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Professor Michael Koetter, PhD

Professor Michael Koetter, PhD
Current Position

since 9/16

Head of the Department of Financial Markets

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

since 9/16

Professor of Financial Economics

Otto von Guericke University Magdeburg

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Research Interests
  • corporate investment allocation and aggregate growth
  • financial intermediation
  • financial stability and banking regulation
  • risk taking and competition
  • real implications of monetary and economic policy

Michael Koetter is Professor of Financial Economics at the Otto von Guericke University Magdeburg and head of the Financial Markets department at IWH since September 2016. The department is host to the annual FIN-FIRE conference on challenges to financial stability.

His research interests concern generally the causal effects of policy actions on financial and non-financial agents’ behaviour. Specific topics are the role of micro- and macro-prudential regulation for the stability of financial systems as well as whether and how financial intermediaries help or hinder the re-allocation of productive resources amongst firms, sectors, and countries. The political economy of financial and economic systems with regards to market structure and risk-resilience is another topic of interest.

Michael Koetter obtained his PhD in economics from Utrecht University and his MSc in international economics from the University of Maastricht. Prior to joining IWH, he was a Professor at Frankfurt School of Finance & Management (2012-2016) and the University of Groningen (2006-2012). He currently serves as a member of the scientific advisory board of the Research Data and Service Center of Deutsche Bundesbank, an editor at the Economics of Transition, and the Vice President of the IBEFA association.

Your contact

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

Publications

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Equity Crowdfunding: High-quality or Low-quality Entrepreneurs?

Daniel Blaseg Douglas Cumming Michael Koetter

in: Entrepreneurship Theory and Practice, forthcoming

Abstract

Equity crowdfunding (ECF) has potential benefits that might be attractive to high-quality entrepreneurs, including fast access to a large pool of investors and obtaining feedback from the market. However, there are potential costs associated with ECF due to early public disclosure of entrepreneurial activities, communication costs with large pools of investors, and equity dilution that could discourage future equity investors; these costs suggest that ECF attracts low-quality entrepreneurs. In this paper, we hypothesize that entrepreneurs tied to more risky banks are more likely to be low-quality entrepreneurs and thus are more likely to use ECF. A large sample of ECF campaigns in Germany shows strong evidence that connections to distressed banks push entrepreneurs to use ECF. We find some evidence, albeit less robust, that entrepreneurs who can access other forms of equity are less likely to use ECF. Finally, the data indicate that entrepreneurs who access ECF are more likely to fail.

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Lending Effects of the ECB’s Asset Purchases

Michael Koetter

in: Journal of Monetary Economics, forthcoming

Abstract

Between 2010 and 2012, the European Central Bank absorbed €218 billion worth of government securities from five EMU countries under the Securities Markets Programme (SMP). Detailed security holdings data at the bank level affirms an effective lending stimulus due to the SMP. Exposed banks contract household lending, but increase commercial lending substantially. Holding non-SMP securities from stressed EMU countries amplifies the commercial lending response. The SMP also improved liquidity buffers and profitability without compromising credit quality.

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

Michael Koetter Felix Noth Oliver Rehbein

in: Journal of Financial Intermediation, forthcoming

Abstract

We show that local banks provide corporate recovery lending to firms affected by adverse regional macro shocks. Banks that reside in counties unaffected by the natural disaster that we specify as macro shock increase lending to firms inside affected counties by 3%. Firms domiciled in flooded counties, in turn, increase corporate borrowing by 16% if they are connected to banks in unaffected counties. We find no indication that recovery lending entails excessive risk-taking or rent-seeking. However, within the group of shock-exposed banks, those without access to geographically more diversified interbank markets exhibit more credit risk and less equity capital.

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Working Papers

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Do Asset Purchase Programmes Shape Industry Dynamics? Evidence from the ECB's SMP on Plant Entries and Exits

Manfred Antoni Michael Koetter Steffen Müller Talina Sondershaus

in: IWH Discussion Papers, No. 12, 2019

Abstract

Asset purchase programmes (APPs) may insulate banks from having to terminate relationships with unproductive customers. Using administrative plant and bank data, we test whether APPs impinge on industry dynamics in terms of plant entry and exit. Plants in Germany connected to banks with access to an APP are approximately 20% less likely to exit. In particular, unproductive plants connected to weak banks with APP access are less likely to close. Aggregate entry and exit rates in regional markets with high APP exposures are also lower. Thus, APPs seem to subdue Schumpeterian cleansing mechanisms, which may hamper factor reallocation and aggregate productivity growth.

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Benign Neglect of Covenant Violations: Blissful Banking or Ignorant Monitoring?

Stefano Colonnello Michael Koetter Moritz Stieglitz

in: IWH Discussion Papers, No. 3, 2019

Abstract

Theoretically, bank‘s loan monitoring activity hinges critically on its capitalisation. To proxy for monitoring intensity, we use changes in borrowers‘ investment following loan covenant violations, when creditors can intervene in the governance of the firm. Exploiting granular bank-firm relationships observed in the syndicated loan market, we document substantial heterogeneity in monitoring across banks and through time. Better capitalised banks are more lenient monitors that intervene less with covenant violators. Importantly, this hands-off approach is associated with improved borrowers‘ performance. Beyond enhancing financial resilience, regulation that requires banks to hold more capital may thus also mitigate the tightening of credit terms when firms experience shocks.

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Politics, Banks, and Sub-sovereign Debt: Unholy Trinity or Divine Coincidence?

Michael Koetter Alexander Popov

in: Deutsche Bundesbank Discussion Paper, No. 53, 2018

Abstract

We exploit election-driven turnover in State and local governments in Germany to study how banks adjust their securities portfolios in response to the loss of political connections. We find that local savings banks, which are owned by their host county and supervised by local politicians, increase significantly their holdings of home-State sovereign bonds when the local government and the State government are dominated by different political parties. Banks' holdings of other securities, like federal bonds, bonds issued by other States, or stocks, are not affected by election outcomes. We argue that banks use sub-sovereign bond purchases to gain access to politically distant government authorities.

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Keywords

Financial Institutions Financial Markets Policy Evaluation Monetary Policy The new Europe Risk Regulation
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