Ownership Networks Effects on Secured Borrowing

Abstract

The secured borrowing based on sell/buy-backs agreements is studied, specifically considering both: quantity and price. The empirical evidence presented in this paper suggests that, after controlling for specific individual characteristics, group-specific effects (defined by belonging or not to a financial group) play a relevant role in this market. Using spatial panel data models, we find that the amount of liquidity obtained with sell/buy-backs depend on traditional determinants (institution’s size and financial leverage), but also, on the average size of the financial group to which the financial institution belongs. Similarly, the borrowing cost depends on the amount of liquidity, but the average profitability of the financial group is also significant. Our results are robust to different relationship structures specified for financial groups.

Keywords: funding costs, short-term liquidity, spatial panel data models

JEL Classification: C33, G20, G32