Rebel Allen Cole

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• PhD
• Chaired Professor of Finance at Florida Atlantic University

We examine the wealth effects of three regulatory changes designed to improve minorityshareholder protection in the Chinese stock markets. Using the value of a firm’s related-party transactions as an inverse proxy for the quality of corporate governance, we find that firms with weaker governance experienced significantly larger abnormal returns aro...

In this article, I examine the effect of pre-existing relationships between a firm and its potential lender on the potential lender's decision whether or not to extend credit to the firm. I find that a potential lender is more likely to extend credit to a firm with which it has a pre-existing relationship as a source of financial services, but that...

In this study, we analyze why U.S. commercial banks failed during the recent financial crisis. We find that proxies for commercial real estate investments, as well as traditional proxies for the CAMELS components, do an excellent job in explaining the failures of banks that were closed during 2009, just as they did in the previous banking crisis of...

The recent consolidation in the banking system has focused attention on the difference in lending between large and small banks, since large banks lend proportionally less to small business. We use a newly available survey of small business finances conducted by the Federal Reserve System to analyze the micro-level differences between large banks a...

We provide measures of absolute and relative equity agency costs for corporations under different ownership and management structures. Our base case is Jensen and Meckling's (1976) zero agency-cost firm, where the manager is the firm's sole shareholder. Utilizing a sample of 1,708 small corporations from the FRB/NSSBF database, we find evidence sup...

In the U.S., state-level exemptions determine the amount of property that individuals can protect from creditor liquidation during the debt settlement process. We exploit within-MSA variation in personal bankruptcy exemptions created by state borders and a stacked regression approach to identify the spillover effects of these laws on business credi...

Climate change is an ethical and moral challenge of a global scale due to its potentially catastrophic implications for human welfare. Understanding forces that drive corporate adaptation to climate change is an important research topic in business ethics. In this paper, we propose that shareholder climate-related proposals could be a catalyst for...

Utilizing a simple time‐varying hazard model, we incorporate nationwide and state‐level economic variables with banking‐industry and bank‐level data to examine U.S. bank failures during 1977–2019. We find that bank‐level financial conditions are more essential in predicting bank failure, although macro factors affect the failure likelihood of vulne...

Bank-owned life insurance (BOLI) is life insurance purchased by bank holding companies (BHCs) for key employees, whose proceeds can be shared by the company and employees’ heirs. We investigate reported benefits of purchasing BOLI to shed light on the dramatic increase in BOLI assets using a sample of 2040 firm-year observations from 2004 to 2013....

Numerous collapses and corporate scandals of large corporations have underscored the impact of corporate conduct on capital markets and society as a whole. These failures have highlighted the need for regulators to rethink regulatory frameworks and enforcement, and for corporations to rework their organizational structures and focus on business eth...

We analyze changes in lending by U.S. banks to businesses during 1994 – 2011. We find that lending to businesses and, in particular, to small businesses, declined precipitously following onset of the financial crisis. We also examine the relative changes in business lending by banks that did, and did not, receive TARP funds from the U.S. Treasury,...

Despite the recent academic focus on the effects of the crisis on bank loan quality, a fully satisfying analysis of their causes is still missing, likely because of a lack of detailed information on bank-borrower relationships and the way loan decisions are taken within banks. Thanks to the availability of a large dataset provided us by a regional...

We examine the effects on IPO uncertainty of an alternative going-public mechanism – the two-stage IPO, where a firm first gets quoted on the OTC market, and then upgrades to a national exchange where it first issues public equity. We find that a two-stage IPO firm experiences lower underpricing and return volatility than does a similar traditional...

The HALO Report is a collaborative effort of the Angel Resource Institute, Florida Atlantic University, and PitchbookTM intended to raise awareness of early stage investment activities highlighting trends that may inform our decisions and impact opportunities for angels and entrepreneurs.

This paper analyzes data from a regional Italian bank to provide new evidence on the relationship between who, within a bank, approves a loan and the subsequent performance of the loan. The size of the bank and its pool of clients, who are primarily small- and medium-size firms, comprises characteristics of both relationship-based and transaction-b...

We analyze the relation between different forms of debt financing at the firm's start-up and subsequent firm outcomes. We distinguish between business debt, obtained in the name of the firm, and personal debt, obtained in the name of the firm's owner and used to finance the start-up firm. Start-up firms with better performance prospects are more li...

Using a large sample of U.S. small businesses and a new measure of optimism, we examine the role of entrepreneurial optimism in small business lending. We provide evidence that optimistic entrepreneurs are not rationed by lenders. Quite the opposite, our results suggest that they often have better credit accessibility and obtain lower cost of finan...

In this paper, we empirically estimate the costs of delay in the FDIC's closures of 433 commercial banks between 2007 and 2014 based upon a counterfactual closure regime. We find that the costs of delay could have been as high as $18.5 billion, or 37% of the FDIC's estimated costs of closure of $49.8 billion. We think that these findings call for a...

In this chapter, we provide an overview of Bhutan’s financial system and regulatory arrangements, enumerate key issues facing the financial sector, and propose improvements to the supervision of financial institutions in Bhutan. The article is based upon information collected during a set of consultative missions in 2014 sponsored by the Asian Deve...

Aggregate bank-loan data reported by the FDIC show that bank lending to small businesses plummeted during 2009 – 2011 following the collapse of Lehman Brothers in Sep. 2008 and the onset of the financial crisis, and continued to decline during the post-crisis years 2012 – 2015. However, the number of banks also declined during both periods, making...

This paper presents the results of an investigation into the performance and stability of Bhutan’s banking system. The study has found that economic growth has fueled a large demand for household credit over recent years, and in turn, banks have responded by substantially increasing their loan portfolios. Private sector credit growth took off from...

We use data from the Surveys of Small Business Finances to classify small privately held firms into four groups based upon their need for credit. Our results reveal strong and significant differences among each of these four groups of firms. Firms that report no need for credit are significantly less levered, more liquid, older, and of higher credi...

We examine executive compensation using data from two nationally representative samples of small privately held US corporations conducted 10 years apart—in 1993 and 2003. We find that executive pay at small privately held firms increases with firm size and varies widely by industry, consistent with stylized facts about executive pay at public compa...

We examine the effects on IPO uncertainty of an alternative going-public mechanism – the two-stage IPO, where a firm first gets quoted on the OTC market, and then upgrades to a national exchange where it first issues public equity. We find that a two-stage IPO firm experiences lower underpricing and return volatility than does a similar traditional...

Bank-owned life insurance (BOLI) is life insurance purchased by bank holding companies (BHCs) for key employees, whose proceeds can be shared by the company and employees' heirs. We investigate whether and how executive compensation affects BOLI and whether BOLI use affects BHC performance. Using a sample of 2,041 firm-year observations from 2004 t...

It is well accepted that access to entrepreneurial finance encourages entrepreneurship and growth. Empirical studies on topic, however, segregate the effect of entrepreneurial finance on entrepreneurship by the source of capital. In this paper, we compare the effect of two main sources of entrepreneurial finance small firm formation and growth: ban...

In this paper, we empirically estimate the costs of delay in the FDIC's closures of 433 commercial banks between 2007 and 2014. We find that the costs of delay could have been as high as $13.6 billion, or 27% of the FDIC's estimated costs of closure of $49.8 billion. We believe that these findings argue for a more aggressive stance by the FDIC with...

In this paper, we empirically estimate the costs of delay in the FDIC’s closures of 433 commercial banks between 2007 and 2014 based upon a counterfactual closure regime. We find that the costs of delay could have been as high as $18.5 billion, or 37% of the FDIC’s estimated costs of closure of $49.8 billion. We think that these findings call for a...

We analyze how the start-up capital structure of a firm affects subsequent firm outcomes. We find that, after three years, firms using debt at start-up—in particular, business debt but not personal debt—are significantly more likely to survive, and to achieve higher levels of revenues than are other firms. We attribute this to the incentives and ex...

The political economy of trade policy has largely neglected popular election. When legislatures determine protection, politicians supply tariffs that are demanded by their constituents. A model of this political market is specified and tested with data related to the McKinley Tariff of 1890. An index of the extent to which tariff protection accrued...

In this study, we use data from the World Bank’s Enterprise Surveys of 80 countries over the period from 2006–2011 to model the credit-allocation process for SMEs into a sequence of three steps. Based upon these three steps, we classify small businesses into four groups based upon their credit needs. In a first step, we analyze which firms do, and...

This study utilizes data from the Federal Reserve Board’s Surveys of Small Business Finances (SSBF) and from the Kauffman Foundation’s Kauffman Firm Surveys (KFS) to provide new evidence on how business credit scoring affects the availability of credit to female- and minority-owned firms. SSBF and KFS data are analyzed using a three-step sequential...

It is well accepted that access to entrepreneurial finance encourages entrepreneurship and growth. Empirical studies on topic, however, segregate the effect of entrepreneurial finance on entrepreneurship by the source of capital. In this paper, we compare the effect of two main sources of entrepreneurial finance on small firm formation and growth:...

We analyze how different forms of debt financing at the firm’s start-up affect subsequent firm outcomes. We find that, after three years, firms using debt at start-up — in particular, business debt but not personal debt — are significantly more likely to survive, and to achieve higher levels of revenues than are other firms. We provide evidence tha...

In this study, we test the predictive power of several alternative measures of bank capital adequacy in identifying U.S. bank failures during the recent crisis period. We find that an unconventional ratio – the non-performing asset coverage ratio (NPACR) – significantly outperforms Basel-based ratios including the Tier 1 ratio, the Total Capital Ra...

In this study, we investigate whether bankers allocate more of their assets to loans when they enjoy superior creditor protection, which we test using bank-level data from 31 developed countries and 96 developing countries over the period 2000-2006. We find that bankers allocate a significantly lower portion of their assets to risky loans when cred...

Using data from the Kauffman Firm Surveys to provide evidence on how U.S. start-up firms finance their assets, we find that about 25% of firms report 100% equity financing of their initial assets. For the remaining 75% of start-ups, we analyze their sources of credit, which we separate into three groups—trade credit, personal credit, and business c...

The capital-structure decision is one of the most fundamental issues in corporate finance. Numerous studies have been conducted to test the two major competing theories of capital structure (Trade-Off Theory and Pecking-Order Theory), yet none of these studies has analyzed the capital-structure decisions of small, privately held U.S. firms, which c...

____________________________________________________________________________ Abstract This study examines the determinants of CEO compensation using data from a nationally representative sample of non-publicly traded U.S. corporations. We find that: (i) the pay-size elasticity is much larger for small privately held firms than for the large publicl...

This study utilizes data from the Federal Reserve Board’s Surveys of Small Business Finances (SSBFs) and from the Kauffman Foundation’s Kauffman Firm Surveys (KFSs) to provide new evidence on how business credit scoring affects the availability of credit to female- and minority-owned firms. SSBF and KFS data are analyzed using a three-step sequenti...

We use a panel regression model with bank- and year-fixed effects to analyze changes in U.S. bank lending to businesses. We find that bank lending to all businesses and, in particular, to small businesses, declined precipitously following onset of the financial crisis. We also examine the relative changes in business lending by banks that did, and...

Bhasin, Cole, and Kiely (1997) document significant increases in REIT liquidity from 1990-94 as measured by a narrowing of the percentage bid-ask spread. However, they measure the average spread in each year across all firms in the industry. In this article, we demonstrate that, when the comparison is restricted to the panel of REITs operating in b...

In this study, we analyze factors determining the ultimate outcomes of banks classified as “problems” by the FDIC: failure or recovery. Using data for banks that were first classified as problems during 1984-1989 as inputs into a competing hazards model, we find that traditional proxies for the CAMELS components do an excellent job in explaining wh...

In this study, we present panel-data evidence on REIT liquidity and its determinants over the 1988 – 2007 period. We focus upon liquidity measures that do not require micro-structure data (1) to facilitate use of our results as benchmarks for comparisons with results from international markets for which micro-structure data may be unavailable, (2)...

In this study, we provide new evidence on the performance measurement and reporting of commercial real estate returns. We do so by examining the accuracy of commercial real-estate appraisals that occurred prior to the sale of properties from the NCREIF National Property Index (“NPI”) during 1984 – 2010, a period which spans two up-and-down cycles o...

This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...

In this study, we analyze the firm’s choice of legal form of organization (“LFO”). We find that only about one in three firms begins operations as a proprietorship, while almost as many begin as limited-liability companies and as corporations. Moreover, this distribution is remarkably stable over the first four years of the firm’s life. Fewer than...

We examine the wealth effects of 3 regulatory changes designed to improve minorityshareholder protection in the Chinese stock markets. Using the value of a firm’s related-party transactions as an inverse proxy for the quality of corporate governance, we find that firms with weaker governance experienced significantly larger abnormal returns around...

This study examines the extent to which individual demographic characteristics of owners influence capital structure decisions. Using the Federal Reserve’s 2003 Survey of Small Business Finances, we estimate the joint effects of traditional capital structure determinants and manager age, gender, education, business experience, sophistication, and w...

In this study, we use a new and comprehensive dataset that provides information on all multifamily properties located in Cook County, IL to provide new evidence on the determinants of foreclosures of multifamily properties. We find that foreclosures are more likely when building are older and have higher ratios of loan to value, and where buildings...

In this study, we use data from the SSBFs to provide new information about the use of credit by small businesses in the U.S. More specifically, we first analyze firms that do and do not use credit; and then analyze why some firms use trade credit while others use bank credit. We find that one in five small firms uses no credit, one in five uses tra...

In this study, we use panel data from 96 countries over the period 1994-2008 to provide new evidence regarding why bank margins differ across countries. More specifically, we test whether, and, if so, by how much, country-level governance variables and bank-specific factors explain the net-interest margins over time. We find that both bank-specific...

In this study, we estimate the cost of advice associated with pre-merger or pre-acquisition due diligence. Mergers and acquisitions (hereafter 'mergers') are significant resource-consuming activities for businesses. The benefits of synergism, efficiency and market power associated with a merger may be realized at some point in the future, but real...

This study examines executive compensation using data from two nationally representative samples of privately held U.S. corporations conducted ten years apart—in 1993 and 2003—and uses these data to test a number of hypotheses. We find that: (i) the level of executive pay at privately held firms is higher at larger firms and varies widely by indust...

This study examines the determinants of executive compensation using data from two nationally representative samples of privately held U.S. corporations conducted ten years apart-in 1993 and 2003 — and uses these data to test a number of hypotheses. We find that: (i) the level of executive pay at privately held firms is higher at larger firms and v...

As many as six million U.S. homeowners are facing foreclosure during 2009 and beyond. Delinquent residential mortgages are at the heart of the ongoing financial crisis, as they have been packaged into mortgage-related securities originally worth trillions of dollars, but now valued at substantial discounts. I propose to address this crisis by strik...

We identify and analyze a sample of publicly traded Chinese firms that issued loan guarantees to their related parties (usually the controlling block holders), thereby expropriating wealth from minority shareholders. Our results show that the issuance of related guarantees is less likely at smaller firms, at more profitable firms and at firms with...

We use a simple dynamic hazard model with time-varying covariates to develop a bank-failure early warning model, and then test the out-of-sample forecasting accuracy of this model relative to a simple one-period probit model, such as is used by U.S. banking regulators. By incorporating time-varying covariates, our model enables us to utilize macro-...

We compare the out-of-sample forecasting accuracy of the time-varying hazard model developed by Shumway (2001) and the one-period probit model used by Cole and Gunther (1998). Using data on U.S. bank failures from 1985 – 1992, we find that, from an econometric perspective, the hazard model is more accurate than the probit model in predicting bank f...

This study analyzes differences by gender in the ownership of privately held U.S. firms and examines the role of gender in the availability of credit. Using data from the nationally representative Surveys of Small Business Finances, which span a period of sixteen years, we document a series of empirical regularities in male- and female-owned firms....

This article tests several hypotheses concerning the failure of thrift institutions and the costs these failures imposed upon the thrift deposit insurance fund. The central hypothesis posits that thrift failures during the 1986-1989 period were largely a function of portfolio decisions made by thrift managers during the mid-1980s, which, in turn, w...

Previous research has established (i) that a country's financial sector influence future economic growth and (ii) that stock market index returns affect future economic growth. We extend and tie together these two strands of the growth literature by analyzing the relationship between banking industry stock returns and future economic growth. Using...

We study the Green and Lin (2003) model of financial intermediation with two new features: traders may face a cost of contacting the intermediary, and consumption needs may be correlated across traders. We show that each feature is capable of generating an equilibrium in which some (but not all) traders “run” on the intermediary by withdrawing thei...

In this study, we use data from the Federal Reserve’s 1993, 1998 and 2003 Surveys of Small Business Finances to classify small businesses into four groups based upon their credit needs and to model the credit allocation process into a sequence of three steps. First, do firms need credit? We classify those that do not as “non-borrowers;” these firms...

Numerous papers in the “law and finance” literature have established that countries with better functioning legal institutions enjoy better developed capital markets, and that legal origin is a fundamental determinant of legal institutions (La Porta et al. 1997, 1998, 2006; Djankov et al. 2007). In this study, we test whether banks are willing to g...

This case presents the issues facing Henderson Global Investors as it restructured three closed-end commingled real estate funds. This case provides the instructor with the opportunity to cover a variety of topics: a review of modern portfolio theory, including how to calculate the basic statistics that underlie the theory; an historical perspectiv...

Previous research has established (i) that a country’s financial sector influence future economic growth and (ii) that stock market index returns affect future economic growth. We extend and tie together these two strands of the growth literature by analyzing the relationship between banking industry stock returns and future economic growth. Using...

In this study, we examine unsuccessful takeover attempts for new evidence on whether mergers create or destroy value for acquirers and targets. We contribute to the literature in three important areas. First, we contribute to the literature on signaling by investigating whether a takeover attempt signals investors about the quality of firm manageme...

In October of 2002, the Simon Property Group made a hostile takeover bid for Taubman Centers, a bid that the financial press widely reported as the first significant hostile takeover attempt in the U.S. REIT industry. As such, this event provides a natural experiment for estimating the value of the market for corporate control, one of the primary c...

Recent empirical research has strongly established that banks do matter for future economic growth. Normally banks listed in the domestic stock exchanges epitomize a country's banking sector, so from the point of view of market efficiency theory, the stock prices of the banking industry should contain information about future economic growth. Using...

This paper investigates the relationship between the independence of board of directors and firm performance in India. Our results are, largely, in harmony with the findings of Sarkar and Sarkar (2000) that the convergence of interest hypothesis seems to prevail in India. We find that the proportion of independent directors on the board is negative...

We examine the wealth effects of four regulatory changes intended to better protect minority shareholders from expropriation by controlling shareholders in the Chinese stock markets. We show that firms with weak governance disproportionately benefited from the new regulation relative to firms with strong governance. This result is consistent with G...

The informational opacity of small businesses makes them an interesting area for the study of banks' lending practices and procedures. We use data from a survey of small businesses to analyze the micro level differences in the loan approval processes of large and small banks. We provide evidence that large banks ($1 billion or more in assets) emplo...

In this study, we examine the wealth effect of regulatory changes intended to improve corporate governance and protect minority shareholders from expropriation by controlling shareholders. Using data on publicly traded Chinese firms, we find strong evidence supporting the claim that better investor protection in the form of share-market regulation...

We examine stock returns for a sample of publicly traded Chinese firms around announcements of block share transfers from government agencies to corporatized firms where the State is the ultimate controlling shareholder. We provide evidence that these transfers improve corporate governance and firm value by partially reattaching cash-flow rights to...

In this article, we examine stock returns for a sample of publicly traded Chinese firms around announcements of block share transfers from government agencies to State-owned enterprises (SOEs). We view these transfers as attempts to improve corporate governance at the firms in question by partially reattaching cash-flow rights to control rights. We...

This article analyzes factors influencing the decisions of prospective lenders to extend credit to small and minority-owned businesses. Using data from a government survey of small businesses, the analysis reveals that prospective lenders (primarily commercial banks)are four times more likely to deny credit to firms owned by African-Americans than...

Bhasin, Cole, and Kiely (1997) document significant increases in REIT liquidity from 1990 to 1994 as measured by a narrowing of the percentage bid-ask spread. However, they measure the average spread in each year across all firms in the industry. In this article, I demonstrate that when the comparison is restricted to the panel of REITs operating i...

Restrictions on stock ownership may harm a company's performance, because restrictions prevent owners from choosing an optimal structure. We examine the stock-price performance and ownership structure of a sample of thrift institutions that converted from mutual to stock ownership. We find that after conversion and the expiration of ownership-struc...

In this study, we use firm-level data from the 1993 National Survey of Small Business Finances to test the hypothesis that banking consolidation has reduced the availability of credit to small businesses. We find that banks in markets where mergers have occurred are more likely than other banks to deny credit to small business loan applicants. Howe...