Table of Contents

Corporate Governance and the Creation of the SEC

Arevik Avedian, Harvard University
Henrik Cronqvist, China Europe International Business School (CEIBS)
Marc Weidenmier, Claremont Colleges - Robert Day School of Economics and Finance, National Bureau of Economic Research (NBER)

Regulatory Capital Requirements and Capital Buffers: An Examination of the Australian Banking Sector

Kassim Jahn Durrani, Macquarie University, Faculty of Business and Economics, University of Sydney
James R Cummings, Macquarie University, Faculty of Business and Economics, Centre for International Finance and Regulation (CIFR)


REGULATION OF FINANCIAL INSTITUTIONS eJOURNAL

"Corporate Governance and the Creation of the SEC" Free Download

AREVIK AVEDIAN, Harvard University
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HENRIK CRONQVIST, China Europe International Business School (CEIBS)
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MARC WEIDENMIER, Claremont Colleges - Robert Day School of Economics and Finance, National Bureau of Economic Research (NBER)
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We study the effects of the creation of the SEC on corporate governance. Established in 1934, the SEC effectively applied the listing standards of the NYSE to all regional stock exchanges in the U.S. We therefore examine the impact of the SEC by comparing non-NYSE listing firms before and after the landmark legislation was adopted, using the NYSE as a control group. Our estimates reveal that there was a 30 percent reduction in board independence, i.e., the creation of the SEC caused boards to become significantly less independent. We find no corresponding effects on firm valuations. Our evidence is consistent with a "substitution of governance mechanisms" hypothesis, i.e., firms endogenously trade off market-based (board) governance and government-sponsored (SEC) governance. The evidence has implications for changes to corporate governance regulations around the world.

"Regulatory Capital Requirements and Capital Buffers: An Examination of the Australian Banking Sector" Free Download
Paris December 2014 Finance Meeting EUROFIDAI - AFFI Paper

KASSIM JAHN DURRANI, Macquarie University, Faculty of Business and Economics, University of Sydney
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JAMES R CUMMINGS, Macquarie University, Faculty of Business and Economics, Centre for International Finance and Regulation (CIFR)
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This study investigates regulatory capital requirements and bank capital buffers for the Australian banking sector. Australian banks were remarkably resilient during recent global financial turmoil. Many have attributed this to a culture of prudent lending, sound capitalisation and a stable funding base. This study investigates further, finding Australian banks have a targeted level of capital in mind, with quarterly speed of adjustment coefficients of 19 and 15 per cent back to this target, for total and tier 1 capital ratios respectively. Findings suggest bank risk, size and return on equity are strong capital buffer determinants, and the impact of Basel II has had a positive impact on the capital buffers held by banks. Capital buffers vary positively with the business cycle, indicating a potential countercyclical effect with lending based on the capital crunch hypothesis. Finally, results indicate bank-specific regulatory imposed prudential capital ratios (PCRs) are having their intended effect on capital ratios, with movements in PCRs having a positive influence on the capital buffers banks hold. Findings indicate the strong degree of importance regulatory oversight has had in maintaining a sound and profitable banking system in Australia.

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About this eJournal

This eJournal distributes working and accepted paper abstracts covering regulatory and legal aspects of national and international financial institutions. The eJournal welcomes research that deals with legal aspects of depository institutions including banks, credit unions, trust companies, and mortgage loan companies. Topics also include regulation of insurance companies, brokers, underwriters, and investment funds.

Editors: G. William Schwert, University of Rochester, and Rene M. Stulz, Ohio State University (OSU)

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Directors

BANKING & FINANCIAL INSTITUTIONS EJOURNALS

MICHAEL C. JENSEN
Harvard Business School, Social Science Electronic Publishing (SSEP), Inc., National Bureau of Economic Research (NBER), European Corporate Governance Institute (ECGI)
Email: mjensen@hbs.edu

Please contact us at the above addresses with your comments, questions or suggestions for FEN-Sub.

Advisory Board

Regulation of Financial Institutions eJournal

EDWARD I. ALTMAN
Max L. Heine Professor of Finance and Vice Director, New York University (NYU) - Salomon Center, Max L. Heine Professor of Finance, New York University (NYU) - Department of Finance

DENNIS R. CAPOZZA
Professor of Finance and Dykema Professor of Business Administration, University of Michigan, Stephen M. Ross School of Business

DONALD CHEW
Morgan Stanley Investment Management

JOHN DAVID CUMMINS
Joseph E. Boettner Professor, Temple University - Risk Management & Insurance & Actuarial Science, Harry J. Loman Professor Emeritus, University of Pennsylvania - Insurance & Risk Management Department

DOUGLAS W. DIAMOND
Merton H. Miller Distinguished Service Professor of Finance, University of Chicago - Booth School of Business, National Bureau of Economic Research (NBER)

EUGENE F. FAMA
Robert R. McCormick Distinguished Service Professor of Finance, University of Chicago - Finance

STEPHEN FIGLEWSKI
Professor of Finance, New York University - Stern School of Business

STUART I. GREENBAUM
Bank of America Professor of Managerial Leadership, Washington University in St. Louis - Olin Business School

MICHAEL C. JENSEN
Jesse Isidor Straus Professor of Business Administration, Emeritus, Harvard Business School, Co-Founder, Chairman, Managing Director and Integrity Officer, Social Science Electronic Publishing (SSEP), Inc., Research Associate, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

JONATHAN M. KARPOFF
Washington Mutual Endowed Chair in Innovation Professor of Finance, University of Washington - Michael G. Foster School of Business

KENNETH LEHN
Professor of Business Administration, University of Pittsburgh - Finance Group

STANLEY R. PLISKA
University of Illinois at Chicago - Department of Finance

CHARLES I. PLOSSER
President, Federal Reserve Bank of Philadelphia, National Bureau of Economic Research (NBER)

KATHERINE SCHIPPER
Duke University - Fuqua School of Business

ALAN SCHWARTZ
Sterling Professor of Law, Yale Law School

G. WILLIAM SCHWERT
Distinguished University Professor of Finance and Statistics, University of Rochester - Simon School, National Bureau of Economic Research (NBER)

RENE M. STULZ
Everett D. Reese Chair of Banking and Monetary Economics, Ohio State University (OSU) - Department of Finance, National Bureau of Economic Research (NBER), Fellow, European Corporate Governance Institute (ECGI)

ROSS L. WATTS
Erwin H. Schell Professor of Management, Massachusetts Institute of Technology (MIT) - Sloan School of Management