Research focus

My research focuses on three main themes: 

1. Bank regulation and supervision, and the role of banks in the real economy. 

My research on banks addresses the following research questions: 

a) How managerial risk incentives and monitoring from the board of directors or other bank stakeholders can affect banks. 

For example, my research on bank dividend policy suggests that, contrary to the theoretical and empirical literature on dividend policy in non-financial firms, bank payout ratios tend to be higher for banks with higher default risk (Onali, 2014), and in a more competitive environment (De Cesari et al., 2023), while they are lower for banks with entrenched CEOs (Onali et al., 2016). I also contribute to the market discipline literature by providing evidence supporting the view that non-depositors may influence bank cost of funding, bank soundness (Danisewicz et al., 2018a), and bank earnings opacity (Danisewicz et al., 2020).  Finally, my research also shows that a higher proportion of female directors on bank boards can lead to a lower probability of a public bailout, plausibly because of stronger monitoring efforts from female directors than their male counterparts (Cardillo et al., 2020).

b) How banking regulation and supervision affects bank shareholders, creditors, and customers. 

The first strand of this body of research investigates the market reaction to announcements related to international bank regulation (Bruno et al., 2018), international accounting standards on credit losses (Onali et al., 2021), and targeted longer-term refinancing operations (Cardillo et al., 2023) . Thus, these studies investigate how these rules may affect bank shareholders' wealth. The second strand of this research is related to question a): my research on depositor preference laws suggest that they can affect non-depositors' monitoring incentives and, in turn, bank conduct. Finally, the third strand of research focuses on the impact on bank lending policies and liquidity creation and, thus, bank borrowers. These studies highlight that enforcement actions (Danisewicz et al., 2018b) and stress tests (Nguyen et al., 2020) can affect bank lending decisions and liquidity creation.

c) How banks affect, via their lending and liquidity creation, the local economy.

This research question is related to the importance of bank lending for the real economy. In particular, drops in bank lending and liquidity creation, for example because of enforcement actions, can lead to a reduction in local economic growth (Danisewicz et al., 2018b). I have also studied the impact of bank market structure on local economic growth after a natural disaster (Duqi et al., 2021).

2. The impact of International Financial Reporting Standards (IFRS) on European capital markets. 

This strand of research focuses on two research questions:

a) How IFRS have affected value relevance 

This strand of research highlights the heterogeneous impact of the introduction of IFRS in the European Union in terms of "value relevance", i.e., the degree to which accounting numbers are reflected in stock prices (Devalle et al., 2010). I also study methodological issues related to estimating value relevance models (Onali et al., 2017).

b) How investors have reacted to the introduction of new IFRS 

This body of work estimates the market reaction to changes in accounting standards, using event-study methodology. In particular, I have concentrated on the impact of announcements related to the standard-setting process of IFRS 9. For example, one of my articles suggests that the pre-adoption market reaction to IFRS 9 was driven by cross-country differences in terms of strength of the rule of law and the extent to which the local GAAPs diverged from IAS 39 (Onali and Ginesti, 2014). Another article, which concentrates on bank stocks, suggests that the potential benefits of IFRS 9 (and the related Expected Loss Model) may depend on bank size, systemic risk, and other bank-specific characteristics (Onali et al., 2021).

3. Asset-pricing: time-series properties of stock returns

I have investigated the extent to which equity markets exhibit behaviour inconsistent with that of a random walk process, using a range of estimators of long memory and multifractality (Onali and Goddard, 2009). I have also examined econometric issues related to estimating long memory in the presence of short memory (Onali and Goddard, 2011; Goddard and Onali, 2012a), and infinite higher-order moments in the returns distribution (Goddard and Onali, 2012b). 

References

Bruno B, Onali E, Schaeck K (2018). Market Reaction to Bank Liquidity Regulation. Journal of Financial and Quantitative Analysis, 53(2), 899-935. 

Cardillo G, Onali E, Torluccio G (2020). Does gender diversity on banks' boards matter? Evidence from public bailouts. Journal of Corporate Finance, 71, 101560.

Cardillo, G, Onali E, Perdichizzi, S (2023). Investor behavior around targeted liquidity announcements. The British Accounting Review, forthcoming.

Danisewicz P, McGowan D, Onali E, Schaeck K (2018a). Debt priority structure, market discipline, and bank conduct. Review of Financial Studies, 31(11), 4493-4555.

Danisewicz P, McGowan D, Onali E, Schaeck K (2018b). The real effects of banking supervision: Evidence from enforcement actions. Journal of Financial Intermediation, 35, 86-101. 

De Cesari, A, Gilder, D, Huang, W, Onali, E (2023). Competition and Bank Payout Policy. Journal of Money, Credit and Banking, forthcoming. 

Devalle A, Onali E, Magarini R (2010). Assessing the Value Relevance of Accounting Data After the Introduction of IFRS in Europe. Journal of International Financial Management & Accounting, 21(2), 85-119.

Duqi, A, McGowan, D, Onali, E, Torluccio G (2021). Natural Disasters and Economic Growth: The Role of Banking Market Structure. Journal of Corporate Finance, 71, 102101.

Goddard J, Onali E (2012a). Short and long memory in stock returns data. Economics Letters, 117(1), 253-255.

Goddard J, Onali E (2012b). Self-affinity in financial asset returns. International Review of Financial Analysis, 24, 1-11.

Nguyen TVH, Ahmed S, Chevapatrakul T, Onali E (2020). Do stress tests affect bank liquidity creation?. Journal of Corporate Finance, 64, 101622.

Onali E, Ginesti G, Cardillo G, Torluccio G (2021). Market reaction to the expected loss model in banks. Journal of Financial Stability, forthcoming.

Onali E, Schaeck K, McGowan D, Danisewicz P (2020). Debtholder Monitoring Incentives and Bank Earnings Opacity. Journal of Financial and Quantitative Analysis, 1-38.

Onali E, Ginesti G, Vasilakis C (2017). How should we estimate value-relevance models? Insights from European data. British Accounting Review, 49(5), 460-473. 

Onali E, Galiakhmetova R, Molyneux P, Torluccio G (2016). CEO power, government monitoring, and bank dividends. Journal of Financial Intermediation, 27, 89-117. 

Onali E (2014). Moral Hazard, Dividends, and Risk in Banks. Journal of Business Finance and Accounting, 41(1-2), 128-155.

Onali E, Ginesti G (2014). Pre-adoption market reaction to IFRS 9: a cross-country event-study. Journal of Accounting and Public Policy, 33(6), 628-637. 

Onali E, Goddard J (2011). Are European equity markets efficient? New evidence from fractal analysis. International Review of Financial Analysis, 20(2), 59-67. 

Onali E, Goddard J (2009). Unifractality and multifractality in the Italian stock market. International Review of Financial Analysis, 18(4), 154-163.