1. About the IWH
  2. Team
  3. Department Heads

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

download CV
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

Publications

cover_journal-of-financial-intermediation.jpg

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.

read publication
cover_european-journal-of-political-economy.png

Delay Determinants of European Banking Union Implementation

Michael Koetter Thomas Krause Lena Tonzer

in: European Journal of Political Economy, forthcoming

Abstract

Most countries in the European Union (EU) delay the transposition of European Commission (EC) directives, which aim at reforming banking supervision, resolution, and deposit insurance. We compile a systematic overview of these delays to investigate if they result from strategic considerations of governments conditional on the state of their financial, regulatory, and political systems. Transposition delays pertaining to the three Banking Union directives differ considerably across the 28 EU members. Bivariate regression analyses suggest that existing national bank regulation and supervision drive delays the most. Political factors are less relevant. These results are qualitatively insensitive to alternative estimation methods and lag structures. Multivariate analyses highlight that well-stocked deposit insurance schemes speed-up the implementation of capital requirements, banking systems with many banks are slower in implementing new bank rescue and resolution rules, and countries with a more intensive sovereign-bank nexus delay the harmonization of EU deposit insurance more.

read publication
cover_journal-of-banking-and-finance.jpg

Cross-border Transmission of Emergency Liquidity

Thomas Kick Michael Koetter Manuela Storz

in: Journal of Banking & Finance, forthcoming

Abstract

We show that emergency liquidity provision by the Federal Reserve transmitted to non-U.S. banking markets. Based on manually collected holding company structures, we identify banks in Germany with access to U.S. facilities. Using detailed interest rate data reported to the German central bank, we compare lending and borrowing rates of banks with and without such access. U.S. liquidity shocks cause a significant decrease in the short-term funding costs of the average German bank with access. This reduction is mitigated for banks with more vulnerable balance sheets prior to the inception of emergency liquidity. We also find a significant pass-through in terms of lower corporate credit rates charged for banks with the lowest pre-crisis leverage, US-dollar funding needs, and liquidity buffers. Spillover effects from U.S. emergency liquidity provision are generally confined to short-term rates.

read publication
Search All Publications

Working Papers

cover_DP_2019-03.jpg

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.

read publication
cover_Deutsche-Bundesbank-Discussion-Paper_2018-53.jpg

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.

read publication
cover_Deutsche-Bundesbank-Discussion-Paper_2018-49.jpg

May the Force Be with You: Exit Barriers, Governance Shocks, and Profitability Sclerosis in Banking

Michael Koetter Carola Müller Felix Noth Benedikt Fritz

in: Deutsche Bundesbank Discussion Paper, No. 49, 2018

Abstract

We test whether limited market discipline imposes exit barriers and poor profitability in banking. We exploit an exogenous shock to the governance of government-owned banks: the unification of counties. County mergers lead to enforced government-owned bank mergers. We compare forced to voluntary bank exits and show that the former cause better bank profitability and efficiency at the expense of riskier financial profiles. Regarding real effects, firms exposed to forced bank mergers borrow more at lower cost, increase investment, and exhibit higher employment. Thus, reduced exit frictions in banking seem to unleash the economic potential of both banks and firms.

read publication
Browse all working papers

Related Topics

Financial Institutions Financial Markets Policy Evaluation Monetary Policy The new Europe Risk Regulation
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoWeltoffen Logo