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To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1468-5957.2010.02217.x Byline: Mohamed Belkhir (1), Abdelaziz Chazi (1) Keywords: banking; deregulation; executive compensation; stock options; vega; delta; risk-taking Abstract: Abstract: This study examines three issues related to the sensitivity of bank CEO compensation to risk, or vega: (1) its relevance compared with CEO compensation vega in industrial firms; (2) its determinants; and (3) its effect on bank risk-taking. Using a sample of 156 US bank holding companies (BHCs) and a benchmark sample of 544 industrial firms over the period 1993-2006, we find that the vega of CEO compensation in banking is of a much smaller magnitude than the vega of CEO compensation in industrial firms, despite an effort by BHCs to increase it since the mid-1990s. We also find that larger BHCs with better investment opportunities and those that operate in a deregulated environment reward their CEOs with a compensation that has a higher sensitivity to risk. Finally, our analyses show that BHCs in which CEOs receive a higher compensation vega assume a higher risk. Author Affiliation: (1)The authors are respectively, Assistant Professor of Finance at the Department of Economics and Finance of the UAE University; and Assistant Professor of Finance at the Department of Accounting and Finance of the American University of Sharjah. They thank Narjess Boubakri, Kilani Ghoudi, Zaher Zantout, Dennis Olson, Mohamed Arouri, Jean-Paul Pollin and other session participants at the Laboratoire d'Economie d'Orleans seminar in 2008 (France), the participants at the 2009 European Financial Mangement Association meeting in Milan, Italy, an anonymous referee and Paul Andre (associate editor) for their helpful comments and suggestions. Any remaining errors and omissions are the sole responsibility of the authors. M. Belkhir acknowledges financial support from UAE University's Research Affairs through grant#02-02-4-11/08. Article History: (Paper received August 2008, revised version accepted February 2010) Article note: (*) Address for correspondence: Mohamed Belkhir, Assistant Professor of Finance, Department of Economics and Finance, UAE University, Po Box 17555, Al Ain, UAE., e-mail: m.belkhir@uaeu.ac.ae

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1540-6261.2009.01547.x Byline: ASTRID A. DICK, ANDREAS LEHNERT (*) Abstract: ABSTRACT We document a link between U.S. credit supply and rising personal bankruptcy rates. We exploit the exogenous variation in market contestability brought on by banking deregulation-the relaxation of entry restrictions in the 1980s and 1990s-at the state level. We find deregulation explains at least 10% of the rise in bankruptcy rates. We also find that deregulation leads to increased lending, lower loss rates on loans, and higher lending productivity. Our findings indicate that increased competition prompted banks to adopt sophisticated credit rating technology, allowing for new credit extension to existing and previously excluded households. Article note: (*) Dick is with the Department of Economics, INSEAD Business School. Lehnert is at the Board of Governors of the Federal Reserve System. The opinions expressed do not necessarily reflect those of the Federal Reserve System. The authors would like to thank Anthony Cho, Erik Hembre, Sarita Subramanian, and Kristin Wilson for excellent research assistance, and Jean Dermine, Karen Dynan, Denis Gromb, Erik Hurst, Augustin Landier, Evren Ors, Joel Peress, Nick Souleles, Victor Stango, Phil Strahan, Tim Van Zandt, and participants at various seminars and conference presentations for their comments and suggestions. All errors are our responsibility.

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1540-6261.2009.01531.x Byline: KRISTOPHER S. GERARDI, HARVEY S. ROSEN, PAUL S. WILLEN (*) Abstract: ABSTRACT We develop a technique to assess the impact of changes in mortgage markets on households, exploiting an implication of the permanent income hypothesis: The higher a household's expected future income, the higher its desired consumption, ceteris paribus. With perfect credit markets, desired consumption matches actual consumption and current spending forecasts future income. Because credit market imperfections mute this effect, the extent to which house spending predicts future income measures the 'imperfectness' of mortgage markets. Using micro-data, we find that since the early 1980s, mortgage markets have become less imperfect in this sense, and securitization has played an important role. Article note: (*) Gerardi is from the Federal Reserve Bank of Atlanta, Rosen from Princeton University and Willen from the Federal Reserve Bank of Boston. We are grateful to a referee and an associate editor, both anonymous, and Campbell Harvey, a very patient editor, for many helpful comments and suggestions. We also thank Mark Aguiar, Mark Doms, Karen Dynan, Jean Grossman, Bob King, Yolanda Kodrzycki, Wayne Passmore, Julio Rotemberg, Scott Schuh, Frank Vannerson, Mark Watson, and audiences at numerous conferences and seminars for helpful suggestions. Finally, we thank Jeff Fuhrer for providing us with computer programs. This research has been supported by Princeton's Center for Economic Policy Studies.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jfineco.2009.10.003 Byline: Alexei V. Ovtchinnikov Keywords: Capital structure; Financing policy; Deregulation Abstract: Deregulation significantly affects the firms' operating environment and leverage decisions. Firms experience a significant decline in profitability, asset tangibility and a significant increase in growth opportunities following deregulation. Firms respond by reducing leverage. Deregulation also significantly affects the cross-sectional relation between leverage and its determinants. Leverage is much less negatively correlated with profitability and market-to-book and much more positively (negatively) correlated with firm size (earnings volatility) following deregulation. These results are consistent with the dynamic tradeoff theory of capital structure. Also consistent with the dynamic tradeoff theory, those firms that are more likely to be above their target capital structure issue significantly more equity in the first few years following deregulation. Author Affiliation: Owen Graduate School of Management, Vanderbilt University, 401 21st St. South, Nashville, TN 37203, USA Article History: Received 20 October 2008; Revised 26 February 2009; Accepted 22 May 2009 Article Note: (footnote) [star] I thank the anonymous referee, David Denis, Diane Denis, Craig Lewis, Ronald Masulis, John McConnell, William Schwert (the editor), Hans Stoll, seminar participants at Vanderbilt University, and conference participants at the 2009 Midwest Finance Association meeting and the 2009 European FMA meeting for helpful comments.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jfineco.2008.12.010 Byline: Nuno Fernandes (a), Ugur Lel (b), Darius P. Miller (c) Keywords: 12h-6; SEC registration; Disclosure; Cross-listing Abstract: We examine the first significant deregulation of U.S. disclosure requirements since the passage of the 1933/1934 Exchange and Securities Acts: the 2007 Securities and Exchange Commission (SEC) Rule 12h-6. Rule 12h-6 has made it easier for foreign firms to deregister with the SEC and thereby terminate their U.S. disclosure obligations. We show that the market reacted negatively to the announcement by the SEC that firms from countries with weak disclosure and governance regimes could more easily opt out of the stringent U.S. reporting and legal environment. We also find that since the rule's passage, an unprecedented number of firms have deregistered, and these firms often had been previous targets of U.S. class action securities lawsuits or SEC enforcement actions. Our findings suggest that shareholders of non-U.S firms place significant value on U.S. securities regulations, especially when the home country investor protections are weak. Author Affiliation: (a) IMD International, Ch. de Bellerive 23, P.O. Box 915, CH - 1001 Lausanne, Switzerland (b) Division of International Finance, Federal Reserve Board, Washington, DC 20551, USA (c) Edwin L. Cox School of Business, Southern Methodist University, Dallas, TX 75275-0333, USA Article History: Received 12 August 2008; Revised 6 October 2008; Accepted 15 December 2008 Article Note: (footnote) [star] We especially thank Chester Spatt for alerting us to the existence of Rule 12h-6. We also appreciate helpful comments from Warren Bailey (the referee), Bill Schwert (the editor), Mark Carey, Hemang Desai, Amy Edwards, Amar Gande, Jose-Miguel Gaspar, Marc Goergen, Karl Lins, Jennifer Marietta-Westberg, Rex Thompson, Wendy Wilson, and seminar participants at Penn State University, George Mason University, the Securities and Exchange Commission, Stockholm School of Economics, Queens University, Chinese University of Hong Kong, University of South Florida, Universidad de los Andes, and participants of the 2008 European Finance Association meetings and the 9th Workshop on Corporate Governance and Investment. Charles Murry and Jason Kotter provided excellent research assistance. This paper represents the authors' opinions and not necessarily those of the Federal Reserve Board. All errors are the sole responsibility of the authors.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jfineco.2008.12.003 Byline: William R. Kerr, Ramana Nanda Abstract: We examine entrepreneurship and creative destruction following US banking deregulations using US Census Bureau data. US banking reforms brought about exceptional growth in both entrepreneurship and business closures. Most of the closures, however, were the new ventures themselves. Although we find evidence for the standard story of creative destruction, the most pronounced impact was a massive increase in churning among new entrants. We argue that creative destruction requires many business failures along with the few great successes. The successes are difficult to identify ex ante, which is why democratizing entry is an important trait of well-functioning capital markets. Author Affiliation: Harvard Business School, Boston, MA 02163, USA Article History: Received 13 October 2008; Revised 12 December 2008; Accepted 15 December 2008 Article Note: (footnote) [star] We are grateful to Rodrigo Canales, Nicola Cetorelli, Shawn Cole, Jim Davis, Ed Glaeser, Paul Gompers, Victoria Ivashina, Ron Jarmin, Josh Lerner, Ross Levine, Javier Miranda, Debarshi Nandy, Mitch Petersen, Steve Ross, David Scharfstein, Antoinette Schoar, Jesper Sorensen, Scott Stern, Phil Strahan, Rebecca Zarutskie, and seminar participants at the US Census Bureau, Danish Research Unit for Industrial Dynamics, European Regional Science Association, Harvard University, Innovation, Policy, and the Economy Group, Kellogg School of Management, London School of Economics and Political Science, Massachusetts Institute of Technology, National Bureau of Economic Research, New York Federal Reserve Board, Reserve Bank of India, and the University of Connecticut for insightful comments on this paper. We also thank the Innovation Policy and the Economy group for financial assistance. The research in this paper was conducted while we were Special Sworn researchers of the US Census Bureau at the Boston Census Research Data Center. Support for this research from National Science Foundation (NSF) Grant (ITR-0427889) is gratefully acknowledged. Research results and conclusions expressed are our own and do not necessarily reflect the views of the Census Bureau or NSF. This paper has been screened to ensure that no confidential data are revealed. A first draft of this paper was circulated in December 2006. All results discussed but not formally presented are available upon request.

To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1540-6261.2007.01292.x Byline: YULIYA DEMYANYK, CHARLOTTE OSTERGAARD, BENT E. SORENSEN (*) Abstract: ABSTRACT We estimate the effects of deregulation of U.S. banking restrictions on interstate personal income insurance for the period 1970 to 2001. Interstate income insurance occurs when personal income reacts less than one-to-one to state-specific output shocks. We find that insurance improved after banking deregulation, with a larger effect in states where small businesses are more important and on proprietors' income than on other components of personal income. Our explanation centers on the role of banks as a prime source of small business finance and on the close intertwining of the personal and business finances of small business owners. Article note: (*) Yuliya Demyanyk is at the Federal Reserve Bank of St. Louis. Charlotte Ostergaard is at the Norwegian School of Management and Norges Bank. Bent Sorensen is at the University of Houston and the CEPR. We thank an anonymous referee for very constructive comments. For further comments and discussions we thank the Editor, an anonymous Associate Editor, Allen Berger, Arnoud Boot, Ralf Elsas, Dmytro Holod, Joe Mason, Mitchell Petersen, Richard Rosen, and Stijn Van Nieuwerburgh, and seminar and conference participants at the University of Vienna, the University of Zurich, the 2004 European Finance Association Meetings in Maastricht, the 2004 University of Houston/Dallas Federal Reserve conference 'International Financial Integration and Risk Sharing' in Houston, the 2005 CFS conference 'Risk Transfer Between (Re-) Insurers, Banks, and Markets' in Frankfurt, the 2005 Econometric Society Meetings in Philadelphia, and the 2006 FIRS Conference on Banking, Corporate Finance, and Intermediation in Shanghai. We thank Pat Reilich and Lindsay Ludwig at the FDIC for help with Call Report data and Philip Strahan for sharing his measures of bank integration. Sorensen thanks Norges Bank for its hospitality. The views expressed in this paper are those of the individual authors and do not necessarily reflect the position of the Federal Reserve Bank of St. Louis or the Federal Reserve System.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jfineco.2005.07.008 Byline: Rebecca Zarutskie Keywords: Bank competition; Corporate debt; Financial constraints; Riegle-Neal act Abstract: This paper presents evidence on the financial and real effects of bank competition using a large panel of privately held firms. I trace the firm-level impact of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which increased the competitiveness of U.S. banking markets. Following the deregulation, newly formed firms used significantly less external debt, were smaller, and realized higher returns on assets, consistent with their investing less due to greater financial constraints. These effects diminish as firms age, ultimately reversing sign. The differential impact that banking market reforms may have on newer and more established firms is underscored. Author Affiliation: Fuqua School of Business, Duke University, Box 90120, Durham, NC 27708, USA Article History: Received 22 March 2004; Revised 6 June 2005; Accepted 7 July 2005 Article Note: (footnote) [star] This paper is based on the first chapter of my dissertation at MIT. I thank my committee, George Plesko, Jim Poterba, and David Scharfstein, for their advice. I also thank Mitch Petersen, Manju Puri, Richard Rosen, and especially an anonymous referee for useful suggestions, as well as seminar participants at Case Western Reserve University, Duke University, the Federal Reserve Banks of Boston, Chicago and New York, Indiana University, the International Monetary Fund, MIT, New York University, the University of North Carolina-Chapel Hill, and the 2003 Chicago Fed Conference on Bank Structure and Competition for their comments. Karen Cys and George Plesko were of invaluable assistance with the data. This research was conducted while I was on temporary assignment with the Internal Revenue Service. I am extremely grateful for the cooperation and assistance of the Statistics of Income Division. The views expressed in this paper are my own and do not necessarily represent those of the IRS or the U.S. Treasury Department. All errors are mine.

The cost of having low oil prices in America is shouldered by its taxpayers. Government-incurred costs to import oil is passed on to the taxpayers under the guise of federal expenditures. In short, although taxpayers pay less for oil, they pay for the higher cost of importing it. This, in turn, supports Arabian Gulf oil producers to the detriment of the domestic oil market. Government support for domestic oil production is needed, as this would improve trade balance, hemispheric capital formation and increase taxable revenue.