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Research Interests: Art and Political Science
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We use a large sample of US banks to construct a new indicator of managerial beliefs based on bank provisioning. This indicator does not only anticipate a future charge-off but also explains future loan growth and other variables. In... more
We use a large sample of US banks to construct a new indicator of managerial beliefs based on bank provisioning. This indicator does not only anticipate a future charge-off but also explains future loan growth and other variables. In particular, the indicator shows that an increase in managerial optimism (pessimism) leads to expanded (tight) lending, leverage, and a riskier (less risky) portfolio. Our findings confirm that widespread managerial optimism (pessimism) prevailed before (during) the 2007-2008 financial crisis and that changes in managerial beliefs played an important role in the lending and leverage cycles.
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In the last decay global competition has changed the way companies engage in R&D. Today, even the largest company could not rely on internally generated and financed research projects to compete in the world market. As a result joint... more
In the last decay global competition has changed the way companies engage in R&D. Today, even the largest company could not rely on internally generated and financed research projects to compete in the world market. As a result joint research activities have
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Research Interests: Economics and Philosophy
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Recent patterns show that most research joint ventures (RJVs) are not industrywide, but take place among a subset of the companies operating in the industry. So, while some members of an industry have formed RJVs, the others have... more
Recent patterns show that most research joint ventures (RJVs) are not industrywide, but take place among a subset of the companies operating in the industry. So, while some members of an industry have formed RJVs, the others have responded by forming competing RJVs. The paper presents the results of an experimental investigation on the evolution of cooperation in patent races when more than two players are involved in the race, so that competing RJVs may occur. Ideed, the experimental evidence shows that competing coalitions very often emerge, and they spur the incentive to innovate. In addition, the larger the number of the players the lower the probability to collude during the race. Finally, players with an initial advantage in the race often are capable to pre-empt the rivals.
The paper examines the main factors that affect the incentive to cooperate in R&D, inquiring into the effects of cooperation on incentives to innovate in both a complete and an incomplete contract framework. It considers several forms of... more
The paper examines the main factors that affect the incentive to cooperate in R&D, inquiring into the effects of cooperation on incentives to innovate in both a complete and an incomplete contract framework. It considers several forms of cooperative agreements and studies the circumstances that make one type of cooperation, more likely than others, to emerge. Theoretical considerations suggest that two of the main factors are uncertainty and spillovers. Further, the incentive to cooperate may be greater or less among symmetric than among asymmetric firms, depending on the source of the asymmetry. When firms cooperate, in most cases they prefer a research joint venture, but because of transaction costs, moral hazard and adverse selection problems other forms of cooperation in R&D may occur. Uncertainty and spillovers also affect the size and the nature of coalitions, and in some circumstances competing research joint ventures may be formed. Finally, the paper surveys the empirical ev...
In a dynamic patent race model we analyze the formation and breakup of joint ventures in relation to: (a) the relative as well as absolute position of the firms in the race; (b) the degree of competition in the ex post market. Fudenberg... more
In a dynamic patent race model we analyze the formation and breakup of joint ventures in relation to: (a) the relative as well as absolute position of the firms in the race; (b) the degree of competition in the ex post market. Fudenberg et al. (1983) studied the main features of a patent race when firms compete in R&D, showing that firms in the same position compete fiercely, dissipating the rent from innovation. By contrast, we show that if firms can cooperate or compete in R&D, and if they start in the same position, they cooperate at the outset but break their agreement in the last stage if they will be serious competitors in the downstream market, while, if they can collude in the ex post market, they cooperate from the outset and they innovate jointly. When the firms are lagged by one step, coop-eration does not take place, except in the case the value of the race is negative and the cost saving due to cooperation is large. However, cooperation never occurs if the leader is mor...
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The paper investigates the causes of confidence and overconfidence and their effects on banking behavior and performance for a large sample of American banks in the period 2000-2013. We construct a new indicator of confidence based on... more
The paper investigates the causes of confidence and overconfidence and their effects on banking behavior and performance for a large sample of American banks in the period 2000-2013. We construct a new indicator of confidence based on banks’ loss provisions and show that before 2007 risk-taking, lending and leverage increased relatively more for banks with an intermediate degree of confidence (mid-confidents) than for the overconfident. The former also suffered the greatest losses in the financial crash of 2007-2008. Hence, unlike the previous literature on overconfidence, we find that the financial crisis was determined mainly by the increased confidence of the mid-confident bank CEOs and not the behavioral biases of overconfident CEOs. The latter, in fact, have more persistent beliefs and react less strongly to news during cyclical upswings. Finally, we show that overconfident behavior is unlikely to maximize a bank’s value.
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The paper studies the impact of firms’ over-indebtedness on innovation. First, we build up an over-indebtedness index which takes account of the firm’s level and structure of the debt as well as of its sustainability. Secondly, we... more
The paper studies the impact of firms’ over-indebtedness on innovation. First, we build up an over-indebtedness index which takes account of the firm’s level and structure of the debt as well as of its sustainability. Secondly, we investigate to what extent over-indebtedness explains firms’ innovative activity by focusing on Italian manufacturing firms over the 2003-2010 period. Empirical evidence suggests that indebtedness plays a significant role in explaining firms’ innovative activity, both in the Centre-North and in the South of Italy. Highly indebted firms are also more innovative, but more innovative firms are also less capable to sustain their debts out of current profits. With respect to the Centre-North, empirical results confirm the significant role played by other forms of indebtedness, as well as banking loans, in explaining innovation also when we focus only on hightech sectors and on over-indebted firms. With respect to the South, the relationship between debt and inn...
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The paper analyses the impact of a preventive measure aimed at fighting the criminal organizations’ activities on the bank-firm relationship in the four Italian regions with the highest density of mafia over the period 2004–2016. Taking... more
The paper analyses the impact of a preventive measure aimed at fighting the criminal organizations’ activities on the bank-firm relationship in the four Italian regions with the highest density of mafia over the period 2004–2016. Taking advantage of the staggered firm-level anti-mafia enforcement actions, we implement a difference-in-differences approach and find that after entering judicial administration mafia-infiltrated firms experience a 19 per cent contraction of bank credit and have a higher probability of being credit rationed than a matched sample of legal companies. We also find that firms confiscated from the mafia experience a negative change in some demand-driven (value of production) and supply-driven (profitability) determinants of loans. Finally, we study whether confiscation of infiltrated firms produces externalities on non-infiltrated companies, and show that banks do not reassess the overall credit risk in local markets.
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Research Interests: Pca and Innovation
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There is a large amount of evidence showing that the discovery of a new good or a new technique is the result of luck as well as of the rational pursuing of a specific aim (see Jewkes et al., 1969, p. 356). Sometimes the pursuing of a... more
There is a large amount of evidence showing that the discovery of a new good or a new technique is the result of luck as well as of the rational pursuing of a specific aim (see Jewkes et al., 1969, p. 356). Sometimes the pursuing of a specific aim leads to findings in different fields as a by-product of the R & D activity (Nelson, 1959). Indeed the very essence of R & D activity is the uncertainty about the nature of discovery and the amount of expenditure necessary to achieve the discovery.
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Lo scopo di questo lavoro è quello di analizzare se il sistema bancario italiano ha avuto un ruolo rilevante sia nella crescita economica che nel declino dell’economia italiana, come pure nella determinazione dei divari di sviluppo... more
Lo scopo di questo lavoro è quello di analizzare se il sistema bancario italiano ha avuto un ruolo rilevante sia nella crescita economica che nel declino dell’economia italiana, come pure nella determinazione dei divari di sviluppo regionale.
Il lavoro si propone di esaminare l'impatto delle principali variabili interne ed esterne alle singole banche sulla loro performance ed organizzazione, esaminando un campione di istituti di credito europei e americani per il periodo... more
Il lavoro si propone di esaminare l'impatto delle principali variabili interne ed esterne alle singole banche sulla loro performance ed organizzazione, esaminando un campione di istituti di credito europei e americani per il periodo 1999-2010, caratterizzato da diverse fasi cicliche dell’attività economica e finanziaria.
Il lavoro si propone di ricostruire la teoria dell’instabilità finanziaria del capitalismo di Hyman Minsky e di valutare la sua rilevanza nella spiegazione della crisi attuale. La prima parte del lavoro è dedicata alla ricostruzione del... more
Il lavoro si propone di ricostruire la teoria dell’instabilità finanziaria del capitalismo di Hyman Minsky e di valutare la sua rilevanza nella spiegazione della crisi attuale. La prima parte del lavoro è dedicata alla ricostruzione del pensiero di Minsky. Partendo da una descrizione del comportamento degli agenti economici e dalle relazioni finanziarie che si stabiliscono in un’economia capitalistica, particolare attenzione viene dedicata all’analisi minskyana del comportamento di banche e imprese e alle condizioni che determinano il livello degli investimenti e dell’attività economica. Al riguardo, si mostra come le aspettative ottimistiche e le posizioni speculative degli operatori generano il boom. D’altra parte, nel boom si pongono le premesse per la crisi, dovendo le banche finanziare le proprie attività a lungo termine con passività a breve e trovando in questa fase maggiori difficoltà a raccogliere liquidità presso i risparmiatori. La mancata restituzione dei prestiti innesc...
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In the last decay global competition has changed the way companies engage in R&D. Today, even the largest company could not rely on internally generated and financed research projects to compete in the world market. As a result joint... more
In the last decay global competition has changed the way companies engage in R&D. Today, even the largest company could not rely on internally generated and financed research projects to compete in the world market. As a result joint research activities have become an increasing important business strategy among oligopolistic firms. Companies use the joint research efforts as new tools to strengthen their individual competitive positions. Moreover, recent patterns show that research joint ventures (RJVs) are not industrywide, but take place among a subset of the companies operating in the industry. So, as some members of an industry have formed RJVs, the others have responded by forming competing RJVs. One example of competing RJVs in the last decay is competition for the development of the high-definition television, to develop the next generation of cable boxes for cable channels and interaction between receivers and broadcasters, for the development of technology enabling televis...
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In a general setting with uncertainty and spillovers in R&D activity, we consider the incentive to cooperate among firms at any or all of the following three stages. Firms can jointly agree on the level of R&D expenditures, they can set... more
In a general setting with uncertainty and spillovers in R&D activity, we consider the incentive to cooperate among firms at any or all of the following three stages. Firms can jointly agree on the level of R&D expenditures, they can set up joint research facilities, and/or they can engage in an information sharing agreements, by which they agree to share any findings with the other firm. We compare expenditures on R&D, profit levels, and welfare levels across the different possible cooperative and competitive setups and offer antitrust implications. Our model differs from previous analyses in three important ways. First, most studies consider only research aimed at lowering production costs, and therefore consider only situations where total profits fall as spillovers increase. We allow for the possibility of product innovation, and define the concepts of offsetting spillovers (falling total profits) and incremental spillovers (when total profits increase as spillovers increase). Se...
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ABSTRACT We investigate the market valuation of accounting information in the European banking industry before and after the adoption of IFRS, the latest version of International Accounting Standards (IAS). Building on Ohlson (1995), we... more
ABSTRACT We investigate the market valuation of accounting information in the European banking industry before and after the adoption of IFRS, the latest version of International Accounting Standards (IAS). Building on Ohlson (1995), we apply panel methods to a multiplicative interaction model in which the partial effects of earnings and book value on share prices are conditional on the adoption of IFRS. According to our evidence, the IFRS introduction enhanced the information content of both earnings and book value for more transparent banks. By contrast, less transparent entities did not experience significant increase in the value relevance of book value.
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ABSTRACT The international comparative evidence on the nexus between finance and growth is ambiguous, owing to the many difficulties in isolating finance, separating its growth effect from that of the other factors. To overcome this... more
ABSTRACT The international comparative evidence on the nexus between finance and growth is ambiguous, owing to the many difficulties in isolating finance, separating its growth effect from that of the other factors. To overcome this problem, we study the effects of financial development on growth from 1960 to 2000 in one country – Italy. Thus we have the same political, legal and regulatory framework but also sharply differing development conditions between regions. After World War II Italy achieved an "economic miracle" similar to what China and India are now experiencing, followed by a lengthy phase of decline. Accordingly, we can distinguish the effect of financial development on growth from other potential causal factors while also considering regions with sharply different economic conditions. Our results show that from 1960 to 1980, when the Italian "economic miracle" was still under way, finance played no significant role in favouring the surge in economic growth, which most likely depended on internal consumption. Between 1980 and 2000, by contrast, the great expansion of Italian financial markets and institutions did have a positive effect on regional economic performance, but overall growth rates were nevertheless low. Although our empirical evidence supports the view that finance is more important for growth in less highly developed regions, it also shows that financial development has not helped to overcome the Italian economic divide.
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The chapter deals with the effects of the new capital requirements (Basel II) on banking behaviour. Since the core of the new rules is the greater sensitivity of regulatory capital to the borrowers' risks, we investigated whether... more
The chapter deals with the effects of the new capital requirements (Basel II) on banking behaviour. Since the core of the new rules is the greater sensitivity of regulatory capital to the borrowers' risks, we investigated whether banks react to the new rules by differentiating their lending behaviour accordingly. Our theoretical conclusions indicate that as banks switch from Basel I to Basel II rules, they reallocate loans from high-risk to low-risk borrowers, while making interest rates more sensitive to probability of default. An econometric study using Italian data supports both these conclusions. Specifically, we find that as banks adapt to Basel II interest rates on loans do become more sensitive to default risk. In addition, an increase in the interest rate reduces the availability of credit in Southern regions, but increases it in the Centre-North. These results suggest that under Basel II higher-risk firms are likely to pay more for loans, and that firms located in the South are likely to be more severely affected.
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ABSTRACT The paper deals with the effects of the new capital requirements (Basel II) on banking behaviour. Since the core of the new rules is the greater sensitivity of regulatory capital to the borrowers' risks, we investigated... more
ABSTRACT The paper deals with the effects of the new capital requirements (Basel II) on banking behaviour. Since the core of the new rules is the greater sensitivity of regulatory capital to the borrowers' risks, we investigated whether banks react to the new rules by differentiating their lending behaviour accordingly. Our theoretical conclusions indicate that as banks switch from Basel I to Basel II rules, they reallocate loans from high-risk to low-risk borrowers, while making interest rates more sensitive to probability of default. An econometric study using Italian data supports both these conclusions. Specifically, we find that as banks adapt to Basel II interest rates on loans do become more sensitive to default risk. In addition, an increase in the interest rate reduces the availability of credit in Southern regions, but increases it in the Centre-North. These results suggest that under Basel II higher-risk firms are likely to pay more for loans, and that firms located in the South are likely to be more severely affected.
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Credit Rationing in Italy.- Does Local Financial Development Matter?.- Local Financial Development and Corporate Financial Policy.- The Geography of Banking Power: The Role of Functional Distance.- Bank Mergers and Credit Allocation Among... more
Credit Rationing in Italy.- Does Local Financial Development Matter?.- Local Financial Development and Corporate Financial Policy.- The Geography of Banking Power: The Role of Functional Distance.- Bank Mergers and Credit Allocation Among Italian Regions.- Basel II and the Financing of R&D Investments.- Basel II and Banking Behaviour in a Dualistic Economy.- Measuring the Efficiency of the Banking System in a Dualistic Economy: Evidence from the Italian Case.- Consolidation, Ownership Structure and Efficiency in the Italian Banking System.
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The paper considers a patent race in which firms do not know their relative positions. In this setting, firms that start in the same position proceed at the highest possible speed; and if one firm has an initial advantage it preempts the... more
The paper considers a patent race in which firms do not know their relative positions. In this setting, firms that start in the same position proceed at the highest possible speed; and if one firm has an initial advantage it preempts the rival, but at the cost of dissipating a significant part of its monopoly rent. So the paper shows that incomplete information in a patent race leads to rent dissipation. The latter is higher, the higher the value of the prize and the lower the cost of R&D. Thus, for innovations that provide relatively high profits the time to discovery is shortened, but the social losses are likely to be high, due to duplication of eÄort. " 2001 Elsevier Science B.V. All rights reserved.