25 Years IWH

Professor Dr Andre Guettler

Professor Dr Andre Guettler
Current Position

since 6/16

Research Professor

 

Halle Institute for Economic Research (IWH) – Member of the Leibniz Association

since 4/13

Director of the Institute of Strategic Management and Finance

Ulm University

Research Interests

  • real implications of financial regulation
  • access to credit for small and medium sized firms

Andre Guettler is Director of the Institute of Strategic Management and Finance at Ulm University. His research concentrates on financial intermediation with particular emphasis on the real effects of financial regulation, competition between banks, access to credit, and credit rating agencies.

He has been a visiting scholar at National University of Singapore, University of Texas at Austin, Tilburg University, and Coppead Business School. He obtained a doctoral degree in finance at Goethe University Frankfurt in 2005.

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Publications

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Hidden Gems and Borrowers with Dirty Little Secrets: Investment in Soft Information, Borrower Self-selection and Competition

Reint E. Gropp Andre Guettler

in: Journal of Banking & Finance , forthcoming

Abstract

This paper empirically examines the role of soft information in the competitive interaction between relationship and transaction banks. Soft information can be interpreted as a valuable signal about the quality of a firm that is observable to a relationship bank, but not to a transaction bank. We show that borrowers self-select to relationship banks depending on whether their observed soft information is positive or negative. Competition affects the investment in learning the soft information from firms by relationship banks and transaction banks asymmetrically. Relationship banks invest more; transaction banks invest less in soft information, exacerbating the selection effect.

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The Impact of Public Guarantees on Bank Risk-taking: Evidence from a Natural Experiment

Reint E. Gropp C. Gruendl Andre Guettler

in: Review of Finance , No. 2, 2014

Abstract

In 2001, government guarantees for savings banks in Germany were removed following a lawsuit. We use this natural experiment to examine the effect of government guarantees on bank risk-taking. The results suggest that banks whose government guarantee was removed reduced credit risk by cutting off the riskiest borrowers from credit. Using a difference-in-differences approach we show that none of these effects are present in a control group of German banks to whom the guarantee was not applicable. Furthermore, savings banks adjusted their liabilities away from risk-sensitive debt instruments after the removal of the guarantee, while we do not observe this for the control group. We also document that yield spreads of savings banks’ bonds increased significantly right after the announcement of the decision to remove guarantees, while the yield spread of a sample of bonds issued by the control group remained unchanged. The evidence implies that public guarantees may be associated with substantial moral hazard effects.

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Working Papers

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European versus Anglo-Saxon Credit View: Evidence from the Eurozone Sovereign Debt Crisis

Marc Altdörfer Carlos A. De las Salas Vega Andre Guettler Gunter Löffler

in: IWH Discussion Papers , No. 34, 2016

Abstract

We analyse whether different levels of country ties to Europe among the rating agencies Moody’s, S&P, and Fitch affect the assignment of sovereign credit ratings, using the Eurozone sovereign debt crisis of 2009-2012 as a natural laboratory. We find that Fitch, the rating agency among the “Big Three” with significantly stronger ties to Europe compared to its two more US-tied peers, assigned on average more favourable ratings to Eurozone issuers during the crisis. However, Fitch’s better ratings for Eurozone issuers seem to be neglected by investors as they rather follow the rating actions of Moody’s and S&P. Our results thus doubt the often proposed need for an independent European credit rating agency.

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Financial Incentives and Loan Officer Behavior: Multitasking and Allocation of Effort Under an Incomplete Contract

P. Behr A. H. Drexler Reint E. Gropp Andre Guettler

in: SAFE Working Paper Series, No. 62 , No. 62, 2014

Abstract

In this paper we investigate the implications of providing loan officers with a compensation structure that rewards loan volume and penalizes poor performance versus a fixed wage unrelated to performance. We study detailed transaction information for more than 45,000 loans issued by 240 loan officers of a large commercial bank in Europe. We examine the three main activities that loan officers perform: monitoring, originating, and screening. We find that when the performance of their portfolio deteriorates, loan officers increase their effort to monitor existing borrowers, reduce loan origination, and approve a higher fraction of loan applications. These loans, however, are of above-average quality. Consistent with the theoretical literature on multitasking in incomplete contracts, we show that loan officers neglect activities that are not directly rewarded under the contract, but are in the interest of the bank. In addition, while the response by loan officers constitutes a rational response to a time allocation problem, their reaction to incentives appears myopic in other dimensions.

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Public Bank Guarantees and Allocative Efficiency

Reint E. Gropp Andre Guettler Vahid Saadi

in: IWH Discussion Papers , No. 7, 2015

Abstract

In the wake of the recent financial crisis, many governments extended public guarantees to banks. We take advantage of a natural experiment, in which long-standing public guarantees were removed for a set of German banks following a lawsuit, to identify the real effects of these guarantees on the allocation of credit (“allocative efficiency”). Using matched bank/firm data, we find that public guarantees reduce allocative efficiency. With guarantees in place, poorly performing firms invest more and maintain higher rates of sales growth. Moreover, firms produce less efficiently in the presence of public guarantees. Consistently, we show that guarantees reduce the likelihood that firms exit the market. These findings suggest that public guarantees hinder restructuring activities and prevent resources to flow to the most productive uses.

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