Behaviour
The maths behind gut decisions First carefully weigh up the costs and benefits and then make a rational...
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East Germany
The Nasty Gap 30 years after unification: Why East Germany is still 20% poorer than the...
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The Impact of Social Capital on Economic Attitudes and Outcomes
Iftekhar Hasan, Qing He, Haitian Lu
Journal of International Money and Finance,
November
2020
Abstract
This article traces the extant literature on the impact of social capital on economic attitudes and outcomes. Special attention is paid to clarify conceptual ambiguities, measurement techniques, channels of influence, and identification strategies. Insights derived from the literature are then used to analyze the marketplace lending industry in China, where the size of the peer-to-peer (P2P) lending market is larger than that of the rest of the world combined. Ironically, approximately two-thirds of these online P2P lending platforms have failed. Empirical evidence from the monthly operating data of 735 lending platforms and transaction level data from one prominent platform (Renrendai) shows that platforms in provinces with high social capital have low risk of failure, and borrowers in provinces with high social capital can borrow at low interest rate and are less likely to default. We also provide observations to guide future economic research on social capital.
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On the Simultaneity Bias in the Relationship Between Risk Attitudes, Entry into Entrepreneurship and Entrepreneurial Survival
Matthias Brachert, Walter Hyll, Mirko Titze
Applied Economics Letters,
No. 7,
2017
Abstract
We consider the simultaneity bias when examining the effect of individual risk attitudes on entrepreneurship. We demonstrate that entry into self-employment is related to changes in risk attitudes. We further show that these changes are correlated with the probability to remain in entrepreneurship.
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24.06.2016 • 26/2016
UK’s “No” to EU will be costly for both sides
On Thursday 23rd, the British people have decided to leave the European Union (EU) Their vote not to remain in the European community was surprisingly clear. UK’s exit will have both political and economic consequences which are far-reaching for the country itself as well as the rest of Europe. “The reactions of the remaining member states are the crucial key now, especially France’s and Germany’s” says Reint E. Gropp, President of the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association.
Reint E. Gropp
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03.05.2016 • 20/2016
Are Lacking Structural Reforms in the Financial Sector the Underlying Reason for the German Criticism of the ECB?
The major reason for the intense criticism of the European Central Bank’s (ECB’s) low-interest-rate policy may be the lack of structural reforms in the German banking system. The resulting persistent fragmentation increases the banking sector’s vulnerability to the low-interest-rate environment. Hence, parts of the banking sector, due to their strong ties to politicians, appear to have successfully influenced public opinion against the ECB.
Reint E. Gropp
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Do Courts Matter for Firm Value? Evidence from the U.S. Court System
Stefano Colonnello, Christoph Herpfer
Abstract
We estimate the link between the court system and firm value by exploiting a U.S. Supreme Court ruling which changed firms‘ exposure to different courts. We find that exposure to courts which are highly ranked by the U.S. Chamber of Commerce increases firm value. The effect is driven by courts‘ attitude towards businesses more than by their efficiency and is more pronounced for firms in industries with high litigation risk. We also test whether firms benefit from the ability to steer lawsuits into friendly courts, so-called forum shopping. We provide evidence that a reduction in firms‘ ability to forum shop decreases firm value, whereas a reduction in plaintiffs‘ ability to forum shop increases firm value.
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The Impact of Risk Attitudes on Financial Investments
Walter Hyll, Maike Irrek
IWH Discussion Papers,
No. 10,
2015
Abstract
Several scholars analyze the relationship between individuals’ willingness to take risks and financial investment decisions. We add to this literature in using data from the German Socio-Economic Panel which allow ruling out that investments in risky assets itself impact on risk attitudes. We show that individuals with a higher willingness to take risks are more likely to hold bonds, stocks, and company assets. When grouping individuals into risk groups, our results reveal that high risk takers are also less likely to own a life insurance. If endogenous adaption of risk attitudes from holding assets in previous years is not taken into account, the impact of risk attitudes on holding risky assets is upward biased.
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Entry into Entrepreneurship, Endogenous Adaption of Risk Attitudes and Entrepreneurial Survival
Matthias Brachert, Walter Hyll, Mirko Titze
SOEPpapers,
No. 701,
2014
Abstract
Empirical studies use the assumption of stability in individual risk attitudes when searching for a relationship between attitude to risk and the decision to become and survive as an entrepreneur. We show that risk attitudes do not remain stable but face endogenous adaption when starting a new business. This adaption is associated with entrepreneurial survival. The results show that entrepreneurs with low risk tolerance before entering self-employment and increased risk tolerance when self-employed have a higher probability of survival than similar entrepreneurs experiencing a decrease in the willingness to take risks. We find the opposite results for entrepreneurs who express a higher willingness to take risks before becoming self-employed: in this case, a decrease in tolerance of risk is correlated with an increasing survival probability.
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On the Stability of Preferences: Repercussions of Entrepreneurship on Risk Attitudes
Matthias Brachert, Walter Hyll
IWH Discussion Papers,
No. 5,
2014
Abstract
The majority of empirical studies make use of the assumption of stable preferences in searching for a relationship between risk attitude and the decision to become and stay an entrepreneur. Yet empirical evidence on this relationship is limited. In this paper, we show that entry into entrepreneurship itself plays a decisive role in shaping risk preferences. We find that becoming self-employed is indeed associated with a relative increase in risk attitudes, an increase that is quantitatively large and significant even after controlling for individual characteristics, different employment status, and duration of entrepreneurship. The findings suggest that studies assuming that risk attitudes are stable over time suffer from reverse causality; risk attitudes do not remain stable over time, and individual preferences change endogenously.
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