Flannery's work is focused on corporate finance and the financial regulatory process, particularly as it applies to banks in the U.S. and abroad. His “hands on” regulatory experience most recently includes more than two years as the Chief Economist and Director of the Division of Economics and Risk Analysis at the U.S. Securities and Exchange Commission (SEC).
Industry Expertise (2)
Areas of Expertise (7)
Government Regulation of the Financial Sector
Banks and Supervision
Media Appearances (3)
CenterState buying 2 other banks to become Florida’s largest community bank
The Ledger online
And the Winter Haven-based bank has probably not finished its buying spree, said Mark Flannery, Bank of America eminent scholar at the University of Florida and chairman of the Department of Finance, Insurance and Real Estate at the Warrington College of Business. “I don’t see any reason to think they’re done” purchasing other banks, Flannery said. “I wouldn’t be surprised to see this keep going. It sort of looks like this is their business.”
Securities and Exchange Commission Operations
Senior Securities and Exchange Commission officials testified on the hill today on what they are doing to protect investors while maintaining fair and free markets. The House Financial Services Subcommittee on Capital Markets convened the hearing. A frequent topic of discussion was the commission’s rule-making process as the Dodd Frank financial law continues to be implemented. Representative Scott Garrett chairs the subcommittee while Representative Carolyn Maloney serves as the Ranking Member.
OFHEO Risk-Based Capital Regulations
Participants talked about federal regulation of government sponsored housing enterprises concentrating on the role of federal agencies and on capital standards for regulation. After their comments they answered questions from the audience.
Housing Booms and Bank GrowthSSRN
Mark J Flannery, Leming Lin, Luxi Wang
2020 The rapid increase in U.S. house prices during the 2001--2006 period was accompanied by a historically rapid expansion of bank assets. We exploit cross-regional variation in local housing booms to study how housing demand shocks affected the growth of the banking sector. We estimate the effect of housing demand shocks that are orthogonal to local non-housing demand shocks and a range of observed local credit supply shocks. We employ several instrumental variables that plausibly identify variation in local housing demand that is exogenous to local banks. We find that the housing boom had a large effect on bank asset growth---the cross-regional elasticity of bank growth with respect to housing demand shocks is around 0.6. The regional elasticity estimate suggests that in aggregate, non-credit-supply-induced housing demand shocks can potentially account for more than a third of the growth of the banking sector during this period.
Contrasting Worldviews at Bank and Securities Market RegulatorsJournal of Money, Credit and Banking
Mark J Flannery
2020 Bank and securities regulators operate with different attitudes about the appropriate regulation of financial institutions and markets. Bank regulators’ prudential oversight protects depositors from worrying about the repayment of their bank claims. In contrast, securities market regulators tend to presume that security markets (almost) always clear quickly at prices close to the asset's fundamental value. These regulators seek to assure full disclosure of information, which facilitates active securities trading. In the United States, the Securities and Exchange Commission's (SEC) investor protection duties are tailored to the financial sophistication of individual investors.
M&A Activity and the Capital Structure of Target FirmsCEPR Discussion Paper
Mark J Flannery, Jan Hanousek, Anastasiya Shamshur, Jiri Tresl
2020 Using a large sample of European acquisitions, we find that acquired firms substantially close the gap between their actual and optimal leverage ratios. The bulk of this adjustment occurs quite rapidly â?? within a year of the acquisition. The typical over-levered firm adjusts its debt-to-assets ratio from 34.4% in the year before acquisition to 20% in the year after. (The adjustment is smaller, but still quite rapid, for targets that had been under-leveraged.) These adjustments occur primarily through debt issuances or retirements. We also investigate whether target firms' pre-merger leverage contributes to the probability of them being acquired. We find that firms further away from their optimal leverage are more likely to be acquired: for an average firm, an increase in the absolute leverage deviation from 1% to 10% of total assets increases the probability of being acquired by 4.1% to 5.6% (The larger effect applies to over-leveraged firms.) Overall, our results provide support for the trade-off theory of capital structure and suggest that financial synergies have a significant role in the typical European acquisition decision.
The Effect of Government Reference Bonds on Corporate Borrowing Costs: Evidence from a Natural ExperimentSSRN
Mark J Flannery, Claire Yurong Hong, Baolian Wang
2020 Government bonds might provide reference entities that reduce corporate bond yield. We study China’s 2017 issuance of two U.S. dollars (USD) denominated sovereign bonds when there were (effectively) no outstanding USD sovereigns. We find that USD-denominated Chinese corporate bonds experienced a decline in yield spreads while RMB bonds did not, and the effect was stronger for corporate bonds with maturities similar to those of the USD sovereigns. Further consistent with the reference effect, USD-denominated corporate bonds experienced declines in bid-ask spreads and volatility. Limited evidence indicates that new corporate bond maturities shifted toward the sovereign bonds’ maturity after their issuance.
Bond Mutual Fund Flows, Fund Liquidity, and Broker-Dealer InventoriesFund Liquidity, and Broker-Dealer Inventories (April 9, 2020)
Mark J Flannery
2020 Some financial supervisors worry that liquidity transformation within the “shadow banking” sector might threaten financial stability. For example, a mutual fund promising overnight liquidity based on illiquid assets (such as corporate bonds) runs the risk of needing to “fire sale” some assets, with potentially deleterious external effects. One protection against this possibility would be a broker-dealer sector that stands ready to stabilize prices by buying (or selling) for its own inventory. I evaluate the extent to which bond mutual funds’ flows are reflected in broker-dealers’ inventories. Although brokers generally trade in the same direction as the mutual funds, high-yield corporate bonds present an exception. Flows out of high-yield bond funds are associated with a significant increase in dealers’ high-yield bond inventories. These results provide further information about how various types of bond mutual funds handle liquidity demands.