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Three Essays in Financial Intermediation

  • Author / Creator
    Wang, Lu
  • This thesis contains three chapters on financial intermediation. Chapter 1 considers whether the rating gap between “all-in” and “stand-alone” ratings for a bank can serve as a good measure of systemic risk, which is defined as the risk that a distressed bank may bring to the banking system. The gap between the stand-alone rating and the all-in rating is attributable to the external support that the bank would receive if it were in financial distress. With the motivation to provide a reliable and easily constructed systemic risk indicator, Chapter 1 contributes to the literature in providing several ways to calculate the rating gap and studies the link between it and a quantitative systemic risk measure, Co-independent Value at Risk (CoVar). This chapter finds that the rating gap is a good proxy for systemic risk for large banks. Chapter 2 evaluates how the risks associated with mergers and acquisitions (M&As) affect banks' levels of solvency. This chapter hypothesizes that bank solvency is affected by M&As directly and indirectly through banks’ market risk, geographical diversification and activity diversification. The relationship between bank solvency, diversification and market risk are estimated as a system using Generalized Method of Moments (GMM). The key finding is that M&As erode banks' solvency, both directly and indirectly through the effects associated with their geographical diversification. Chapter 3 explores whether banks pursue different diversification strategies in response to time-varying market betas and spillover effects during upturns and downturns in markets. The main findings are: 1) banks use different diversification strategies in response to market movements conditional on market stability; 2) banks may need to consider market spillovers in activity diversification plans because spillovers change the link between activity diversification and a bank’s return.

  • Subjects / Keywords
  • Graduation date
    2016-06:Fall 2016
  • Type of Item
    Thesis
  • Degree
    Doctor of Philosophy
  • DOI
    https://doi.org/10.7939/R3Z02ZF16
  • License
    This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.
  • Language
    English
  • Institution
    University of Alberta
  • Degree level
    Doctoral
  • Department
    • Department of Economics
  • Supervisor / co-supervisor and their department(s)
    • Smith R.Todd (Economics)
  • Examining committee members and their departments
    • Young, Denise (Economics)
    • Galvani, Valentina (Economics)