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Dong, Gang. Essays in banking and finance. Retrieved from https://doi.org/doi:10.7282/T3R78D61

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TitleEssays in banking and finance
NameDong, Gang (author); Palia, Darius (chair); Wu, Yangru (internal member); Kim, Jin-Mo (internal member); Brunnermeier, Markus (outside member); Rutgers University; Graduate School - Newark
Date Created2012
Other Date2012-05 (degree)
SubjectManagement, Banks and banking, Banks and banking--Real estate business, Financial risk management, Mortgage-backed securities, United States.--Patient Protection and Affordable Care Act
Extentxi, 158 p. : ill.
DescriptionThis dissertation includes three essays. The first essay identifies the determinants of bank’s risk contribution to systemic risk, and documents that banks with higher non-interest income (noncore activities like investment banking, venture capital and trading activities) have a higher contribution to systemic risk than traditional banking (deposit taking and lending). After decomposing total non-interest income into two components, trading income and investment banking and venture capital income, we find that both components are roughly equally related to systemic risk. These results are robust to endogeneity concerns when we use a difference-in-difference approach with the Lehman bankruptcy proxying for an exogenous shock. We also find that banks with higher trading income one-year prior to the recession earned lower returns during the recession period. No such significant effect was found for investment banking and venture capital income. The second essay analyzes the effect of mortgage securitization on the real economy and housing market. I estimate the dynamic response of housing risk and real GDP to shocks of mortgage securitization and banks’ ownership of mortgage-backed security (MBS), and test three hypotheses suggested in the extant literature. Using structural vector autoregression (SVAR) methodology and cross-sectional analysis, I find that securitization reduces housing risk by completing the market. Interestingly, housing risk increases when commercial banks’ ownership of MBS increases. This positive relationship is inconsistent with the agency view of securitization but is consistent with the neglected risk view of mortgage securitization (Gennaioli, Shleifer, and Vishny 2011). The causal inference is drawn from a quasi-experimental design using housing data of bordering CBSA regions in neighboring states with and without the passing of anti-predatory lending laws. The third essay identifies the passing of the Patient Protection and Affordable Care Act (PPACA) as an exogenous shock and uses the event study method to estimate the stock market’s reaction in terms of asset price changes in the health care sector. The stock market appears to view the passing of PPACA as good news to the home care and specialty outpatient services but bad news to the medical instrument and health insurance industries. This might suggest that the existing institutional structure of the insurance industry is biased against comprehensive health, and most growth opportunities exist in the home care and specialty outpatient services. Furthermore, the magnitude of the abnormal return is relatively larger for firms with higher profit and R&D investment, but smaller for firms held by healthcare-specialized institutional investors, which is consistent with the literature that price changes are partially due to information revelation efforts by sophisticated institutional investors.
NotePh.D.
NoteIncludes bibliographical references
NoteIncludes vita
Noteby Gang Dong
Genretheses, ETD doctoral
Persistent URLhttps://doi.org/doi:10.7282/T3R78D61
Languageeng
CollectionGraduate School - Newark Electronic Theses and Dissertations
Organization NameRutgers, The State University of New Jersey
RightsThe author owns the copyright to this work.
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