Gamze Ozturk Danisman

In this paper, we use U.S. commercial banks' data to investigate whether the effect of unexpected deposit flows on loan production depends on banks' exposure to off-balance-sheet funding liquidity risk. We find that lending is sensitive to deposit shocks at small banks but not at large ones. Furthermore, for small banks, the increase in lending that is explained by unexpected deposit inflows depends on how much they are exposed to funding liquidity risk that stems from their off-balance-sheet exposures, as measured by the level of unused commitments. Small banks that are more exposed to such funding liquidity risk tend to extend fewer new loans. Our results indicate that unexpected deposit inflows from, for instance, the failure of other banks or market disruptions might not as easily be lent again to borrowers.

This paper investigates the influence of bank market power on risk during the Global Financial Crisis 2007/2009 (GFC). We use a sample of 6,090 private and listed US banks for 2007-2016 and perform our estimations using panel data techniques, together with bank-fixed effects. The findings suggest that the crisis increases banks’ default risk for banks with lower market power. Meanwhile, higher market power helps banks to remain stable during turbulent times and have lower default risk. Banks with more market power achieve this stability mainly because of lower leverage and portfolio risk. They managed to maintain a portfolio with higher and more stable earnings during the crisis. This paper supports the view that market power in banking is very vital, and competition is more harmful to stability during crisis periods. Policymaking in banking may specifically focus on improving bank market power but not maximizing competition between banks, especially during crises.

This paper explores how banks' environmental, social, and governance (ESG) activities affect their lending during financial crises. We use a sample of 83 listed banks from 20 European countries for the 2002-2020 period and consider the global financial crisis of 2007-2009 and the European sovereign debt crisis of 2010-2012. We implement two-step system GMM dynamic panel data estimation techniques. We also address potential endogeneity issues using instrumental variables (IV) and two-stage least squares (2SLS) estimations by instrumenting ESG activity with board gender diversity. We find that lending falls to a lesser extent for banks with higher ESG scores during crisis times. Looking at the different potential channels shows that, during crises, banks more engaged in ESG activities are less affected in terms of credit and 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. Going deeper reveals that our findings are mainly driven by the environmental pillar component of ESG scores.

This paper explores the relevance of technological innovations for the internationalisation of manufacturing firms. It differentiates between two technological innovations: eco-innovations and generic-technological innovations (i.e., intelligent manufacturing). By pooling the Flash Eurobarometer-415 and -433 surveys, we use a broad firm-level sample of 4954 European and non-European (the US and Switzerland) manufacturing firms. Appling the Heckman selection model, the findings indicate that eco-innovations positively affect the decision of the firms to internationalise whilst showing no significant impact on the level of international operations. On the other hand, generic-technological innovations positively affect both the decision and the level of global operations.

Building on the natural-resource-based view, and using a sample of 7,165 European SMEs, this chapter investigates the drivers of eco-design innovations among SMEs under three categories: (1) sustainability-oriented firm capabilities, (2) technological capabilities, and (3) access to finance. The findings reveal that sustainability-oriented capabilities achieved through investments into circular economy are the strongest driver of SMEs' eco-design innovations. Firms' technological capabilities are also found to boost their ability to adopt eco-design innovations. While equity finance increases the possibilities for SMEs to devote resources to eco-design, grant finance is interestingly observed to decrease such possibilities. The more traditionally used form of debt finance remains detached from eco-design implementations. The study contributes to a better understanding of how eco-design practices can be broadened within SMEs and highlights policy recommendations in this regard.

This chapter examines the impact of ESG scores on bank stock returns as a response to the COVID-19 pandemic. The authors use a sample of 73 publicly listed banks from 15 developed European countries. They perform the analysis using two different periods that cover the pandemic: the first major wave period of COVID-19 (February-April 2020) and an extended period (February 2020-April 2021). The findings reveal the negative influence of the COVID-19 pandemic on bank stock returns during the first wave of the pandemic. They further find that, during the first wave, stock returns of banks with higher ESG scores were more resilient to the pandemic. However, when they use the extended time period (from February 2020-April 2021), the influence of both COVID-19 and ESG scores becomes insignificant. The chapter's findings have important policy implications during unprecedented crisis times such as COVID-19.