Purchasing Power Returns – Political Uncertainty High
According to the Joint Economic Forecast, Germany's gross domestic product declines by 0.6% in 2023. This is a strong downward revision of 0.9 percentage points from the forecast made in spring 2023. Industry and private consumption are recovering more slowly than expected.
If a senior executive refuses to give information to professional investors, the company's stock market value drops afterwards. This is shown in an IWH study after evaluating 1.2 million answers from telephone conferences.
Europe's top bankers: Risky business despite bonus cap
Ten years ago, the EU Parliament decided to limit the flexible remuneration of bank managers. But the cap on bonuses misses its target: Executive board members of systemically important European banks take high risks without changes.
Stricter rules for banks can relieve real estate markets
Exuberant price levels in the German real estate market could further exacerbate an economic crisis. Fiscal instruments exert too little influence to contain this danger.
Exclusively for non-commercial scientific purposes, the IWH European Real Estate Index (EREI) provides a comprehensive overview of residential property offers for sale and rent in 18 European countries.
Communication instead of conflict – why are female CEOs so interesting for hedge funds
Female CEOs particularly benefit from the intervention of hedge fund activists due to their strong communication and cooperation skills. The value of female-led firms is enhanced more by the intervention of activist investors than that of firms with male CEOs.
Alone at home: Isolation during the Corona pandemic increases likelihood of selfishness
Experiencing social distancing as a measure against the Corona pandemic led participants in an IWH study to make more selfish decisions. However, a reference to norm-consistent behaviour was able to reduce this effect. Focusing on exemplary behaviour could therefore alleviate the negative social consequences of the lockdown.
We provide independent research on economic topics that really matter and aim to enrich society with facts and evidence-based insights that facilitate better economic decisions. We focus on growth and productivity because we are convinced that economic prosperity enables people to lead happier lives. We provide young researchers a nurturing place to develop their competencies and to make the most of their skills. Working in flat hierarchies, we are driven by open-minded intellectual curiosity and we have the courage to share inconvenient insights.
The downturn in 2023 is milder in East Germany than in Germany as a whole – Implications of the Joint Economic Forecast Autumn 2023 and of Länder data from recent publications of the Statistical Offices
Abstract
The German economy has been in a downturn for more than a year. In East Germany, however, the economy has been somewhat stronger in the past four quarters: According to the Halle Institute for Economic Research (IWH), East German gross domestic product (GDP) is expected to increase by 0.5% in 2023, while production in Germany as a whole will fall by 0.6%. Next year, expansion rates of 1.3% are forecast in both the east and the west. For 2025, East German gross domestic product is expected to grow by 1.2%, which is slightly slower than in Germany as a whole (1.5%).
Joint Economic Forecast 2/2023: Purchasing power returns ‒ political uncertainty high
Professor Dr Oliver Holtemöller
Abstract
According to the Joint Economic Forecast, Germany's gross domestic product declines by 0.6% in 2023. This is a strong downward revision of 0.9 percentage points from the forecast made in spring 2023. "The most important reason for this revision is that industry and private consumption are recovering more slowly than we expected in spring," says Oliver Holtemöller, Vice President and Head of the Macroeconomics Department at the Halle Institute for Economic Research (IWH).
High inflation, increased interest rates, weak foreign demand and uncertainty among private households and firms are currently weighing on the German economy. In its autumn forecast, the Halle Institute for Economic Research (IWH) expects gross domestic product (GDP) to decline by 0.5% in 2023 and to increase by 0.9% in 2024.
IWH-Insolvenztrend: Etwas weniger Firmenpleiten im August, im nächsten Quartal wohl deutlich mehr
Professor Dr Steffen Müller
Abstract
Die Zahl der Insolvenzen von Personen- und Kapitalgesellschaften lag im August erneut über dem Niveau vor der Corona-Pandemie, ging jedoch den zweiten Monat in Folge leicht zurück. Für das vierte Quartal sind steigende Insolvenzzahlen wahrscheinlich.
in: Industrial Relations: A Journal of Economy and Society,
forthcoming
Abstract
<h3>Abstract We investigate to what extent workplace unionization protects workers from external shocks by preventing involuntary job separations. Using the COVID-19 pandemic as a plausibly exogenous shock hitting the whole economy, we compare workers who worked in unionized and non-unionized workplaces directly before the pandemic in a difference-in-differences framework. We find that unionized workers were substantially more likely to remain working for their pre-COVID employer and to be in employment. This greater employment stability was not traded off against lower working hours or labor income.</h3>
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation during the post-COVID period. Because our model implies a stronger transmission of shocks when inflation is high, it generates conditional heteroskedasticity in inflation and inflation risk. Hence, our model can generate more sizeable inflation surges due to cost-push and demand shocks than a standard linearized model. Finally, our model implies that the central bank faces a more severe trade-off between inflation and output stabilization when inflation is elevated.
Can Mentoring Alleviate Family Disadvantage in Adolescence? A Field Experiment to Improve Labor-Market Prospects
Sven Resnjanskij
Jens Ruhose
Simon Wiederhold
Ludger Woessmann
Katharina Wedel
in: Journal of Political Economy,
forthcoming
Abstract
We study a mentoring program that aims to improve the labor-market prospects of school-attending adolescents from disadvantaged families by offering them a university-student mentor. Our RCT investigates program effectiveness on three outcome dimensions that are highly predictive of later labor-market success: math grades, patience/social skills, and labor-market orientation. For low-SES adolescents, the mentoring increases a combined index of the outcomes by over half a standard deviation after one year, with significant increases in each dimension. Part of the treatment effect is mediated by establishing mentors as attachment figures who provide guidance for the future. Effects on grades and labor-market orientation, but not on patience/social skills, persist three years after program start. By that time, the mentoring also improves early realizations of school-to-work transitions for low-SES adolescents. The mentoring is not effective for higher-SES adolescents. The results show that substituting lacking family support by other adults can help disadvantaged children at adolescent age.
We analyze the usefulness of accounting information on tax loss carryforwards and negative performance to predict earnings and cash flows. We use hand-collected information on tax loss carryforwards and corresponding deferred taxes from the International Financial Reporting Standards tax footnotes for listed firms from Germany. Our out-of-sample tests show that considering accounting information on tax loss carryforwards does not enhance performance forecasts and typically even worsens predictions. The most likely explanation is model overfitting. Besides, common forecasting approaches that deal with negative performance are prone to prediction errors. We provide a simple empirical specification to account for that problem.
in: Journal of Financial and Quantitative Analysis,
forthcoming
Abstract
This study examines how antitrust law adoptions affect horizontal merger and acquisition (M&A) outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ five-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement (Baker (2003)). The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.
in: Review of Corporate Finance Studies,
forthcoming
Abstract
We analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders.
Abstract We study how different types of import competition affect firm productivity using firm-product data from German manufacturing (2000-2014). Competition from high-income countries causes affected domestic firms to increase their productivity and lower their prices. Oppositely, import competition from low-wage countries does not lead to firm productivity gains. Instead, domestic firms' sales and input usage decline. Our findings confirm the intuition of ladder models that the effect of competition depends on the "closeness" of competitors. They are in line with widespread X-inefficiencies throughout the economy, which firms reduce in response to competition from high-income countries.
We make a comparison of microfinance banks (MBs) and commercial banks (CBs) in terms of efficiency, business orientation, stability, and asset quality by analyzing a large sample of banks from 60 countries around the world. Our findings indicate that microfinance banks have higher intermediation, non-interest income, wholesale funding and liquidity, but lower efficiency and asset quality. These significant variations are influenced by smaller microfinance banks and are driven mostly to African and Latin American microfinance banks.
in: Review of Economics and Statistics,
forthcoming
Abstract
Why do cities differ so much in productivity? A long literature has sought out systematic sources, such as inherent productivity advantages, market access, agglomeration forces, or sorting. We document that up to three quarters of the measured regional productivity dispersion is spurious, reflecting the “luck of the draw” of finite counts of idiosyncratically heterogeneous plants that happen to operate in a given location. The patterns are even more pronounced for new plants, hold for alternative productivity measures, and broadly extend to European countries. This large role for individual plants suggests a smaller role for places in driving regional differences.
in: Journal of Money, Credit and Banking,
forthcoming
Abstract
Abstract This paper examines the effect of dislocations in foreign currency (FX) swap markets ("CIP deviations") on bank lending. Using data from UK banks we show that when the cost of obtaining swap-based funds in a particular foreign currency increases, banks reduce the supply of cross-border credit in that currency. This effect is increasing in the degree of banks' reliance on swap-based FX funding. Access to foreign relatives matters as banks employ internal capital markets to shield their cross-border FX lending supply from the described channel. Partial substitution occurs from banks outside the UK not affected by changes in synthetic funding costs.
in: Industrial Relations: A Journal of Economy and Society,
forthcoming
Abstract
<h3>Abstract We investigate to what extent workplace unionization protects workers from external shocks by preventing involuntary job separations. Using the COVID-19 pandemic as a plausibly exogenous shock hitting the whole economy, we compare workers who worked in unionized and non-unionized workplaces directly before the pandemic in a difference-in-differences framework. We find that unionized workers were substantially more likely to remain working for their pre-COVID employer and to be in employment. This greater employment stability was not traded off against lower working hours or labor income.</h3>
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation during the post-COVID period. Because our model implies a stronger transmission of shocks when inflation is high, it generates conditional heteroskedasticity in inflation and inflation risk. Hence, our model can generate more sizeable inflation surges due to cost-push and demand shocks than a standard linearized model. Finally, our model implies that the central bank faces a more severe trade-off between inflation and output stabilization when inflation is elevated.
Can Mentoring Alleviate Family Disadvantage in Adolescence? A Field Experiment to Improve Labor-Market Prospects
Sven Resnjanskij
Jens Ruhose
Simon Wiederhold
Ludger Woessmann
Katharina Wedel
in: Journal of Political Economy,
forthcoming
Abstract
We study a mentoring program that aims to improve the labor-market prospects of school-attending adolescents from disadvantaged families by offering them a university-student mentor. Our RCT investigates program effectiveness on three outcome dimensions that are highly predictive of later labor-market success: math grades, patience/social skills, and labor-market orientation. For low-SES adolescents, the mentoring increases a combined index of the outcomes by over half a standard deviation after one year, with significant increases in each dimension. Part of the treatment effect is mediated by establishing mentors as attachment figures who provide guidance for the future. Effects on grades and labor-market orientation, but not on patience/social skills, persist three years after program start. By that time, the mentoring also improves early realizations of school-to-work transitions for low-SES adolescents. The mentoring is not effective for higher-SES adolescents. The results show that substituting lacking family support by other adults can help disadvantaged children at adolescent age.
We analyze the usefulness of accounting information on tax loss carryforwards and negative performance to predict earnings and cash flows. We use hand-collected information on tax loss carryforwards and corresponding deferred taxes from the International Financial Reporting Standards tax footnotes for listed firms from Germany. Our out-of-sample tests show that considering accounting information on tax loss carryforwards does not enhance performance forecasts and typically even worsens predictions. The most likely explanation is model overfitting. Besides, common forecasting approaches that deal with negative performance are prone to prediction errors. We provide a simple empirical specification to account for that problem.
in: Journal of Financial and Quantitative Analysis,
forthcoming
Abstract
This study examines how antitrust law adoptions affect horizontal merger and acquisition (M&A) outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ five-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement (Baker (2003)). The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.
in: Review of Corporate Finance Studies,
forthcoming
Abstract
We analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders.
Abstract We study how different types of import competition affect firm productivity using firm-product data from German manufacturing (2000-2014). Competition from high-income countries causes affected domestic firms to increase their productivity and lower their prices. Oppositely, import competition from low-wage countries does not lead to firm productivity gains. Instead, domestic firms' sales and input usage decline. Our findings confirm the intuition of ladder models that the effect of competition depends on the "closeness" of competitors. They are in line with widespread X-inefficiencies throughout the economy, which firms reduce in response to competition from high-income countries.
We make a comparison of microfinance banks (MBs) and commercial banks (CBs) in terms of efficiency, business orientation, stability, and asset quality by analyzing a large sample of banks from 60 countries around the world. Our findings indicate that microfinance banks have higher intermediation, non-interest income, wholesale funding and liquidity, but lower efficiency and asset quality. These significant variations are influenced by smaller microfinance banks and are driven mostly to African and Latin American microfinance banks.
in: Review of Economics and Statistics,
forthcoming
Abstract
Why do cities differ so much in productivity? A long literature has sought out systematic sources, such as inherent productivity advantages, market access, agglomeration forces, or sorting. We document that up to three quarters of the measured regional productivity dispersion is spurious, reflecting the “luck of the draw” of finite counts of idiosyncratically heterogeneous plants that happen to operate in a given location. The patterns are even more pronounced for new plants, hold for alternative productivity measures, and broadly extend to European countries. This large role for individual plants suggests a smaller role for places in driving regional differences.
in: Journal of Money, Credit and Banking,
forthcoming
Abstract
Abstract This paper examines the effect of dislocations in foreign currency (FX) swap markets ("CIP deviations") on bank lending. Using data from UK banks we show that when the cost of obtaining swap-based funds in a particular foreign currency increases, banks reduce the supply of cross-border credit in that currency. This effect is increasing in the degree of banks' reliance on swap-based FX funding. Access to foreign relatives matters as banks employ internal capital markets to shield their cross-border FX lending supply from the described channel. Partial substitution occurs from banks outside the UK not affected by changes in synthetic funding costs.
in: Industrial Relations: A Journal of Economy and Society,
forthcoming
Abstract
<h3>Abstract We investigate to what extent workplace unionization protects workers from external shocks by preventing involuntary job separations. Using the COVID-19 pandemic as a plausibly exogenous shock hitting the whole economy, we compare workers who worked in unionized and non-unionized workplaces directly before the pandemic in a difference-in-differences framework. We find that unionized workers were substantially more likely to remain working for their pre-COVID employer and to be in employment. This greater employment stability was not traded off against lower working hours or labor income.</h3>
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation during the post-COVID period. Because our model implies a stronger transmission of shocks when inflation is high, it generates conditional heteroskedasticity in inflation and inflation risk. Hence, our model can generate more sizeable inflation surges due to cost-push and demand shocks than a standard linearized model. Finally, our model implies that the central bank faces a more severe trade-off between inflation and output stabilization when inflation is elevated.
Can Mentoring Alleviate Family Disadvantage in Adolescence? A Field Experiment to Improve Labor-Market Prospects
Sven Resnjanskij
Jens Ruhose
Simon Wiederhold
Ludger Woessmann
Katharina Wedel
in: Journal of Political Economy,
forthcoming
Abstract
We study a mentoring program that aims to improve the labor-market prospects of school-attending adolescents from disadvantaged families by offering them a university-student mentor. Our RCT investigates program effectiveness on three outcome dimensions that are highly predictive of later labor-market success: math grades, patience/social skills, and labor-market orientation. For low-SES adolescents, the mentoring increases a combined index of the outcomes by over half a standard deviation after one year, with significant increases in each dimension. Part of the treatment effect is mediated by establishing mentors as attachment figures who provide guidance for the future. Effects on grades and labor-market orientation, but not on patience/social skills, persist three years after program start. By that time, the mentoring also improves early realizations of school-to-work transitions for low-SES adolescents. The mentoring is not effective for higher-SES adolescents. The results show that substituting lacking family support by other adults can help disadvantaged children at adolescent age.
We analyze the usefulness of accounting information on tax loss carryforwards and negative performance to predict earnings and cash flows. We use hand-collected information on tax loss carryforwards and corresponding deferred taxes from the International Financial Reporting Standards tax footnotes for listed firms from Germany. Our out-of-sample tests show that considering accounting information on tax loss carryforwards does not enhance performance forecasts and typically even worsens predictions. The most likely explanation is model overfitting. Besides, common forecasting approaches that deal with negative performance are prone to prediction errors. We provide a simple empirical specification to account for that problem.
in: Journal of Financial and Quantitative Analysis,
forthcoming
Abstract
This study examines how antitrust law adoptions affect horizontal merger and acquisition (M&A) outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ five-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement (Baker (2003)). The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.
in: Review of Corporate Finance Studies,
forthcoming
Abstract
We analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders.
Abstract We study how different types of import competition affect firm productivity using firm-product data from German manufacturing (2000-2014). Competition from high-income countries causes affected domestic firms to increase their productivity and lower their prices. Oppositely, import competition from low-wage countries does not lead to firm productivity gains. Instead, domestic firms' sales and input usage decline. Our findings confirm the intuition of ladder models that the effect of competition depends on the "closeness" of competitors. They are in line with widespread X-inefficiencies throughout the economy, which firms reduce in response to competition from high-income countries.
We make a comparison of microfinance banks (MBs) and commercial banks (CBs) in terms of efficiency, business orientation, stability, and asset quality by analyzing a large sample of banks from 60 countries around the world. Our findings indicate that microfinance banks have higher intermediation, non-interest income, wholesale funding and liquidity, but lower efficiency and asset quality. These significant variations are influenced by smaller microfinance banks and are driven mostly to African and Latin American microfinance banks.
in: Review of Economics and Statistics,
forthcoming
Abstract
Why do cities differ so much in productivity? A long literature has sought out systematic sources, such as inherent productivity advantages, market access, agglomeration forces, or sorting. We document that up to three quarters of the measured regional productivity dispersion is spurious, reflecting the “luck of the draw” of finite counts of idiosyncratically heterogeneous plants that happen to operate in a given location. The patterns are even more pronounced for new plants, hold for alternative productivity measures, and broadly extend to European countries. This large role for individual plants suggests a smaller role for places in driving regional differences.
in: Journal of Money, Credit and Banking,
forthcoming
Abstract
Abstract This paper examines the effect of dislocations in foreign currency (FX) swap markets ("CIP deviations") on bank lending. Using data from UK banks we show that when the cost of obtaining swap-based funds in a particular foreign currency increases, banks reduce the supply of cross-border credit in that currency. This effect is increasing in the degree of banks' reliance on swap-based FX funding. Access to foreign relatives matters as banks employ internal capital markets to shield their cross-border FX lending supply from the described channel. Partial substitution occurs from banks outside the UK not affected by changes in synthetic funding costs.
in: Industrial Relations: A Journal of Economy and Society,
forthcoming
Abstract
<h3>Abstract We investigate to what extent workplace unionization protects workers from external shocks by preventing involuntary job separations. Using the COVID-19 pandemic as a plausibly exogenous shock hitting the whole economy, we compare workers who worked in unionized and non-unionized workplaces directly before the pandemic in a difference-in-differences framework. We find that unionized workers were substantially more likely to remain working for their pre-COVID employer and to be in employment. This greater employment stability was not traded off against lower working hours or labor income.</h3>
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation during the post-COVID period. Because our model implies a stronger transmission of shocks when inflation is high, it generates conditional heteroskedasticity in inflation and inflation risk. Hence, our model can generate more sizeable inflation surges due to cost-push and demand shocks than a standard linearized model. Finally, our model implies that the central bank faces a more severe trade-off between inflation and output stabilization when inflation is elevated.
Can Mentoring Alleviate Family Disadvantage in Adolescence? A Field Experiment to Improve Labor-Market Prospects
Sven Resnjanskij
Jens Ruhose
Simon Wiederhold
Ludger Woessmann
Katharina Wedel
in: Journal of Political Economy,
forthcoming
Abstract
We study a mentoring program that aims to improve the labor-market prospects of school-attending adolescents from disadvantaged families by offering them a university-student mentor. Our RCT investigates program effectiveness on three outcome dimensions that are highly predictive of later labor-market success: math grades, patience/social skills, and labor-market orientation. For low-SES adolescents, the mentoring increases a combined index of the outcomes by over half a standard deviation after one year, with significant increases in each dimension. Part of the treatment effect is mediated by establishing mentors as attachment figures who provide guidance for the future. Effects on grades and labor-market orientation, but not on patience/social skills, persist three years after program start. By that time, the mentoring also improves early realizations of school-to-work transitions for low-SES adolescents. The mentoring is not effective for higher-SES adolescents. The results show that substituting lacking family support by other adults can help disadvantaged children at adolescent age.
We analyze the usefulness of accounting information on tax loss carryforwards and negative performance to predict earnings and cash flows. We use hand-collected information on tax loss carryforwards and corresponding deferred taxes from the International Financial Reporting Standards tax footnotes for listed firms from Germany. Our out-of-sample tests show that considering accounting information on tax loss carryforwards does not enhance performance forecasts and typically even worsens predictions. The most likely explanation is model overfitting. Besides, common forecasting approaches that deal with negative performance are prone to prediction errors. We provide a simple empirical specification to account for that problem.
in: Journal of Financial and Quantitative Analysis,
forthcoming
Abstract
This study examines how antitrust law adoptions affect horizontal merger and acquisition (M&A) outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ five-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement (Baker (2003)). The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.
in: Review of Corporate Finance Studies,
forthcoming
Abstract
We analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders.
Abstract We study how different types of import competition affect firm productivity using firm-product data from German manufacturing (2000-2014). Competition from high-income countries causes affected domestic firms to increase their productivity and lower their prices. Oppositely, import competition from low-wage countries does not lead to firm productivity gains. Instead, domestic firms' sales and input usage decline. Our findings confirm the intuition of ladder models that the effect of competition depends on the "closeness" of competitors. They are in line with widespread X-inefficiencies throughout the economy, which firms reduce in response to competition from high-income countries.
We make a comparison of microfinance banks (MBs) and commercial banks (CBs) in terms of efficiency, business orientation, stability, and asset quality by analyzing a large sample of banks from 60 countries around the world. Our findings indicate that microfinance banks have higher intermediation, non-interest income, wholesale funding and liquidity, but lower efficiency and asset quality. These significant variations are influenced by smaller microfinance banks and are driven mostly to African and Latin American microfinance banks.
in: Review of Economics and Statistics,
forthcoming
Abstract
Why do cities differ so much in productivity? A long literature has sought out systematic sources, such as inherent productivity advantages, market access, agglomeration forces, or sorting. We document that up to three quarters of the measured regional productivity dispersion is spurious, reflecting the “luck of the draw” of finite counts of idiosyncratically heterogeneous plants that happen to operate in a given location. The patterns are even more pronounced for new plants, hold for alternative productivity measures, and broadly extend to European countries. This large role for individual plants suggests a smaller role for places in driving regional differences.
in: Journal of Money, Credit and Banking,
forthcoming
Abstract
Abstract This paper examines the effect of dislocations in foreign currency (FX) swap markets ("CIP deviations") on bank lending. Using data from UK banks we show that when the cost of obtaining swap-based funds in a particular foreign currency increases, banks reduce the supply of cross-border credit in that currency. This effect is increasing in the degree of banks' reliance on swap-based FX funding. Access to foreign relatives matters as banks employ internal capital markets to shield their cross-border FX lending supply from the described channel. Partial substitution occurs from banks outside the UK not affected by changes in synthetic funding costs.
Joint Economic Forecast Autumn 2023: Purchasing Power Returns - Political Uncertainty High
According to the Joint Economic Forecast, Germany's gross domestic product declines by 0.6% in 2023. This is a strong downward revision of 0.9 percentage points from the forecast made in spring 2023. Industry and private consumption are recovering more slowly than expected.
New Regulatory Framework in Europe
This figure shows the different pillars that form the basis of the new regulatory framework in Europe. The Single Rulebook applies to all 28 member states. The three pillars of the European Banking Union are obligatory for Euro Area countries and voluntary for the remaining EU member states.
Source: Koetter, Michael; Krause, Thomas; Tonzer, Lena (2017): Delay determinants of European Banking Union implementation. IWH Discussion Papers 24/2017, Halle Institute for Economic Research (IWH).
Share of Zombie Firms 2010-2014 by Country
The graph shows the percentage share of firms that have been classified as zombies in a given year and country. Zombie firms are firms, that for at least two consecutive years have negative returns, negative investment, and debt servicing capacity (EBITDA/ financial debt) below 5 %.
Source: Koetter, Michael; Setzer, Ralph; Storz, Manuela; Westphal, Andreas (2017): Do we want these two to tango? On zombie firms and stressed banks in Europe. IWH Discussion Papers 13/2017, Halle Institute for Economic Research (IWH).
Comparison of EFN Forecasts with Alternative Forecasts
EU: European Commission, Economic Forecast, November 2017; IMF: World Economic Outlook, October 2017, ECB: December 2017 staff macroeconomic projections. OECD: Economic Outlook, November 2017; Consensus: Consensus Economics, Consensus Forecasts, December 2017.
Source: EFN-European Forecasting Network (2017): EFN Report: Economic Outlook for the Euro Area in 2018 and 2019.
Euro Area Inflation Dynamics and Possible Drivers (a)
This figure (a) shows headline inflation rates in the Euro area and in ten member countries of the European Monetary Union (EMU). The possible inflation drivers may all have contributed to the low inflation rate in recent years. The series of survey- and market-based inflation expectations were obtained from Consensus Economics, Thomson Reuters and own calculations. For the remaining data sources it is referred to the data and estimation section.
Source: Dany-Knedlik, Geraldine; Holtemöller, Oliver (2017): Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations. IWH Discussion Papers 10/2017, Halle Institute for Economic Research (IWH).
Euro Area Inflation Dynamics and Possible Drivers (b)
This figure (b) shows unemployment rates in the Euro area and in ten member countries of the European Monetary Union (EMU). The possible inflation drivers may all have contributed to the low inflation rate in recent years. The series of survey- and market-based inflation expectations were obtained from Consensus Economics, Thomson Reuters and own calculations. For the remaining data sources it is referred to the data and estimation section.
Source: Dany-Knedlik, Geraldine; Holtemöller, Oliver (2017): Inflation dynamics during the financial crisis in Europe: Cross-sectional identification of long-run inflation expectations. IWH Discussion Papers 10/2017, Halle Institute for Economic Research (IWH).
Bank Levies Paid by German Banks
This figure shows the payments of the bank levy (in million euros) by German banks for the years 2011-2015, broken down by banking group. During the years 2011-2014, banks had to contribute to the national restructuring fund as specified in the Restructuring Fund Act. In 2015, banks contributions were for the first time calculated as specified in the Banking Resolution and Restructuring Directive.
Source of Figure: Deutscher Bundestag Drucksache 18/5993, BB8/5993he 18 5 December 2015.
Source: Buch, Claudia; Tonzer, Lena; Weigert, Benjamin (2017): Assessing the effects of regulatory bank levies. VOX CEPR's Policy Portal: Research-based policy analysis and commentary from leading economists.
Aggregated Foreign Funding for Brazilian Banks (2007-2010)
This figure shows the development of aggregated foreign funding for Brazilian banks between January 2007 and December 2010. The vertical line is set at September 2008, the month when the collapse of Lehman Brothers triggered a freeze in global interbank markets. Foreign funding is aggregated from the bank-level data in the baseline sample. The variable is reported in real 2013 US$ millions.
Source: Noth, Felix; Ossandon Busch, Matias (2017): Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil. IWH Discussion Papers 7/2017, Halle Institute for Economic Research (IWH).
Unemployment Rates by Nationality (2014)
The unemployment rate of EU nationals in most countries is slightly higher than that of domestic nationals; these rates are almost perfectly correlated for all member states. As the figure displays, the unemployment rate of citizens from non-EU member states is significantly higher than that of domestic nationals in almost all countries; the dispersion of the rates is also significantly greater.
Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.
Labour Market Situation for Non-EU Foreigners in Relation to the Number of Applications for Asylum (2014)
In fact, there is a positive correlation between the number of applications for asylum in recent years and the difference in the unemployment rates of domestic nationals and of citizens from non-EU member states (as shown in the figure at hand). This indicates that the marginal costs of integrating refugees do indeed increase as the number of refugees grows.
Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.
Employment Rates by Nationality and Gender (2014)
Large differences between nationals and foreigners from non-EU countries can also be observed when it comes to the employment rate. In most countries, the employment rate is considerably lower for non-EU citizens than for domestic nationals; this is the case especially for women, but it applies to men as well. While the employment rate of male non-EU foreigners increases at least somewhat with the employment rate of male domestic nationals, the employment rate of female non-EU foreigners is largely disconnected from the domestic rate (see figure above).
Source: Altemeyer-Bartscher, Martin; Holtemöller, Oliver; Lindner, Axel; Schmalzbauer, Andreas; Zeddies, Götz (2016): On the Distribution of Refugees in the EU. In: Intereconomics, Volume 51, July/August 2016, Number 4, pp. 220-228.
Average Work Performance of Employees Based on Meaning of Task (2014)
The figure demonstrates that the average number of responses differs between the three treatment groups "Original Meaning", "No Meaning" and "Alternative Meaning". It shows the average work performance of workers fulfilling the same task with the same reward but with different information about the usefulness or meaning of their work done before.
Since some workers did not respond at first and only participated in the experiment as latecomers after they were sent further invitations, these were considered as a special group. Therefore, two different groups were created "Immediate" and "Pooled" and were considered separately. In essence, the additional "Pooled" group consists of latecomers grouped together with the employees that immediately participated in the experiment.
Source: Chadi, Adrian; Jeworrek, Sabrina; Mertins, Vanessa (2016): When the Meaning of Work Has Disappeared: Experimental Evidence on Employees’ Performance and Emotions. Management Science 63(6): 1696-1707.
