Equity Is Cheap for Large Financial Institutions

• 成果类型: Article
• 署名作者: Gandhi, Priyank; Lustig, Hanno; Plazzi, Alberto
• 署名单位: Rutgers University System; Rutgers University New Brunswick; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa001
• 发表日期: 2020
• 页码: 4231
• 关键词: deposit insurance; moral hazard; BANK BAILOUTS; rare disasters; TOO BIG; RISK; time; FAIL; governance; returns

摘要

Across a wide panel of countries, the top-10% of financial stocks on average account for over 20% of a country's market capitalization but earn on average significantly lower returns than do nonfinancial firms of the same size and risk exposures. In a bailout-augmented, rare disasters asset pricing model, the spread in risk-adjusted returns between large and small institutions depends on country characteristics that determine the likelihood of bailouts. Consistent with this model, we find larger spreads in countries with large and interconnected financial sectors, weaker capital regulation and corporate governance, and fiscally stronger governments. Valuation gaps increase in anticipation of financial crises.