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EMPIRICAL BANKING

Syllabus

EN IT

Learning Objectives

LEARNING OUTCOMES:
Ability to read and understand economic/financial/banking papers
Ability to replicate the empirical part using methodologically correct approaches.

KNOWLEDGE AND UNDERSTANDING:
Understand a theoretical problem and empirical analysis. Understanding, memorization, and reproduction of formulas.

APPLYING KNOWLEDGE AND UNDERSTANDING:
Use practically knowledge of banking economic theory and econometrics to solve research questions in banking.

MAKING JUDGEMENTS:
Ability to evaluate empirical work, recognizing strengths and weaknesses. Identify the limits of previous analyses, propose how to improve them, try to apply your ideas by evaluating the results obtained.

COMMUNICATION SKILLS:
Ability to illustrate, in English, the research question, the econometric methods used and the results obtained with specific technical language. Ability to answer questions on topics.

LEARNING SKILLS:
Ability to set a research demand, constructive critique to existing literature, use of econometric software and statistical techniques.

Prerequisites

Intermediate-level knowledge of Micro-econometrics and Banking.

Econometrics prerequisite: Basic knowledge of econometric analysis: Linear regressions, dummy variables, interaction terms, the transformation of variables (e.g. logarithms).
Suggested textbook: Introduction to Econometrics, James H. Stock and Mark W. Watson, updated Third Edition. Pearson Education Limited, 2015.
Suggested chapters: Ch.1 (1.2, 1.3); Ch.3 (3.1, 3.2, 3.3, 3.4, 3.7 ); Ch.4; Ch.5 (5.3, 5.4); Ch.6 (6.2-6.7); Ch.8 (8.2, 8.3).

Banking and Financial System prerequisite: basic knowledge of the functioning of the financial system and the banking system in particular.
Suggested textbook: R.W. Melicher, E.A. Norton. "Introduction to Finance - Markets, Investments, and Financial Management" (16th edition), Wiley.
Suggested chapters: Ch 1-3.

Program

• Review of basic concepts on financial markets and banking intermediaries (4hrs)
Monetary functions and money creation; credit function; transmission mechanism of monetary policy.
• The theory of financial intermediation (4hrs)
Neoclassical models; Old View and New View; Transaction Costs; Asymmetric Information.
• Market-based vs bank-based economies.
Analysis of systems based on banking intermediaries and financial markets (2hrs)
• Finance and growth (10hrs)
Theoretical and empirical channels through which banks may affect economic growth.
• Islamic banks (6hrs)
Characteristics and peculiarities of Islamic banks.
• M&As in the banking sector (6hrs)
Introduction to the general characteristics of M&As; Econometric analysis of payment methods and failed takeovers.
• Credit risk – and scoring models (4hrs)
Introduction to the characteristics and statistical problems of scoring models.

Books

Two textbooks are suggested (non compulsory).
1. Microeconometrcis of Banking - Methods, Applications, and Results. H. Degryse, M. Kim, S. Ongena. Oxford University Press 2009.
2. Modern Banking. S. Hefferman. John Wiley & sons, 2005.

Bibliography

Allen, F., and Gale, D. (1995). A welfare comparison of intermediaries and financial markets in Germany and the US. European Economic Review, 39, 179-209.
Beck, T., Levine, R., and Loayza, N. (2000). Finance and the Sources of Growth. Journal of Financial Economics, 58, 261-300.
Beck, T., Demirgüç-Kunt, A., and Merrouche, O. (2013). Islamic vs. conventional banking: Business model, efficiency and stability. Journal of Banking & Finance, 37, 433-447.
Caiazza, S., Pozzolo, A.F. (2016). The determinants of failed takeovers in the banking sector: Deal or country characteristics?. Journal of Banking & Finance, 72, S92-S103.
DeYoung, R., Evanoff, D.D., and Molyneux, P. (2009). Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature. Journal of Financial Services Research, 36, 87-110.
Faccio, M., and Masulis, R.W. (2005). The Choice of Payment Method in European Mergers and Acquisitions. The Journal of Finance, 60, 1345–1388.
King, R.G., and Levine, R. (1993). Finance and Growth: Schumpeter Might Be Right. The Quarterly Journal of Economics, 108, 717-737.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., and Vishny, R.W. (1998). Law and Finance. Journal of Political Economy, 106, 1113-1155.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., and Vishny, R.W. (2008). The Economic Consequences of Legal Origins. Journal of Economic Literature, 46, 285-332.
Levine, R. (1997). Financial Development and Economic Growth: Views and Agenda. Journal of Economic Literature, 35, 688-726.
Levine, R., and Zervos, S. (1998). Stock Markets, Banks, and Economic Growth. The American Economic Review, 88, 537-558.
Martynova, M, and Renneboog, L. (2008). A Century of Corporate Takeovers: What Have We Learned and Where Do We Stand? Journal of Banking & Finance, 32, 2148-2177.
Rajan, R.G., and Zingales, L. (1998). Financial Dependence and Growth. American Economic Review, 88, 559-586.
Stiglitz, J.E., and Weiss, A. (1981). Credit Rationing in Markets with Rationing Credit Information Imperfect. The American Economic Review, 71, 393-410.

Teaching methods

Frontal class.
If a TA will be available:
- Computer classroom excercises.
- Take-home to sent to the TA.
- Short empirical paper

Exam Rules

Rules for taking the exam
A fundamental requirement for the exam is to book on the Delphi system within the scheduled time interval. Failure to book does not allow you to take the exam. In case of problems in booking during the period in which it is possible to book, notify the teacher immediately.
Arrive in the classroom 15 minutes before the start of the test.
The student must have a valid identity document with him. Students must leave the classroom if they cannot be identified with certainty.

2. Rules during the exam
It is not possible to leave the classroom during the test.
The student can withdraw after 10 minutes have elapsed from the start of the test to allow late students to enter the classroom. The student who remains in the room after the tenth minute is required to hand in the assignment.
Late students who arrive 10 minutes after the test start cannot enter the classroom and will have to book a subsequent session.

3. Exam test
The exam is written and focuses on the course program.
The test consists of three questions, each presenting one or more sub-points to be developed. At least one question will be based on the comment on a table of a paper analyzed in class.
Calculator use, mobile phones, and other electronic tools are not allowed unless otherwise indicated by the teacher.
Grades, expressed in 30/30, are published on the course website.

Students can take the exam in any session appeal.
However, it is possible to reject the final grade just once. The resit grade will be registered. Fail will always be registered.
The student who presents himself to the exam by answering the initial call and then decides to withdraw is considered present at the exam. The next time the student takes the exam, the grade will be recorded.

4. Vision of the task and acceptance of the vote
The student can view the assignment on the day and time indicated by the teacher and, in any case, in the 15 days following the exam.
Under "normal" conditions, the task discussion only occurs in the presence.
It is possible to refuse the vote only once.
The student who does not intend to accept the grade must notify the teacher as indicated by the teacher when publishing the results.

5. Evaluation of the exam
The exam will be assessed according to the following criteria:


Fail: Important and serious gaps and/or inaccuracies in the knowledge and understanding of the topics; limited analytical skills, frequent generalizations, and limited critical and judgmental skills. Topics could be more sparsely and consistently presented, with appropriate language.
18-20: Knowledge and understanding of the arguments are sufficient with possible generalizations and imperfections; just enough analytical skills and autonomy of judgment; the arguments are frequently presented with inappropriate and inconsistent language. Poor in-depth study of the topics.
21-23: Routine knowledge and understanding of topics; ability to correct analysis with sufficiently coherent logical argument and mostly appropriate language. The in-depth study of the topics is mostly scarce.
24-26: Fair knowledge and understanding of the topics; good skills of analysis and synthesis with arguments expressed in a rigorous way but with a language that is only sometimes appropriate. Discreet deepening of the topics.
27-29: Complete knowledge and understanding of the topics; remarkable analysis and synthesis abilities. Good autonomy of judgment. Topics are exposed rigorously and with appropriate language. The in-depth study of the themes is good, and the ability to connect among topics is good.
30-30L: Excellent level of knowledge and in-depth understanding of the topics. Excellent skills of analysis, synthesis and autonomy of judgment. Arguments are expressed in an original way and with appropriate technical language. Excellent in-depth skills and excellent connection among topics.