Faculty of Business

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Browsing by Author "Akın, Özlem"

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    Anticipating the financial crisis: evidence from insider trading in banks
    (Oxford University Press, 2020-04) Akın, Özlem; Marín, J. M.; Peydro, J. - L.; International Finance; PARLAYAN, Özlem Akın
    Banking crises are recurrent phenomena, often induced by excessive bank risk-taking, which may be due to behavioural reasons (over-optimistic banks neglecting risks) and to conflicts of interest between bank shareholders/managers and debtholders/taxpayers (banks exploiting moral hazard). We test whether US banks' stock returns in the 2007-8 financial crisis are associated with bank insiders' sales of their own bank's shares in the period prior to 2006Q2 (the peak and reversal in real estate prices). We find that top-five executives' sales of shares predict bank performance during the crisis. Interestingly, effects are insignificant the sales of independent directors and other officers. Moreover, the top-five executives' impact is stronger for banks with higher exposure to the real estate bubble, where a one standard deviation increase of insider sales is associated with a 13.33 percentage point drop in stock returns during the crisis period. Finally, even though bankers in riskier banks sold more shares (furthering their own interests), they did not change their bank's policies, for example, by reducing bank-level exposure to real estate. The informational content of bank insider trading before the crisis suggests that insiders knew that their banks were taking excessive risks, which has important implications for theory, public policy and the understanding of crises, as well as a supervisory tool for early warning signals.
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    Global trends in liquidity creation: The role of the off-balance sheet
    (Peter Lang AG, 2019-03-28) Akın, Özlem; Özsoy, Satı Mehmet; Economics; International Finance; PARLAYAN, Özlem Akın; ÖZSOY, Satı Mehmet
    Banks create liquidity by transforming liquid liabilities into illiquid assets and this is one of their main functions. Yet excessive liquidity creation, especially via off-balance sheet activities, might have contributed to the 2008-2009 financial crisis. In this chapter, we analyze the dynamics of liquidity creation in Turkey and the United States, and the contribution of off-balance sheet activities therein.
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    Political connections and informed trading: Evidence from TARP
    (Wiley, 2021-09) Akın, Özlem; Coleman, N. S.; Fons‐Rosen, C.; Peydró, J.-L.; International Finance; PARLAYAN, Özlem Akın
    We study insider trading behavior surrounding the largest bank bailout in history: Troubled Asset Relief Program (TARP). In politically connected banks, insider buying during the pre-TARP period is associated with increases in abnormal returns around bank-specific TARP announcement; for unconnected banks, trading and returns are uncorrelated. Results hold across insiders within the same bank and are stronger for finance-related government connections. Through a Freedom of Information Act request, we obtained the previously undisclosed TARP funds requested; the ratio of received to requested funds correlates both with abnormal returns and insider buying behavior in connected banks.
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    The real estate and credit bubble: evidence from Spain
    (Springer Science+Business Media, 2014-08) Akın, Özlem; Montalvo, J. G.; Villar, J. G.; Peydró, J.-L.; Raya, J. M.; International Finance; PARLAYAN, Özlem Akın
    We analyze the determinants of real estate and credit bubbles using a unique borrower-lender matched dataset on mortgage loans in Spain. The dataset contain real estate credit and price conditions (loan principal and spread, and the appraisal and market price) at the mortgage level, matched with borrower characteristics (such as income, labor status and contract) and the lender identity, over the last credit boom and bust. We find that lending standards are softer in the boom than in the bust. Moreover, despite some adjustment in lending conditions in the good times depending on borrower risk, the results suggest too soft lending standards and excessive risk-taking in the boom. For example, mortgage spreads for non-employed are identical to employed borrowers during the boom. Banks with worse corporate governance problems soften even more the standards. Finally, we analyze the mechanism by which banks could increase the supply of mortgage loans despite of regulatory restrictions on LTVs. The evidence is consistent with banks encouraging real estate appraisal firms to introduce an upward bias in appraisal prices (29 %), to meet loan-to-value regulatory thresholds (40 % of mortgages are just bunched on these limits), thus building-up the credit and the real estate bubble.