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O. Emre Ergungor |

Economist

Dr. Emre Ergungor, an economist in the Research Department of the Federal Reserve Bank of Cleveland, focuses on financial intermediation and information economics research.

Born in Istanbul, Turkey, Dr. Ergungor earned his bachelor’s degree in mechanical engineering from Bogazici University and his M.B.A. from Koc University, both in Istanbul. He earned his Ph.D. in finance from the University of Michigan in 2000 and joined the bank in September of the same year. He is married with two children.

• Fed Publications
• Other Publications
• Work in Progress

Title	Date	Publication	Author(s)	Type
Foreclosures in Ohio: Does Lender Type Matter?	December, 2007	Federal Reserve Bank of Cleveland, Working Paper no. 0724	Ozgur Emre Ergungor;	Working Papers
	Abstract: Whether mortgages are originated mostly by depository institutions regulated by the Federal agencies or by less-regulated lenders does not seem to affect the foreclosure filing rate in Ohio's counties. What seems to matter is whether the lenders have a physical presence in the market, in which case, foreclosure rates are lower.
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Prepayment Penalties on Subprime Mortgages	September, 2007	Federal Reserve Bank of Cleveland, Economic Commentary	Ozgur Emre Ergungor;	Economic Commentary
	Abstract: As a result of the subprime mortgage mess, prepayment penalties are under close scrutiny. While these, like other kinds of contract terms, can be abused, there are good reasons for why they exist. In principle, they serve to extend credit to a greater number of borrowers.
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On the Resolution of Financial Crises: The Swedish Experience	June, 2007	Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 21	Ozgur Emre Ergungor;	Policy Discussion Papers
	Abstract: Sweden was one of the Scandinavian countries experiencing a severe financial crisis In the late 1980s and early 1990s. This paper reviews the policy choices and external factors that pushed the country's financial system over the edge and then examines the steps the government took to make its resolution of the crisis one of the most successful in the past 30 years.
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Home Price Derivatives	January, 2007	Federal Reserve Bank of Cleveland, Economic Commentary	Ozgur Emre Ergungor;	Economic Commentary
	Abstract: Until recently, homeowners had no way to protect the value of their homes against losses that could result from housing market downturns. With the derivatives contracts introduced by the CME last year, homeowners now have some means of protection, and new and better products are more likely to follow from them.
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Industrial Loan Companies	October, 2006	Federal Reserve Bank of Cleveland, Economic Commentary	Ozgur Emre Ergungor; James B Thomson;	Economic Commentary
	Abstract: Once Wal-Mart announced its intention to acquire an industrial loan company, a public furor arose that has brought a lot of attention to a type of institution that has existed for quite some time, but was not widely recognized outside of banking circles. What are ILCs and why have they become so controversial lately?
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Systemic Banking Crises	February, 2005	Federal Reserve Bank of Cleveland, Policy Discussion Paper, no. 9	Ozgur Emre Ergungor; James B Thomson;	Policy Discussion Papers
	Abstract: Systemic banking crises can have devastating effects on the economies of developing or industrialized countries. This Policy Discussion Paper reviews the factors that weaken banking systems and make them more susceptible to crises.
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Dividends	April, 2004	Federal Reserve Bank of Cleveland, Economic Commentary	Ozgur Emre Ergungor;	Economic Commentary
	Abstract: In recent years, there has been increasing pressure on U.S. corporations to distribute earnings to shareholders in the form of dividends. This Commentary explains that dividends are important, but investors can err by reading too much into them.
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Securitization	August, 2003	Federal Reserve Bank of Cleveland, Economic Commentary	Ozgur Emre Ergungor;	Economic Commentary
	Abstract: Obscure just 20 years ago, loan portfolio securitization by private and government-sponsored enterprises is a $5 trillion business today. This Commentary explains the reasons behind the spectacular growth of asset-backed securities.
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Information and Prices	May, 2003	Federal Reserve Bank of Cleveland, Economic Commentary	Ozgur Emre Ergungor; Joseph G Haubrich;	Economic Commentary
	Abstract: Information problems pervade the economy. This Commentary describes the challenges they create and the clever solutions markets find to overcome them.
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Financial System Structure and Economic Development: Structure Matters	January, 2003	Federal Reserve Bank of Cleveland, Working Paper no. 0305	Ozgur Emre Ergungor;	Working Papers
	Abstract: This paper investigates how the structure of a financial system?whether it is bank or market oriented? affects economic growth. In contrast to earlier research, which indicates that the financial system?s structure is irrelevant for growth, I find that countries grow faster when they have flexible judicial system and more market-oriented financial systems.
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Legal Systems and Bank Development	February, 2002	Federal Reserve Bank of Cleveland, Economic Commentary	Ozgur Emre Ergungor;	Economic Commentary
	Abstract: In some countries, banks are firms’ key source of financing. In others, firms look mainly to credit markets to meet their financial needs. Why should this be so? New research suggests that a country’s legal tradition strongly influences which financial system becomes dominant there.
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Community Banks as Small Business Lenders: The Tough Road Ahead	January, 2002	Federal Reserve Bank of Cleveland, Working Paper no. 0203	Ozgur Emre Ergungor;	Working Papers
	Abstract: This paper investigates the performance of community banks as small business (relationship) lenders. Theory suggests that competition reduces the benefits of bank-borrower relationships, making small business loans more risky and less profitable. In support of this theory, the evidence indicates that community banks? performance deteriorates with increasing small business lending. Policies that encourage community banks to engage in more aggressive small business lending may lessen the soudness of these institutions.
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Theories of loan commitments: a literature review	September, 2001	Federal Reserve Bank of Cleveland, Economic Review, vol. 37, no. 3, pp. 2-19	Ozgur Emre Ergungor;	Economic Review
	Abstract: A loan commitment is an agreement by which a bank promises to lend to a customer at prespecified terms while retaining the right to renege on its promise if the borrower's creditworthiness deteriorates. The contract also specifies the various fees that must be paid over the life of the commitment. Loan commitments are widely used in the economy. As their use has spread, a rich literature has evolved to explain why they exist, how they are priced, and how they affect the risk of the bank and the deposit insurer. This article summarizes what we have learned on these issues. Its main insight is that loan commitments are an optimal tool for risk sharing and for resolving informational problems. The author also points out some issues that the current literature leaves unexplained.
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Market- vs. Bank-Based Financial Systems: Do Investor Rights Really Matter?	January, 2001	Federal Reserve Bank of Cleveland, Working Paper no. 0101R	Ozgur Emre Ergungor;	Working Papers
	Abstract: Why are common-law countries market-dominated and civil-law countries bank-dominated? This paper provides an explanation tied to legal traditions. Civil-law courts have been less effective in resolving conflicts than common-law courts because civil-law judges traditionally refrain from interpreting the codes and creating new rules. In a civil-law environment, where potential conflicts between borrowers and individual lenders inhibit the development of markets because the courts are unable to penalize defrauding borrowers, I show that banks can induce borrowers to honor their obligations by threatening to withhold services that only banks can provide. In other words, banks emerge as the primary contract enforcers in economies where courts are imperfect.
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Relationship Loans and Information Exploitability in a Competitive Market: Loan Commitments vs. Spot Loans	January, 2000	Federal Reserve Bank of Cleveland, Working Paper no. 0013	Ozgur Emre Ergungor;	Working Papers
	Abstract: Despite the numerous benefits of loan commitments, only 79% of the commercial and industrial loans are made under commitment. I show that two factors limit the use of loan commitments. First, because banks commit themselves to lend, they carry costly liquidity reserves to meet their obligations. Due to liquidity costs, the interest rate on commitment loans is high relative to spot loans. Second, high interest rates trigger moral hazard. If the bank expects a profitable relationship in the future, it can absorb a portion of the liquidity costs to reduce the interest rate and attenuate moral hazard. If not, the borrower cannot get a loan commitment.
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Title	Date	Publication	Author(s)	Type
Offer-Price Discount of Bank Seasoned Equity Offers--Do Voluntary and Involuntary Offers Convey Different Information?	April, 2007	Journal of Financial Intermediation	Ozgur Emre Ergungor; C.N.V. Krishnan; Ajai K Singh; Allan A Zebedee;	Journal Article
	Abstract: Seasoned equity offers made by undercapitalized banks (labeled involuntary offers) could be different from other seasoned equity offers because the issuer is presumably under regulatory duress to make up the shortfall in required capital. For this reason, involuntary offers may exhibit limited managerial opportunism. When a firm issues seasoned equity, investment bankers gather information about the issuer in the period between the registration of the offer and its issue date. The information gathered during the book-building process gets reflected in the offer price discount on the issue date. We find that the offer price discount appears to convey more information to investors on the issue date for the voluntary issuers. However, we find that both types of issues show signs of market timing, and that investors react negatively to both types of issuance announcements. Our results are robust to several checks. (This paper has appeared as Federal Reserve Bank of Cleveland, Working Paper, no. 05-15.)
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Financial System Structure and Economic Development--Structure Matters	April, 2007	International Review of Economics and Finance	Ozgur Emre Ergungor;	Journal Article
	Abstract: This paper investigates how the structure of a financial system--whether it is bank or market oriented--affects economic growth. In contrast to earlier research, which indicates that the financial system's structure is irrelevant for growth, I find that countries grow faster when they have flexible judicial system and more market-oriented financial systems. (This paper has appeared before as Federal Reserve Bank of Cleveland, Working Papers, no. 03-05)
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Systemic Banking Crises Part I--Underlying Causes of Banking System Collapse	January, 2006	Research in Finance, vol. 28	Ozgur Emre Ergungor; James B Thomson;	Journal Article
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Systemic Banking Crises II--Time-Consistent Crisis Resolution Policies	January, 2006	Research in Finance, vol. 28	Ozgur Emre Ergungor; James B Thomson;	Journal Article
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The Profitability of Bank-Borrower Relationships	July, 2005	Journal of Financial Intermediation, vol. 14, pp. 485-512.	Ozgur Emre Ergungor;	Journal Article
	Abstract: This paper investigates the performance of community banks as small business (relationship) lenders. Theory suggests that competition reduces the benefits of bank-borrower relationships, making small business loans more risky and less profitable. In support of this theory, the evidence indicates that community banks' performance deteriorates with increasing small business lending. Policies that encourage community banks to engage in more aggressive small business lending may lessen the soundness of these institutions. (This paper has appeared as Federal Reserve Bank of Cleveland, Working Paper, no. 02-03--"Community banks as small business lenders: the tough road ahead".)
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Market- vs. Bank-Based Financial Systems: Do Rights and Regulations Really Matter?	December, 2004	Journal of Banking and Finance, v. 28, no. 12, p. 2869-2887	Ozgur Emre Ergungor;	Journal Article
	Abstract: Revised March 2002: Why are common-law countries market-dominated and civil-law countries bank-dominated? This paper provides an explanation tied to legal traditions. Civil-law courts have been less effective in resolving conflicts than common-law courts because civil-law judges traditionally refrain from interpreting the codes and creating new rules. In a civil-law environment, where potential conflicts between borrowers and individual lenders inhibit the development of markets because the courts are unable to penalize defrauding borrowers, I show that banks can induce borrowers to honor their obligations by threatening to withhold services that only banks can provide. In other words, banks emerge as the primary contract enforcers in economies where courts are imperfect.(This paper has appeared before as Federal Reserve Bank of Cleveland, working paper no. 01-01R.
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Title	Date	Publication	Author(s)	Type
Arm's-Length Mortgage Lending in Information Sensitive Neighborhoods	March, 2007		Ozgur Emre Ergungor;	Unpublished manuscript
	Abstract: The motivation for this paper comes from recent developments in Cuyahoga County. The county asked banks to sign a document that says they won't make predatory loans. Given the ambiguity of the term "predatory," the banks refused and instead of originating loans, they started purchasing them from other lenders (they can thus satisfy the CRA requirements). Since I argued in earlier papers that it is important for bankers to get their hands dirty in areas that may depend on soft information creation, the switch from originations to purchases may represent to a switch from relationship to arms-length lending. If so, this should lower credit access and increase post-lending problems such as foreclosures. Note that if the markets were friction-free, it would not matter whether institutions originate the loans themselves or purchase them from other lenders who would turn around and make new loans.
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The Information Content of Banking Relationships	January, 2007		Ozgur Emre Ergungor; Nandu Nayar; Ajai K Singh;	Unpublished manuscript
	Abstract: The GLB Act of 1999 formally tore down the firewalls between investment and commercial banking. In this study, we will examine how information flows between commercial banking and investment banking arms of BHCs. It is well-established that banks obtain proprietary information during lending relationships. We will compare the precision of analysts' earnings forecasts when the analyst's investment bank has a lending relationship with the borrower through its commercial banking arm and when it does not; second, we will compare market reaction to analyst recommendations when the analyst's bank has a lending relationship with the firm; third, we will test whether a commercial lending relationship has any impact on the investment bank's choice of firms its analysts will follow. A comparison of pre- and post-GLB period should also tell us how effective the firewalls were in the first place and whether their removal had a significant impact on the information content of analysts' forecasts and recommendations.
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Foreclosures: Relationship Lending in the Consumer Market and its Aftermath	December, 2006	Federal Reserve Bank of Cleveland, Working Paper no. 0617	Ozgur Emre Ergungor;	Working Papers
	Abstract: Relationship lending theory suggests that lenders in close proximity to their borrowers might be the most efficient providers of screening and monitoring services, because the cost of collecting information declines with distance. The author presents evidence that ties bank branch presence to borrower performance in the low-income housing market, which provides support for this theory.
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Bank Branch Presence and Access to Credit in Low-to-Moderate Income Neighborhoods	December, 2006	Federal Reserve Bank of Cleveland, Working Paper no. 0616	Ozgur Emre Ergungor;	Working Papers
	Abstract: Banks specialize in lending to informationally opaque borrowers by collecting soft information about them. Some researchers claim that this process requires a physical presence in the market to lower information collection costs. The author provides evidence in support of this argument in the mortgage market for low-income borrowers. Mortgage originations increase and interest spreads decline when there is a bank branch located in a low-to-moderate income neighborhood.
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Bank Seasoned Equity Offers: Do Voluntary and Involuntary Offers Differ?	December, 2004	Federal Reserve Bank of Cleveland Working Paper no. 0414	Ozgur Emre Ergungor; C.N.V. Krishnan; Ajai K Singh; Allan A Zebedee;	Working Papers
	Abstract: Recent research has shown that for industrial and utilities' seasoned equity offers (SEOs) the offer price discount is informative and has significant price effects. We examine whether the offer price discount for SEOs made by undercapitalized banks is different from those made by banks that were already overcapitalized prior to issue announcement. The former are labeled "involuntary" issues, and the latter "voluntary." Voluntary issues are likely made by opportunistic managers at times when their stock is overvalued. Prior research has argued and provided evidence suggesting that for involuntary issues, such timing discretion may be limited. However, we find no significant differences in the issue-date discount, and in issue-date abnormal returns between the two types of issues. We find that trading volume increases dramatically at the offer date, stays at abnormally high levels over a 60-day post-issue period, and is accompanied by a positive abnormal return in the post-offer period for both types of issues. The post-issue long-run returns are positive for both types of issues. Inconsistent with prior research, we do not find a significant difference even in the announcement date returns of the involuntary and voluntary issues. It appears that the market does not perceive the voluntary and involuntary issuers to be different.
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