Events

The Center for Banking and Finance in Rio together with the Brazilian School of Public and Business Administration (EBAPE) at the Getúlio Vargas Foundation (FGV) invite for its International Conference on Banking and Economic Development to be held in Rio de Janeiro, Brazil on December 6-7, 2018.

Conference Program

Photos

Finance Seminars, Co-Pierre Georg, University of Cape Town, South Africa.

Title: How Financial Institutions Manage Political Risk: Evidence from Brexit and the Trump Election

Recent years have seen a significant increase in political uncertainty around the world. This paper exploits trade-level data to study how financial institutions manage such political risk, in particular how they reacted to the Brexit vote and the Trump election. We provide evidence that in the weeks before the votes, financial institutions were more likely to increase their exposure to UK and US when the polls suggested that Brexit and Trump’s victory were less likely. Financial institutions also significantly sell their holdings of UK and US securities, respectively, in the immediate aftermath of these votes. Furthermore, these effects are more pronounced for institutions with a higher exposure to the UK (and US), and for more fragile banks, such as those exhibiting low equity ratio or high loss provision. In addition, we also show that these results are mainly driven by the institutions' proprietary trading rather than by the institutions’ customers trading strategies.

Finance Seminar, Pedro Matos, University of Virginia, EUA.
Title: Leviathan Inc. and Corporate Environmental Engagement

In a 2010 report, The Economist called the resurgence of state-owned mega-enterprises, especially those in emerging economies, “Leviathan Inc.”, and criticized their poor governance and efficiency. We show that state-owned enterprises engage more in environmental issues and are more responsive to salient environmental events and change in government’s political orientation. The effect is more pronounced in energy firms from emerging economies and countries with higher energy risks, and with direct shareholdings by domestic government rather than sovereign wealth funds. Firm performance does not suffer from such engagement suggesting that “Leviathan Inc.” may be better positioned at dealing with environmental externalities.

Finance Seminars, KLENIO BARBOSA, INSPER, Brazil.

Title: BANK COMPETITION AND THE LIMITS OF CREDITOR'S PROTECTION REFORMS

This paper empirically investigates how the lack of competition in the credit market can hamper the effects of an increase in creditor protection on the interest rate and the spread of loans in the Brazilian credit market. Banking oligopoly pricing theory suggests that the effects of an increase in creditor protections may be limited or absent on interest rates in credit markets which lack competition. Brazil is a perfect testing ground to study the effect of an increase in the creditor protection because in early 2005 a new bankruptcy law was approved by the Brazilian Congress. That new legislation improved corporate creditor protection and the bankruptcy system’s efficiency. Using monthly data provided by the Central Bank of Brazil, which contains information on bank interest rates for corporate and consumer loans, volume of credit, market power indicators, and other important covariates, we find that the lack of competition hampers 27.5% of the potential reducing effect of the law in the interest rate of new corporate credit operations. If we consider the average market power over all credit lines (treated and control group), then the liming effect represents 295 basis points, or 40.1%. Our results show that an institutional reform in that increases creditors protection has a positive effect on credit condition for firms, but the competition structure of the market matters