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Öğe Disentangling the effect of Trust on Bank Lending(ELSEVIER, 2023-06) Nicolas, Christina; Tarazi, Amine; Danışman, Gamze ÖztürkThis paper studies the effect of trust on bank lending using a sample of commercial banks in 34 countries around the world. We distinguish between two forms of trust: In-group trust, which we define as the trust in people we know, and Out-group trust, which we define as the trust in people we meet for the first time. We find that Out-group trust is positively and significantly associated with bank lending. A closer look shows that this ef-fect only holds in countries with relatively lower levels of formal institutional and judicial development. As for In-group trust, we find that its influence on bank lending is depen-dent on the level of informal lending available in each country. Overall, this paper provides novel evidence on the importance of trust and the different mechanisms by which it in-fluences bank lending around the world. (c) 2023 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY license ( http://creativecommons.org/licenses/by/4.0/ )Öğe Economic policy uncertainty and bank stability: Size, capital, and liquidity matter(Elsevier Science Inc, 2024) Danisman, Gamze Ozturk; Tarazi, AmineWe examine the impact of economic policy uncertainty on bank stability post-2007-2008 global financial crisis and how bank size, capital, and liquidity mitigate this relationship. We use 176,477 quarterly observations for US commercial banks over the period from 2011Q1 to 2020Q3 and find consistent and robust evidence that bank stability decreases as the level of economic policy uncertainty increases. We show that bank size, capital, and liquidity matter, i.e., the negative impact of policy uncertainty on bank stability is stronger for larger banks and weaker for highly capitalized banks as well as for more liquid banks. Our channel analysis shows that the increase in the level and volatility of lending and deposit rates, and the decrease in risk-adjusted capitalization and risk-adjusted profitability might to some extent explain the decrease in bank stability in times of higher economic policy uncertainty. Additional analysis reveals that higher market power mitigates the negative impact of EPU on bank stability. Our findings support the Basel II and III regulatory reforms aimed at tightening the capital levels with stricter rules for the larger banks and the implementation of the newly introduced liquidity rules.Öğe ESG activity and bank lending during financial crises(ELSEVIER, 2023-01-03) Danışman, Gamze Öztürk; Tarazi, AmineThis paper explores how banks' environmental, social, and governance (ESG) activities affect their lending during financial crises. We use a sample of European listed banks with available ESG scores from 2002 to 2020 and consider the global financial crisis of 2007-2009 and the European sovereign debt crisis of 2010-2012. We estimate a two-step system GMM dynamic panel data model and also address potential endogeneity with instrumental variable (IV) and difference-in-difference (DiD) estimations. We find that lending falls to a lesser extent for banks with higher ESG scores during crisis times. Our findings are robust to using alternative ESG rating providers. An investigation of the different potential channels shows that, during crises, banks more engaged in ESG activities are less affected in terms of credit risk, asset risk, and profitability. They also face a lower reduction in market funding, allowing them to downsize to a lesser extent during crises, and their deposit rates do not increase as much as in less ESG-engaged banks. A deeper investigation reveals that our findings mainly hold for banks focused on traditional lending and deposit activities and are essentially driven by the environmental pillar component of ESG scores and the global financial crisis of 2007-2009.