Conference Agenda

Please note that all times are shown in the time zone of the conference. The current conference time is: 1st Nov 2024, 12:20:02am CET

 
 
Session Overview
Session
FI 14: Crimes, Leaks and Sanctions
Time:
Saturday, 19/Aug/2023:
11:30am - 1:00pm

Session Chair: Christian Julliard, LSE
Location: 2A-00 (floor 2)


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Presentations
ID: 2123

``Crime and Punishment"? How Banks Anticipate and Propagate Global Financial Sanctions

Mikhail Mamonov1, Anna Pestova1, Steven Ongena2

1CERGE-EI; 2University of Zurich

Discussant: Eliza Wu (University of Sydney)

We study the impacts of global financial sanctions on banks and their corporate borrowers in Russia. Financial sanctions were consecutively imposed between 2014 and 2019, allowing targeted (but not yet sanctioned) banks to adapt their international and domestic exposures in advance. Using a staggered difference-in-differences approach with in-advance adaptation to anticipated treatment, we establish that targeted banks immediately reduced their foreign assets and actually increased their international borrowings, compared to similar other banks. Once sanctioned, however, these banks not only further reduced their foreign assets but also turned to decrease their international borrowings while facing considerable outflow of domestic private deposits. The introduction of government support prevented the banks' disorderly failures and resulted in credit reshuffling: the banks contracted their lending to the domestic corporate sector by at least 4% of GDP and increased household lending by almost the same magnitude, which mostly offset the total economic loss. Further, we introduce a two-stage treatment diffusion approach that flexibly addresses potential spillovers of the sanctions to private banks with political connections. Using unique hand-collected board membership and bank location data, our approach shows that, throughout this period, politically-connected banks were not all equally recognized as potential sanction targets. Finally, using the syndicated loan data, we establish that the real negative effects of sanctions materialized only when sanctioned firms were borrowing from sanctioned banks. (E65, F34, G21, G41, H81.)

EFA2023_2123_FI 14_1_``Crime and Punishment How Banks Anticipate and Propagate Global Financial Sanctions.pdf


ID: 1165

Tax Evasion and Information Production: Evidence from the FATCA

Si Cheng1, Massimo Massa2, Hong Zhang3

1Syracuse University; 2INSEAD; 3Singapore Management University

Discussant: Meziane Lasfer (Bayes Business School, City, University of London)

We examine how tax evasion affects offshore information production. Using the Foreign

Account Tax Compliance Act (FATCA) as an exogenous shock, we document that affected

offshore asset management companies significantly enhance their performance as a response. This improvement comes from better information processing and is more substantial for tax-sensitive companies. Other policies related to fees and portfolio-based tax management are less affected. Our results reveal a novel substitution effect between tax evasion and information production, suggesting that curbing offshore tax evasion can help improve competitiveness and efficiency in the global asset management industry and related markets.

EFA2023_1165_FI 14_2_Tax Evasion and Information Production.pdf


ID: 646

The Political Economy of Financial Regulation

Rainer Haselmann1, Arkodipta Sarkar2, Shikhar Singla1,4, Vikrant Vig3,4

1Goethe University Frankfurt, Germany; 2National University of Singapore; 3Northwestern, Kellog; 4London Buisness School

Discussant: Amanda Heitz (Tulane University)

Increased interdependencies across countries have led to calls for greater harmonization of regulations to prevent local shock from spilling over to other countries. Using the rulemaking process of the Basel Committee on Banking Supervision (BCBS), this paper studies the process through which harmonization is achieved. Through leaked voting records, we document that the probability of a regulator opposing an initiative increases if their domestic national champion (NC) opposes the new rule, particularly when the proposed rule disproportionately affects them. Next, we show that smaller banks, even when they collectively have a higher share in the domestic market, do not have any impact on regulators’ stand – suggesting that regulators’ support for NCs is not guided by their national interest. Further, we find the effect is driven by regulators who had prior experience working in large banks. Finally, we show this unanimous decision-making process results in significant watering down of proposed rules. Overall, the results highlight the limits of harmonization of international financial regulation.

EFA2023_646_FI 14_3_The Political Economy of Financial Regulation.pdf


 
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