set matsize 500 set mem 100m use "C:\laeven_levine_JFE.dta", clear ************************************************** *** *** *** Table 1: Summary statistics *** *** *** ************************************************** * Log of total operating income * gen ltopein=ln(topein) * Log of total employees * gen lempl=ln(employee) tabstat q int_topein ntloan_east conflict_inc conflict_ast, by(year) stats(n mean p50 sd) columns(statistics) format(%9.2f) tabstat q int_topein ntloan_east conflict_inc conflict_ast, stats(n mean p50 sd) columns(statistics) format(%9.2f) pwcorr q int_topein ntloan_east conflict_inc conflict_ast, sig ******************************************************************** *** *** *** Table 2 *** *** Industry-adjusted discount *** *** *** ******************************************************************** tabstat qe_inc if div_inc1==1, stats(mean p50) format(%9.3f) tabstat qe_ast if div_ast1==1, stats(mean p50) format(%9.3f) ttest q=qi_inc if div_inc1==1 ttest q=qi_ast if div_ast1==1 signtest q=qi_inc if div_inc1==1 signtest q=qi_ast if div_ast1==1 reg q div_inc1 co2-co43 yr2-yr5, robust reg q div_ast1 co2-co43 yr2-yr5, robust ***************************************************************************** *** *** *** Table 3 *** *** Conflicts of interest, and valuation of banks: *** *** *** ***************************************************************************** ** industry-adjusted q ** reg qe_inc conflict_inc co2-co43 yr2-yr5, robust cluster(series) reg qe_ast conflict_ast co2-co43 yr2-yr5, robust cluster(series) ** unadjusted q ** reg q int_topein conflict_inc yr2-yr5 co2-co43, robust cluster(series) reg q ntloan_east conflict_ast yr2-yr5 co2-co43, robust cluster(series) **************************************************************************** *** *** *** Table 4 *** *** Bank-level controls *** *** Liability structure, concentration, ownership, recent performance *** *** *** **************************************************************************** reg qe_inc ltotast conflict_inc dep_lia eq_ast totastgr1 totincgr1 mshare_dep co2-co43 yr2-yr5, robust cluster(series) reg qe_ast ltotast conflict_ast dep_lia eq_ast totastgr1 totincgr1 mshare_dep co2-co43 yr2-yr5, robust cluster(series) ***************************** * Alternative size variable * ***************************** reg qe_inc ltopein conflict_inc dep_lia eq_ast totastgr1 totincgr1 mshare_dep co2-co43 yr2-yr5, robust cluster(series) reg qe_ast ltopein conflict_ast dep_lia eq_ast totastgr1 totincgr1 mshare_dep co2-co43 yr2-yr5, robust cluster(series) ************************************** * unadjusted Q as dependent variable * ************************************** reg q ltotast int_topein conflict_inc dep_lia eq_ast totastgr1 totincgr1 mshare_dep co2-co43 yr2-yr5, robust cluster(series) reg q ltopein int_topein conflict_inc dep_lia eq_ast totastgr1 totincgr1 mshare_dep co2-co43 yr2-yr5, robust cluster(series) reg q ltotast ntloan_east conflict_ast dep_lia eq_ast totastgr1 totincgr1 mshare_dep co2-co43 yr2-yr5, robust cluster(series) reg q ltopein ntloan_east conflict_ast dep_lia eq_ast totastgr1 totincgr1 mshare_dep co2-co43 yr2-yr5, robust cluster(series) ************************************************ * Bank-level and country-level characteristics * ************************************************ reg qe_inc ltotast conflict_inc dep_lia eq_ast totastgr1 totincgr1 mshare_dep growth inflation co2-co43 yr2-yr5, robust cluster(series) reg qe_inc ltopein conflict_inc dep_lia eq_ast totastgr1 totincgr1 mshare_dep growth inflation co2-co43 yr2-yr5, robust cluster(series) reg qe_ast ltotast conflict_ast dep_lia eq_ast totastgr1 totincgr1 mshare_dep growth inflation co2-co43 yr2-yr5, robust cluster(series) reg qe_ast ltopein conflict_ast dep_lia eq_ast totastgr1 totincgr1 mshare_dep growth inflation co2-co43 yr2-yr5, robust cluster(series) reg q ltotast int_topein conflict_inc dep_lia eq_ast totastgr1 totincgr1 mshare_dep growth inflation co2-co43 yr2-yr5, robust cluster(series) reg q ltopein int_topein conflict_inc dep_lia eq_ast totastgr1 totincgr1 mshare_dep growth inflation co2-co43 yr2-yr5, robust cluster(series) reg q ltotast ntloan_east conflict_ast dep_lia eq_ast totastgr1 totincgr1 mshare_dep growth inflation co2-co43 yr2-yr5, robust cluster(series) reg q ltopein ntloan_east conflict_ast dep_lia eq_ast totastgr1 totincgr1 mshare_dep growth inflation co2-co43 yr2-yr5, robust cluster(series) **************************************************************** *** *** *** Table 5 *** *** Endogeneity/Instrumental variables *** *** *** **************************************************************** * (1) OLS with two-way fixed effects * xtreg qe_inc conflict_inc yr2-yr5, fe i(series) xtreg qe_ast conflict_ast yr2-yr5, fe i(series) * Instrumental variables * * (2) Country-level activity restrictions as instrument for conflict_ast and conflict_inc * * Restrictions and banks engaging in underwriting of securities (Barth et al) * ivreg qe_inc (conflict_inc=sec) yr2-yr5, robust first * First-stage F-test on joint significance of all identifying instruments * reg conflict_inc yr2-yr5 sec, robust test sec * Hausman test * ivreg2 qe_inc (conflict_inc=sec) yr2-yr5 ivendog conflict_inc ivreg qe_ast (conflict_ast=sec) yr2-yr5, robust first * First-stage F-test on joint significance of all identifying instruments * reg conflict_ast yr2-yr5 sec, robust test sec * Hausman test * ivreg2 qe_ast (conflict_ast=sec) yr2-yr5 ivendog conflict_ast * (3) Country-level entry applications denied as instrument for conflict_ast and conflict_inc * * Entry applications denied (Barth et al) * ivreg qe_inc (conflict_inc=entryd) yr2-yr5, robust cluster(series) first * First-stage F-test on joint significance of all identifying instruments * reg conflict_inc yr2-yr5 entryd, robust cluster(series) test entryd * Hausman test * ivreg2 qe_inc (conflict_inc=entryd) yr2-yr5 ivendog conflict_inc ivreg qe_ast (conflict_ast=entryd) yr2-yr5, robust cluster(series) first * First-stage F-test on joint significance of all identifying instruments * reg conflict_ast yr2-yr5 entryd, robust cluster(series) test entryd * Hausman test * ivreg2 qe_ast (conflict_ast=entryd) yr2-yr5 ivendog conflict_ast * (4) Average conflict_inc of other banks in country as instrument for conflict_inc * sort ctycode year by ctycode year: egen cflincsum=sum(conflict_inc) by ctycode year: egen cflincno=count(conflict_inc) gen cflincother=(cflincsum-conflict_inc)/(cflincno-1) if cflincno>1 ivreg qe_inc (conflict_inc=cflincother) yr2-yr5, robust cluster(series) first * First-stage F-test on joint significance of all identifying instruments * reg conflict_inc cflincother yr2-yr5, robust cluster(series) test cflincother * Hausman test * ivreg2 qe_inc (conflict_inc=cflincother) yr2-yr5 ivendog conflict_inc sort ctycode year by ctycode year: egen cflastsum=sum(conflict_ast) by ctycode year: egen cflastno=count(conflict_ast) gen cflastother=(cflastsum-conflict_ast)/(cflastno-1) if cflastno>1 ivreg qe_ast (conflict_ast=cflastother) yr2-yr5, robust cluster(series) first * First-stage F-test on joint significance of all identifying instruments * reg conflict_ast cflastother yr2-yr5, robust cluster(series) test cflastother * Hausman test * ivreg2 qe_ast (conflict_ast=cflastother) yr2-yr5 ivendog conflict_ast * (5) IV * ivreg qe_inc (conflict_inc=ltotast roa pndivinc1 spfin nyse) co2-co43 yr2-yr5, first robust cluster(series) ivreg qe_ast (conflict_ast=ltotast roa pndivast1 spfin nyse) co2-co43 yr2-yr5, first robust cluster(series) * F-test * reg conflict_inc ltotast roa pndivinc1 spfin nyse co2-co43 yr2-yr5, robust cluster(series) test ltotast roa pndivinc1 spfin nyse reg conflict_ast ltotast roa pndivast1 spfin nyse co2-co43 yr2-yr5, robust cluster(series) test ltotast roa pndivast1 spfin nyse * Hausman test * ivreg2 qe_inc (conflict_inc=ltotast roa pndivinc1 spfin nyse) co2-co43 yr2-yr5 ivendog conflict_inc ivreg2 qe_ast (conflict_ast=ltotast roa pndivast1 spfin nyse) co2-co43 yr2-yr5 ivendog conflict_ast * (6) Heckman self-selection model * heckman qe_inc conflict_inc ltotast roa pndivinc1 spfin nyse co2-co43 yr2-yr5, select(div_inc1=ltotast roa pndivinc1 spfin nyse) twostep heckman qe_ast conflict_ast ltotast roa pndivast1 spfin nyse co2-co43 yr2-yr5, select(div_ast1=ltotast roa pndivast1 spfin nyse) twostep *** First-stage **** * (2) Country-level activity restrictions as instrument for conflict_ast and conflict_inc * reg conflict_inc sec yr2-yr5, robust reg conflict_ast sec yr2-yr5, robust * (3) Country-level activity restrictions as instrument for conflict_ast and conflict_inc * reg conflict_inc entryd yr2-yr5, robust cluster(series) reg conflict_ast entryd yr2-yr5, robust cluster(series) * (4) Average conflict_inc of other banks in country as instrument for conflict_inc * reg conflict_inc cflincother yr2-yr5, robust cluster(series) reg conflict_ast cflastother yr2-yr5, robust cluster(series) * (5) IV * reg conflict_inc ltotast roa pndivinc1 spfin nyse co2-co43 yr2-yr5, robust cluster(series) reg conflict_ast ltotast roa pndivast1 spfin nyse co2-co43 yr2-yr5, robust cluster(series) ***************************************************************************** *** *** *** Table 6 *** *** Comparison of size of specialized banks and diversified banks *** *** *** ***************************************************************************** gen nonint=topein-netint gen lntloan=ln(ntloan) gen ltoeast=ln(toeast) gen ltopein=ln(topein) gen lnetint=ln(netint) gen lnonint=ln(nonint) reg ltotast cb_inc ib_inc co2-co43 yr2-yr5, robust cluster(series) reg lntloan cb_inc ib_inc co2-co43 yr2-yr5, robust cluster(series) reg ltoeast cb_inc ib_inc co2-co43 yr2-yr5, robust cluster(series) reg ltopein cb_inc ib_inc co2-co43 yr2-yr5, robust cluster(series) reg lnetint cb_inc ib_inc co2-co43 yr2-yr5, robust cluster(series) reg lnonint cb_inc ib_inc co2-co43 yr2-yr5, robust cluster(series) reg ltotast cb_ast ib_ast co2-co43 yr2-yr5, robust cluster(series) reg lntloan cb_ast ib_ast co2-co43 yr2-yr5, robust cluster(series) reg ltoeast cb_ast ib_ast co2-co43 yr2-yr5, robust cluster(series) reg ltopein cb_ast ib_ast co2-co43 yr2-yr5, robust cluster(series) reg lnetint cb_ast ib_ast co2-co43 yr2-yr5, robust cluster(series) reg lnonint cb_ast ib_ast co2-co43 yr2-yr5, robust cluster(series) ***************************************************************************** *** *** *** Table 7 *** *** Mergers *** *** *** ***************************************************************************** * Exclude banks that merged with another financial institution * reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 if mergert~=1, robust cluster(series) reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 if mergert~=1, robust cluster(series) * Exclude banks that merged with other financial institutions during the last 3 years * reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 if mergert3~=1, robust cluster(series) reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 if mergert3~=1, robust cluster(series) * Exclude banks that merged with other financial institutions during the last 5 years * reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 if mergert5~=1, robust cluster(series) reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 if mergert5~=1, robust cluster(series) * Control for mergers with dummy variable * reg qe_inc ltotast mergert conflict_inc co2-co43 yr2-yr5, robust cluster(series) reg qe_ast ltotast mergert conflict_ast co2-co43 yr2-yr5, robust cluster(series) * Exclude banks that merged with other financial institutions during the last 3 years * reg qe_inc ltotast mergert3 conflict_inc co2-co43 yr2-yr5, robust cluster(series) reg qe_ast ltotast mergert3 conflict_ast co2-co43 yr2-yr5, robust cluster(series) * Exclude banks that merged with other financial institutions during the last 5 years * reg qe_inc ltotast mergert5 conflict_inc co2-co43 yr2-yr5, robust cluster(series) reg qe_ast ltotast mergert5 conflict_ast co2-co43 yr2-yr5, robust cluster(series) * Excluding observations where there have been extreme changes in income or assets * * if a bank experienced a change in assets of greater than 50% from year t to year t+1, then exclude that bank in year t+1, t+2, and t+3 ... * gen astchange=0 if totastgr1~=. replace astchange=1 if totastgr1>0.5 & totastgr1~=. sort ctyname bkname year by ctyname bkname: replace astchange=1 if totastgr1[_n-1]>0.5 & totastgr1[_n-1]~=. by ctyname bkname: replace astchange=1 if totastgr1[_n-2]>0.5 & totastgr1[_n-2]~=. by ctyname bkname: replace astchange=1 if totastgr1[_n-3]>0.5 & totastgr1[_n-3]~=. by ctyname bkname: replace astchange=1 if totastgr1[_n-4]>0.5 & totastgr1[_n-4]~=. reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 if astchange~=1, robust cluster(series) reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 if astchange~=1, robust cluster(series) ***************************************************************************** *** *** *** Table 8 *** *** Insurance *** *** *** ***************************************************************************** * Exclude banks with major insurance operations as identified by Worldscope * reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 if insdummy==1, robust cluster(series) reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 if insdummy==1, robust cluster(series) * Using dummy variable for insurance * gen insurance=0 replace insurance=1 if insdummy==3 reg qe_inc ltotast insurance conflict_inc co2-co43 yr2-yr5, robust cluster(series) reg qe_ast ltotast insurance conflict_ast co2-co43 yr2-yr5, robust cluster(series) * Controlling for implied value of insurance operations * reg qe_ins ltotast conflict_ins co2-co43 yr2-yr5, robust cluster(series) ***************************************************************************** *** *** *** Table 9 *** *** Subsamples *** *** *** ***************************************************************************** ** Only diversified firms * reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 if div_inc1==1, robust reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 if div_ast1==1, robust * Only commercial banks * reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 if bktype=="Commercial Bank", robust reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 if bktype=="Commercial Bank", robust * Excluding U.S. banks * reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 if US~=1, robust reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 if US~=1, robust * Only U.S. banks, global benchmark * reg qe_inc ltotast conflict_inc yr2-yr5 if US==1, robust reg qe_ast ltotast conflict_ast yr2-yr5 if US==1, robust * Only U.S. banks, U.S. benchmark * reg qe_inc_us ltotast conflict_inc yr2-yr5 if US==1, robust reg qe_ast_us ltotast conflict_ast yr2-yr5 if US==1, robust * Weighted Least Squares * egen conobank=count(ctyno), by(ctyname year) reg qe_inc ltotast conflict_inc co2-co43 yr2-yr5 [pweight=conobank], robust reg qe_ast ltotast conflict_ast co2-co43 yr2-yr5 [pweight=conobank], robust ***************************************************************************** *** *** *** Table 10 *** *** Alternative q's and Alternative performance measures *** *** *** ***************************************************************************** * Median values * reg qe_incm ltotast conflict_inc co2-co43 yr2-yr5, robust cluster(series) reg qe_astm ltotast conflict_ast co2-co43 yr2-yr5, robust cluster(series) ** US; Income ** reg qe_inc_us ltotast conflict_inc co2-co43 yr2-yr5, robust cluster(series) ** US; Assets ** reg qe_ast_us ltotast conflict_ast co2-co43 yr2-yr5, robust cluster(series) ** Global; Alternative measure * reg opince_inc ltotast conflict_inc co2-co43 yr2-yr5 if opince_inc<0.5, robust cluster(series) reg opince_ast ltotast conflict_ast co2-co43 yr2-yr5 if opince_ast<0.5, robust cluster(series)