Contemporary issues in the US financial services industry

Abstract

This thesis comprises three empirical studies, which investigate selected contemporary issues in the US financial services industry.

The first study, entitled “Organizational Culture, Competition and Bank Loan Loss Provisioning” examines the extent to which organizational culture affects bank loan loss provisioning practices following changes to the competitive environment. I use a textual analysis approach in conjunction with the so-called Competing Values Framework in order to measure various types of organizational culture (including control, collaborate, compete and create cultures). The results of a difference-in-difference analyses suggest that banks with a control culture exercise less discretion over loan loss provisions. Compete and create banks use more discretionary loan loss provisions when industry competition increases. These results provide novel cultural-based evidence to explain why banks behave differently following changes to the competitive environment. As such, this chapter contributes to the literature on: bank loan loss provisioning practices, bank competition, and organizational culture.

The second study, entitled “Does shareholder discipline benefit banking stability? Evidence from a quasi-natural experiment”, investigates the impact of shareholder litigation rights on bank stability. As a quasi-natural experiment, I exploit the staggered adoption of the Universal Demand laws (which weakened the litigation rights of bank shareholders in listed banks) across numerous US states. The results of a difference-in-differences analysis suggest that weakened shareholder litigation rights enhance bank stability. Overall, this finding provides novel evidence that shareholder litigation rights may not be an effective corporate governance mechanism in constraining bank risk.

In the third study entitled “Strategic Relatedness and Mergers and Acquisitions Outcomes: Empirical Evidence from US Credit Unions”, I use the US credit union industry as a laboratory to examine the impact of strategic relatedness on deal initiations and merger and acquisition (M&As) outcomes. The results of an extensive empirical analysis suggest that if two credit unions are strategically related, they are more likely to merge. However, these types of merger destroy value.