Browsing by Author "Ding, Dong"
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Item Essays on Financial Markets: Bank Efficiency, Risk Taking and Contagion(2018-08-09) Ding, Dong; Sickles, RobinThe global financial crisis 2007-2008 has brought many issues into the light and led to a profound questioning about the existing prudential regulations. This dissertation consists of three essays on banking supervision and systemic risk with common themes which are: (i) to evaluate the effectiveness of capital regulations, (ii) to provide important insights to regulators and banks for understanding and monitoring risks, and (iii) to suggest new techniques and frameworks to improve micro and macro prudential supervisions. The three chapters attempt to achieve these goals from different angles. Chapter 1 is an empirical study assessing how capital regulations impact U.S. banks' capital ratios, risk-taking and performance (proxied by the cost efficiency). The analysis is based on standard models taken from the banking and finance literature but with added attention paid to specifying possible cost inefficiencies in the provision of intermediation services. Chapter 2 moves into more methodological innovations of Chapter 1 research questions and focuses on a spatial panel analysis of financial interconnectness of U.S. banks. Chapter 3 employs network approaches to examine contagion within the financial network, which are able to provide visual and analytical representation of exposures not evident in standard economic models.Item Frontier efficiency, capital structure, and portfolio risk: An empirical analysis of U.S. banks(Elsevier, 2018) Ding, Dong; Sickles, Robin C.Firm’ ability to effectively allocate capital and manage risks is the essence of their production and performance. This study investigated the relationship between capital structure, portfolio risk levels and firm performance using a large sample of U.S. banks from 2001 to 2016. Stochastic frontier analysis (SFA) was used to construct a frontier to measure the firm's cost efficiency as a proxy for firm performance. We further look at their relationship by dividing the sample into different size and ownership classes, as well as the most and least efficient banks. The empirical evidence suggests that more efficient banks increase capital holdings and take on greater credit risk while reducing risk-weighted assets. Moreover, it appears that increasing the capital buffer impacts risk-taking by banks depending on their level of cost efficiency, which is a placeholder for how productive their intermediation services are performed. An additional finding, is that the direction of the relationship between risk-taking and capital buffers differs depending on what measure of risk is used.