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On the informative content of sanctions

Author

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  • Guerello, Chiara
  • Murè, Pina
  • Rovo, Natasha
  • Spallone, Marco

Abstract

This investigation exploits a new database, which merges the balance sheet items of Italian banks with sanctions by Bank of Italy and CONSOB in the last decade. We highlight the informative content of sanctions as key for the success of the supervisory activity. First, we evaluate the effects of sanctions on bank performance: we find a negative impact, more pronounced for those banks that were repeatedly sanctioned, for reasons mainly related to risk assessment and funding strategies. Second, we identify a set of bank ratios related to sanctions: we find a strong predictive power of indicators related to efficiency, productivity, and both funding and asset management. Overall, we show that after the first sanction several banks were not able to correct their strategies to avoid further penalties, because likely they were not provided with enough information on the motivations behind sanctions, hence on the required adjustments.

Suggested Citation

  • Guerello, Chiara & Murè, Pina & Rovo, Natasha & Spallone, Marco, 2019. "On the informative content of sanctions," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 591-612.
    • Handle: RePEc:eee:ecofin:v:48:y:2019:i:c:p:591-612
    DOI: 10.1016/j.najef.2018.07.013
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    1. Pina Murè & Marco Spallone & Fabiomassimo Mango & Stefano Marzioni & Lucilla Bittucci, 2021. "ESG and reputation: The case of sanctioned Italian banks," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(1), pages 265-277, January.

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    More about this item

    Keywords

    Enforcement actions; Bank supervision; Bank performance; Assets and funding management; Basel III;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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