25 Years IWH

Professor Michael Koetter, PhD

Professor Michael Koetter, PhD
Current Position

seit 9/16

Head of the Department of Financial Markets

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

seit 9/16

Professor of Financial Economics

Otto von Guericke University Magdeburg

Research Interests

  • financial intermediation, investment allocation, and growth
  • risk taking and competition
  • real implications of (unorthodox) monetary policy

Since September 2016, he is professor of Financial Economics at the University of Magdeburg and head of the Department of Financial Markets at IWH.

His research concerns the nexus between regional financial conditions and implications for the real economy. Planned research collaborations with the IWH intend to use some of the rich micro data sets collected and/or co-managed at the institute and combine these data with micro-level information on financial intermediaries. Examples of specific research questions concern the role of financial intermediaries to re-allocate productive resources among small and medium enterprises efficiently or if and how banks can help family-run businesses to smoothly conduct intergenerational transfer of productive assets.

Michael Koetter obtained his PhD in economics from Utrecht University and his MSc in international economics from the University of Maastricht. From 2012 to 2016, he was Professor of Banking and Finance at the Frankfurt School of Finance & Management. Before, he held the chair of International Financial and Monetary Economics at the University of Groningen. Michael Koetter also worked as a consultant at the Boston Consulting Group and as a researcher at Deutsche Bundesbank. Since 2013, he has been research professor at the IWH and acted as interim head of the Department of Financial Markets between August 2014 and December 2015.

Your contact

Professor Michael Koetter, PhD
Professor Michael Koetter, PhD
Leiter - Department Financial Markets
Send Message +49 345 7753-727

Events

09. November 2017

The Future of Financial Intermediation

Eltville, Deutschland

Browse all events

Publications

Too Connected to Fail? Inferring Network Ties from Price Co-movements

Jakob Bosma Michael Koetter Michael Wedow

in: Journal of Business & Economic Statistics , forthcoming

Abstract

We use extreme value theory methods to infer conventionally unobservable connections between financial institutions from joint extreme movements in credit default swap spreads and equity returns. Estimated pairwise co-crash probabilities identify significant connections among up to 186 financial institutions prior to the crisis of 2007/2008. Financial institutions that were very central prior to the crisis were more likely to be bailed out during the crisis or receive the status of systemically important institutions. This result remains intact also after controlling for indicators of too-big-to-fail concerns, systemic, systematic, and idiosyncratic risks. Both CDS-based and Equity-based connections are significant predictors of bailouts.

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Bank Recapitalization, Regulatory Intervention, and Repayment

Thomas Kick Michael Koetter Tigran Poghosyan

in: Journal of Money Credit and Banking , No. 7, 2016

Abstract

We use prudential supervisory data for all German banks during 1994–2010 to test if regulatory interventions affect the likelihood that bailed-out banks repay capital support. Accounting for the selection bias inherent in nonrandom bank bailouts by insurance schemes and the endogenous administration of regulatory interventions, we show that regulators can increase the likelihood of repayment substantially. An increase in intervention frequencies by one standard deviation increases the annual probability of capital support repayment by 7%. Sturdy interventions, like restructuring orders, are effective, whereas weak measures reduce repayment probabilities. Intervention effects last up to 5 years.

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Lend Global, Fund Local? Price and Funding Cost Margins in Multinational Banking

Rients Galema Michael Koetter C. Liesegang

in: Review of Finance , No. 5, 2016

Abstract

In a proposed model of a multinational bank, interest margins determine local lending by foreign affiliates and the internal funding by parent banks. We exploit detailed parent-affiliate-level data of all German banks to empirically test our theoretical predictions in pre-crisis times. Local lending by affiliates depends negatively on price margins, the difference between lending and deposit rates in foreign markets. The effect of funding cost margins, the gap between local deposit rates faced by affiliates abroad and the funding costs of their parents, on internal capital market funding is positive but statistically weak. Interest margins are central to explain the interaction between internal capital markets and foreign affiliates lending.

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Working Papers

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Borrowers Under Water! Rare Disasters, Regional Banks, and Recovery Lending

Michael Koetter Felix Noth Oliver Rehbein

in: IWH Discussion Papers , No. 31, 2016

Abstract

We test if and how banks adjust their lending in response to disaster risk in the form of a natural catastrophe striking its customers: the 2013 Elbe flooding. The flood affected firms in East and South Germany, and we identify shocked banks based on bank-firm relationships gathered for more than a million firms. Banks with relationships to flooded firms lend 13-23% more than banks without such customers compared to the preflooding period. This lending hike is associated with higher profitability and reduced risk. Our results suggest that local banks are an effective mechanism to mitigate rare disaster shocks faced especially by small and medium firms.

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Inside Asset Purchase Programs: The Effects of Unconventional Policy on Banking Competition

Michael Koetter Natalia Podlich Michael Wedow

in: ECB Working Paper Series , No. 2017, 2017

Abstract

We test if unconventional monetary policy instruments influence the competitive conduct of banks. Between q2:2010 and q1:2012, the ECB absorbed Euro 218 billion worth of government securities from five EMU countries under the Securities Markets Programme (SMP). Using detailed security holdings data at the bank level, we show that banks exposed to this unexpected (loose) policy shock mildly gained local loan and deposit market shares. Shifts in market shares are driven by banks that increased SMP security holdings during the lifetime of the program and that hold the largest relative SMP portfolio shares. Holding other securities from periphery countries that were not part of the SMP amplifies the positive market share responses. Monopolistic rents approximated by Lerner indices are lower for SMP banks, suggesting a role of the SMP to re-distribute market power differentially, but not necessarily banking profits.

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Do We Want These Two to Tango? On Zombie Firms and Stressed Banks in Europe

Manuela Storz Michael Koetter Ralph Setzer Andreas Westphal

in: IWH Discussion Papers , No. 13, 2017

Abstract

We show that the speed and type of corporate deleveraging depends on the interaction between corporate and financial sector health. Based on granular bank-firm data pertaining to small and medium-sized enterprises (SME) from five stressed and two non-stressed euro area economies, we show that “zombie” firms generally continued to lever up during the 2010–2014 period. Whereas relationships with stressed banks reduce SME leverage on average, we also show that zombie firms that are tied to weak banks in euro area periphery countries increase their indebtedness even further. Sustainable economic recovery therefore requires both: deleveraging of banks and firms.

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