ce qu'Henri Bourguinat appela la règle des trois D, à savoir la désintermédiation, le décloisonnement et la déréglementation. La désinter

Essays in Empirical Corporate Finance

Stefano Colonnello

This dissertation consists of three chapters. The first chapter examines whether the availability of credit default swaps (CDS) has consequences for creditor governance. CDSs offer creditors the opportunity to hedge credit risk and may impact their willingness to renegotiate debt agreements after covenant violations and to monitor firms. I show that firms implement more conservative investment and financing policies after covenant violations if CDSs are traded on their debt, consistent with heightened renegotiation frictions. Moreover, firms with traded CDS contracts exhibit significantly worse operating and stock performance after covenant violations. Overall, these findings point to an exacerbation of debt-equity conflicts due to the availability of CDSs. Finally, I analyze the interaction of creditor governance and internal governance, and provide evidence suggesting that the possibility to hedge risk through CDSs also reduces creditors' incentives to monitor firms. The second chapter models the joint effects of debt, macroeconomic conditions, and cash flow cyclicality on risk-shifting behavior and managerial pay-for-performance sensitivity. I show that risk-shifting incentives rise during recessions and that the shareholders can eliminate such adverse incentives by reducing the equity-based compensation in managerial contracts. I also show that this reduction should be larger in highly procyclical firms. Using a sample of U.S. public firms, I provide evidence supportive of the model's prediction. First, I find that equity-based incentives are reduced during recessions. Second, I show that the magnitude of this effect is increasing in a firm's cash flow cyclicality. The third chapter analyzes the impact of the formation of universal banks on corporate investment by looking at the gradual dismantling of the Glass-Steagall Act's separation between commercial and investment banking. Using a matched sample of U.S. firms and their relationship banks, I show that firms curtail investment after positive shocks to the underwriting capacity of their main bank. This result is driven by unrated firms and is strongest in the first two years after a shock. Moreover, I obtain similar results for borrowing firms' net debt issuance activity. As an exogenous shock to the formation of universal banks in the U.S., I also use the 1997 loosening of restrictions on commercial banks' securities activities. My findings suggest that universal banks may pay more attention to large and transparent firms that provide more underwriting opportunities while exacerbating financial constraints of opaque firms.

EPFL2015

Essays in Bank Financing

Yalda Sigrist

This thesis examines the optimal mode of financing for banks and financial institutions. The first chapter, which is a joint work with Prof. Jean-Charles Rochet, investigates how Systemically Important Financial Institutions (SIFIs) should be financed. The main specificity of such firms is that their failure imposes negative externalities on the financial system and, more broadly, on the whole economy. Since their shareholders do not internalize these externalities, they tend to provide less capital than what would be socially optimal, generating too many failures. In jurisdictions where they receive tax exemptions, CoCo bonds are a simple means of increasing the resilience of SIFIs while providing large tax benefits to banks' shareholders. However, we show that when tax revenues are properly accounted for, these CoCo bonds are detrimental to social welfare. The second chapter provides a formal model of a bail-in plan, a pre-defined contract that results in self-recapitalization of a financial institution when it is in distress and has no access to equity financing. Bail-ins have the potential to eliminate inefficient bank liquidations and ease financing constraints in bad times. Using a theoretical model of a bail-in contract where banks face time varying financing frictions, taxation and liquidation costs, I show that banks' capital structure decisions and optimal financing and pay-out policies are largely affected by the design of the contingent capital (specifically the conversion ratio). However independent of its design, for an optimal level of debt, bail-in contracts always decrease shareholders incentives to build up liquid buffers and to recapitalize in good times but also eliminate any risk-taking incentives. The third chapter presents a model of bank optimal maturity structure when banks face systemic risk through correlated investments. Banks can privately affect the probability of success of their projects. Risky short-term debt can act as a disciplinary device if it is not rolled over when an adverse interim-date signal on the quality of banks' assets is received. The optimal maturity structure is the result of the trade-off between the disciplinary benefits of short-term debt and the costs of inefficient early liquidations. I show that bank asset commonality affects this trade-off since it reduces the costs of exerting effort through positive information synergies and increases the inefficiency of early liquidations through negative fire-sale externalities. In particular, there is a more important role for the disciplinary effects of short-term debt in high correlation, high fire-sale externalities and low information synergies environments.

EPFL2017

Essays in Dynamic Corporate Finance

Francesca Maria Zucchi

This thesis examines the effects of financing frictions on corporate decisions using dynamic models. Accounting for financing frictions helps reconcile a number of regularities that are hard to explain within the Modigliani-Miller framework. For instance, financing frictions provide incentives for firms to keep liquidity on their balance sheets as a precautionary hedge---a pattern that has been heavily debated in light of the secular increase of cash-to-asset ratios of U.S. firms. The first chapter develops a model that investigates the relation between corporate policies and secondary stock market liquidity. I show that secondary market illiquidity limits a firm's ability to hold precautionary liquidity, exacerbates financial constraints, reduces investment, and decreases firm value. The model reproduces the positive relation between market liquidity and corporate cash holdings observed in the data. This relation might be surprising since firms with illiquid stocks, which have been documented to be more financially constrained than more liquid peers, should be willing to keep more precautionary cash. I also show that the illiquidity-driven drop in firm value can feed back into the secondary market by deterring the participation of liquidity providers, thereby making the market more illiquid. The self-reinforcing nature of this relation gives rise to an internal-external liquidity loop, which singles out a propagation mechanism between financial markets and the corporate sector. From a banking perspective, liquidity hoarding has been a hotly debated topic among academics and policy-makers in the aftermath of the 2007-2009 financial crisis. The second chapter, which is a joint work with Prof. Erwan Morellec and Marco Della Seta, develops a dynamic model of the effects of liability structure and liquid reserves on banks' insolvency risk. When a bank relies on short-term debt financing, negative operating shocks get amplified as the bank weaker fundamentals also translate into losses when rolling over short-term debt. This amplification mechanism leads to an increase in default risk that gets more pronounced as debt maturity decreases and rollover losses increase. Because of this amplification mechanism, banks with identical debt ratios and liquid reserves but different debt structures have different default risk. Heavy exposure to rollover risk can also lead banks to implement gambling strategies when close to default. The third chapter, which is a joint work with Prof. Semyon Malamud, analyzes firms' optimal policies in a general equilibrium setting. It characterizes optimal liquidity management, innovation, and production decisions for a continuum of firms facing financing frictions and the threat of creative destruction. We show that liquidity constraints lead firms to cut production and increase markups, which are then countercyclical with respect to firm-specific shocks. We also illustrate that liquidity constraints may spur firms' investment in innovation and give rise to a non-monotonic cash-investment relation. We embed our single-firm dynamics in a Schumpeterian model of endogenous growth and demonstrate that financing frictions have a non-monotonic effect on economic growth and may increase aggregate consumption. When the corporate sector is constrained, liquidity injections by the government have real effects and can stimulate growth.

EPFL2015