Three essays in banking and finance

This dissertation consists of three distinct essays in banking and corporate finance. The essays are individual papers, but their topics are closely related since they address the risk of firms from different perspectives. The first two essays are primarily focused on the risk related issues of financial institutions, whereas the third paper deals with the firm-specific return variation or firm-specific risk of newly public (IPO) companies.; The first paper investigates the firm-specific and country characteristics that influence the level of noninterest income, and whether the shift in banking activities affects the riskiness as well as the performance of banks. The findings suggest that banks' size and loan loss provision, explicit deposit insurance, bank freedom, the extent of state ownership and governance, and transparency of the country have positive effects on noninterest income. Greater dependence on traditional lending and financing, and liquidity of the bank as well as a market based economy, and multiple bank supervisory bodies have negative associations with noninterest income. More importantly, the evidence indicates that there is no significant impact of noninterest income on the total risk of banks. However, it shows a strong and significant positive association with the bank's market risk.; The second essay examines the effect of cross-border bank mergers and acquisitions on the bond yield spreads of acquiring banks. The study highlights the potential role of investor protection, moral hazard, bank regulation and supervision, and recovery rate. The results suggest that in cross-border bank M&As, the difference in investor protection as well as moral hazard between acquirer's and target's countries significantly affect the bond holders' perceived risk, as measured by yield spreads. However, the results do not show a strong impact of banking regulation or supervision on yield spreads.; The third paper investigates the evolution of firm-specific return variation following the commencement of trading in firms with recent IPOs. Specifically, the essay examines how firm-specific return variation, defined as the portion of a firm's stock return variation that is not explained by market and industry returns (1-R2), evolves over the first 6 years after going public. The analysis indicates an inverse U-shaped curve of firm-specific return variation as companies go through their first few years of being publicly traded. Taken together the findings suggest that analysts add mainly industry and market level information, while insiders and institutional investors to a lesser extent, convey more firm-specific information to market participants.